7 ways the Pentagon mismanages its massive budget

Timothy McGrath, “7 incredible ways the Pentagon mismanages its massive budget,” GlobalPost, 19 November 2013

In November, Reuters published the second part of its series on the Pentagon’s management (or lack thereof) of its $565.8 billion budget. And it’s a doozy. …

1) The Pentagon cooks the books

The agency in charge of the Pentagon’s accounting is called the Defense Finance and Accounting Service (DFAS). It seems that a lot of what they do is make things up. The official mechanism for making things up is called an “unsubstantiated change action,” more commonly known as a “plug.” …

2) Those “plugs” add up to a lot of money

The total amount of plugs in the Pentagon’s finances was $9.22 billion in 2012. According to Reuters’ sources, the actual number of concealed errors, phony money, and missing information could be much higher.

Now, financial accounting is tricky business, so those dollars don’t necessarily correspond to actual dollars lost and replaced, but rather, stand in for money spent and received. Make enough mistakes with the accounting, and pretty quickly the actual connection between the numbers on the page and the money in circulation becomes totally imaginary. One DFAS office in Columbus, Ohio, made $1.59 trillions in errors in its 2009 financial reports for the Air Force. About $538 billion of that were plugs. But that’s not possible. That number alone was significantly larger than the entire Air Force budget.

3) It doesn’t comply with mandatory audits

By law, federal agencies must submit to mandatory annual audits.

The Pentagon is the only agency that has not complied. It has failed to comply every year since 1996, the year when the audits were set to begin. Since 1996, Congress has given the Defense Department $8.5 trillion dollars.

Repeat: that’s 8.5 trillion unaudited dollars. That’s half of the current US debt.

4) It has too many old and incompatible accounts and business management systems

The Pentagon has no single system for measuring, monitoring, and accounting for money and resources. How many does it have? Two? 10?

Try 5,000.

5) It has too many supplies and no idea how to manage them

The Pentagon is as bad at accounting for its material resources as it is for its financial resources.

The Defense Logistics Agency, which is in charge of the Pentagon’s supplies, estimates that half of the agency’s $14 billion inventory is excessive.

The Pentagon is also something of a hoarder. Take a visit to one of the US Army’s eight Joint Munitions Command depots and you’ll find thousands of rifles from World War II; air-to-air missiles built for fighter jet models that have been decommissioned; or several hundred pounds of dangerously unstable C4 that was made in 1979.

6) It can’t keep track of its contracts

The Pentagon spends a lot of money securing goods and services from private external vendors. It has signed over $3 trillion worth of contracts in the last decade. But it’s doing a terrible job keeping track of them.

There is a huge backlog of contracts waiting to be reviewed, audited, and closed out. At the end of 2011, the Defense Departments unresolved contracts totaled $573.3 billion.

7) It has wasted billions of dollars trying to fix its billion-dollar waste problems

The Pentagon is aware of all these problems, of course, and it has taken steps to correct them. Unfortunately, those steps have often been as disastrous as the problems they are supposed to correct.

Read the full article here.