The Pentagon Has Been Cooking Its Books, and No One Is Talking About It

As President Trump seeks to add $54 billion to the military budget, the partisan debate over military spending is renewed once again. The right has often criticized the Obama administration as “decimating the military,” while others argue that we still have by far the biggest and most powerful military in the world.

Is there truth betwixt the pointing fingers? As Philip Ewing of NPR observes, “It’s complicated. Pentagon leaders bristle at the idea their force has been ‘gutted’ or is a ‘disaster.’ The U.S. remains far and away the world’s foremost military power. But spending is down; the force is smaller than when Obama took office and its equipment is aging.”

What’s not being addressed by any president, the mainstream media, or advocacy journalist mouthpieces from MSNBC to Fox News are revelations from Reuters back in 2013 finding gross mismanagement at the Pentagon amounting to $8.5 trillion unaccounted for just since 1996. Not only are the funds MIA, but the books continue to be doctored as a matter of course to conceal discrepancies.

The Pentagon does not properly manage money, can’t always keep track of supplies and weapons, and continues to order more stuff at higher prices while never tracking down the original shipments.

It’s unimaginable that these revelations were met with such deafening silence from other media outlets after Scot Paltrow and Kelly Carr published a series of damning reports. They added more information one day after then-Defense Secretary Chuck Hagel complained that a proposed cut of roughly 10% to the Pentagon’s budget — amounting to $52 billion in 2014 — would be “an irresponsible way to govern, [forcing] the department into a very bad set of choices.” Trump’s arguments for increased spending echo similar concerns.

The military had a base budget of $583 billion in 2015, but counting international security, benefits for veterans and various other expenditures, the U.S. spends well above $700 billion annually on defense. This amounts to more than the next 13 countries combined, including about 6 times larger than #2, China.

China’s expenditures have been steadily increasing for many years but have remained flat as a percentage of their GDP since the 1980s. The United States had also been spending less but the percentage increased sharply after 9/11.

The $8.5 trillion is only reflective of what has been unaccounted for since 1996 and one can only imagine how much disappeared prior to that. The Pentagon has been able to operate this way for years with impunity.

1996 was the first year it should have been audited under a law requiring audits of all government departments (the Government Management and Reform Act passed in 1994), yet it remains the only federal agency in noncompliance. Since then, the 2009 National Defense Authorization Act requires the DOD to be audit-ready by 2017, but stipulates no penalties for missing the deadline.

The consequences aren’t only financial: the causes likely run the gamut from gross incompetence and fraud while the effects range from mistreatment of veterans to endangerment of our troops. Outmoded systems have potentially devastating effects on our soldiers, including problems ranging from unjustifiably withholding pay to interfering with proper deployment, possibly putting lives at risk.

How does this happen? Quite simply, it’s a huge mess. Estimates of how many accounting and business systems are in use by the DOD range between 2,200 and 5,000.

Paltrow spoke to military accounting staffers including Linda Woodford, one example of many who were required to literally forge accounting entries. She spent the last 15 years of her career in the office of the Defense Finance and Accounting Service (DFAS), the Pentagon’s main accounting agency, “inserting phony numbers in the U.S. Department of Defense’s accounts,” a practice that has apparently become part of the culture throughout the military. Paltrow wrote:

 “At the DFAS offices that handle accounting for the Army, Navy, Air Force and other defense agencies, fudging the accounts with false entries is standard operating procedure…and…isn’t confined to DFAS….  Former military service officials say record-keeping at the operational level throughout the services is rife with made-up numbers to cover lost or missing information.”

Bad bookkeeping is more than a taxpayer issue. The report of the Pentagon Inspector General in September 2012 stated:

“In one example of many, the Army lost track of $5.8 billion of supplies between 2003 and 2011 as it shuffled equipment between reserve and regular units. Affected units may experience equipment shortages that could hinder their ability to train soldiers and respond to emergencies.”

Hagel decried the cuts to the defense budget after sending a video to the entire DOD in August of 2013, admitting, “the Department of Defense is the only federal agency that has not produced audit-ready financial statements, which are required by law. That’s unacceptable.” Yet he and DFAS Director Teresa McKay refused requests for interviews about this issue.

The Pentagon does not properly manage money, can’t always keep track of supplies and weapons, and continues to order more stuff at higher prices...

The problems are as extensive as one might expect from any private company or agency without proper controls in place. The difference is a private company hemorrhaging money would likely go out of business and/or be charged with fraud. Repeated attempts at fixes have gone unfulfilled.

Despite this longstanding ineptitude and cover-up, we still hadn’t managed to dramatically increase our national debt until congressional spending significantly increased during the Bush administration and then exploded under Obama. One can’t help but wonder why no one is paying substantive attention to this issue. Is there a sacred cow mooing somewhere in a pasture near the beltway?

Now-retired Senator Tom Coburn (R-Okla.), one of Congress’ more vocal critics of fraud and waste, along with Senator Joe Manchin (D-W.V.), introduced the Audit the Pentagon Act of 2013, which would have penalized the Pentagon if not audit-ready by 2017.

“…failure to meet the deadline will result in restrictions on funding for new acquisition programs, prohibit purchases of any information- technology systems that would take more than three years to install, and transfer all DFAS functions to the Treasury.

‘The Pentagon can’t manage what it can’t measure, and Congress can’t effectively perform its constitutional oversight role if it doesn’t know how the Pentagon is spending taxpayer dollars,’ Coburn said.  ‘Until the Pentagon produces a viable financial audit, it won’t be able to effectively prioritize its spending, and it will continue to violate the Constitution and put our national security at risk.’ “

Unfortunately, the bill attracted co-sponsors but went nowhere in the Senate.

Later, Senator Charles Grassley pushed through an amendment to the annual defense appropriations bill, requiring the Pentagon to account for its expenditures by matching each payment to the expense it covered. The order was ignored and Grassley gave up. Similar bipartisan efforts in 2014 and 2015 also fell flat.

One can't help but wonder why no one is paying substantive attention to this issue.

Many on the left fail to understand why putting so much faith in government often entails such a lack of accountability not possible in the private sector, which may be worse at the DOD than any other agency.

Meanwhile, others on the right seems to be unable to acknowledge that the military appears to be the single biggest failure of the very government largesse they always complain about, with potentially dire consequences.

Advocating for cutting social programs and complaining about “big government” while failing to address this situation makes little sense and suggests that critics of the military industrial complex have a point.

This is an example of an endemic problem in Washington. The failure of both parties to address it is inexplicable, but since it’s been largely ignored by the media, most politicians seem to have little incentive to address it.

The sad reality is that if our military needs additional resources, the first major expenditure should be for functional accounting and procurement systems. Once that happens, perhaps we can get more “bang for the buck,” and won’t need additional increases after all.

The hypothetical “Lean, Mean, Fighting Machine” would be a better alternative indeed.

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