Possible Gold Mine of Untracked Money in DOD
The accounting practices of the Department of Defense are so ridiculous that it should be a Saturday Night Live Skit. This assessment comes from the DOD’s own Inspector General! Here are some articles that lay out the crazy way the Department of Defense keeps track or does not keep track of all the billions of dollars given to it each year.
It is such a joke, but one that is not really funny.
Down the Rabbit Hole
Here is a list that was put together by Winslow T. Wheeler, Director of the Straus Military Reform Project of the Center for Defense Information, regarding why there are billions and billions of dollars that disappear into the black hole of the Department of Defense Budget. In his article, “The Pentagon’s Black Hole” on The Huffington Post, Wheeler identifies 13 “material weaknesses” which where pointed out by the DOD Inspector General Report called: “Summary of DOD Office of the Inspector General Audits of Financial Management.”
Here is a copy of what Wheeler wrote in his HuffPost Article with references to specific page numbers from the above referenced DOD IG report.
1. Financial Management Systems: The 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.” (See p. 4.)
2. Fund Balance with Treasury: DOD managers do not know how much money is in their accounts at the Treasury, nor when they spend more than Congress appropriates to them. (See p. 5.)
3. Accounts Receivable: DOD does not “record, report, collect, and reconcile” funds received from other agencies or the public. (See p. 6.)
4. Inventory: 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. (See p. 7.)
5. Operating Materials and Supplies: “In addition, DOD cannot accurately report the value of operating materials and supplies.” (See p. 7.)
6. General Property, Plant, and Equipment: “The cost and depreciation of the DOD general property, plant, and equipment are not reliably reported ….” (See. p. 8.)
7. Government-Furnished Material and Contractor-Acquired Material: “…the value of DOD property and material in the possession of contractors is not reliably reported.” (See p. 9.)
8. Accounts Payable: DOD does not know who owes it money, nor how much. (See p. 10.)
9. Environmental Liabilities: DOD does not accurately estimate or report the cost of cleaning up its facilities, does not track its environmental liabilities, and does not even have a complete record of its ranges and operational activities. (See p. 11.)
10. Statement of Net Costs: DOD’s “systems do not always capture actual costs in a timely [or accurate] manner.” (See p. 11.)
11. Intragovernmental Eliminations: DOD tracks neither buyer nor seller amounts when conducting transactions with other agencies. (See p. 12.)
12. Other Accounting Entries: DOD sometimes enters “unsupported” (i.e. imaginary) amounts in its books. (See p. 13.)
13. Reconciliation of Net Cost of Operations to Budget: DOD uses those imaginary figures to make the books balance. (See p. 14.)
Then, Wheeler reveals in his article above that “DOD management has acknowledged that all 13 “material weaknesses” continue to exist (because over the decades they have done nothing to fix them.”
Wheeler then adds “three additional “Issue Areas”"
1. DOD’s “audit trails” are not kept “in sufficient detail.” Put simply, no one can track the money.
2. DOD’s “Internal Controls,” intended to track the money, are inoperative. Thus, DOD cost reports and financial statements are surely inaccurate, but the errors cannot be identified because the data cannot be verified.
3. “Compliance with Laws and Regulations:” DOD does not observe many of the laws that govern all this.
Now we know why Donald Rumsfeld said $2.3 Trillion was missing from the Department of Defense in 2001. Their accounting system is like the Keystone Cops of accounting.
Has anything changed at the Pentagon since 2009? We know that under G. W. Bush huge pallets of cash totaling more than $12 billion dollars were given to people in Iraq with no paper trail. The money in stacks of $100 bills was shrink-wrapped and flown to Iraq on wooden pallets. Over $12 Billion dollars – disappeared into someone’s pocket.
Over 6 Billion Dollars Missing From Money Flown Into Iraq By U.S. Military! “Believed To Be Stolen!”
As reported in this article by the Guardian of the UK, the Coalition Provisional Authority (CPA) of the U.S. in Iraq reported in one of it’s memorandums from a CPA meeting:
The memorandum concludes: “Many of the funds appear to have been lost to corruption and waste … thousands of ‘ghost employees’ were receiving pay cheques from Iraqi ministries under the CPA’s control. Some of the funds could have enriched both criminals and insurgents fighting the United States.”
According to Stuart Bowen, the special inspector general for Iraq reconstruction, the $8.8bn funds to Iraqi ministries were disbursed “without assurance the monies were properly used or accounted for”. But, according to the memorandum, “he now believes that the lack of accountability and transparency extended to the entire $20bn expended by the CPA”.
Keep in mind that for Fiscal year 2010 National Defense was more than 23% of our budget or $722 billion. Yet, there are factions within Congress that claim we cannot cut anything from Defense. Does this make any sense? For some crazy reason, I don’t know, perhaps because those senators and congress folks on both sides of the aisle get money from various defense sector corporations, there are politicians that draw a line in the sand saying, “Leave Defense Alone!”
Also, the U.S. spends more on Defense than any other country on earth! And, we don’t know where most of the money actually is spent. The money is given out and we do not track it.
Yet, right now there are petty debates over cutting other programs like education, medicare, medicaid, and social security.
It’s time to take a large flashlight and find out what went down the rabbit hole of the Pentagon accounting system.
Does the Black Hole in DOD lead to a Black Budget?
Even though the cold war is over billions of dollars a year are going to projects so secret that possibly the President of the U.S. does not even know they exist. Here’s an article by Phil Patton of Wired, “Exposing the Black Budget” that explains the secret Black Budget that also needs some sunlight on it.