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Report: Audit Shows Pentagon Agency Lost Track of Hundreds of Millions of Dollars

Report: Audit Shows Pentagon Agency Lost Track of Hundreds of Millions of Dollars

How do you lose track of almost a billion dollars?!

https://commons.wikimedia.org/wiki/File:The_Pentagon_January_2008.jpg

Can you imagine what would happen to us if we couldn’t account for any money, especially an amount close to a billion dollars? Well, a Politico investigation has found that an internal audit in the Pentagon’s Defense Logistics Agency found that they lost track of hundreds of millions of dollars.

The Defense Department has a total of $2.2 trillion in assets.

Politico reported:

Ernst & Young found that the Defense Logistics Agency failed to properly document more than $800 million in construction projects, just one of a series of examples where it lacks a paper trail for millions of dollars in property and equipment. Across the board, its financial management is so weak that its leaders and oversight bodies have no reliable way to track the huge sums it’s responsible for, the firm warned in its initial audit of the massive Pentagon purchasing agent.

The audit raises new questions about whether the Defense Department can responsibly manage its $700 billion annual budget — let alone the additional billions that Trump plans to propose this month. The department has never undergone a full audit despite a congressional mandate — and to some lawmakers, the messy state of the Defense Logistics Agency’s books indicates one may never even be possible.

“If you can’t follow the money, you aren’t going to be able to do an audit,” said Sen. Chuck Grassley, an Iowa Republican and senior member of the Budget and Finance committees, who has pushed successive administrations to clean up the Pentagon’s notoriously wasteful and disorganized accounting system.

$800 million! How do you lose track of $800 million?!

Politico described the DLA “as the Walmart of the military.” The agency has 25,000 employees and they receive around “100,000 orders a day on behalf of the Army, Navy, Air Force, Marine Corps and a host of other federal agencies.” These orders range “from poultry to pharmaceuticals, precious metals and aircraft parts.”

The auditors cannot find where all the money is going though:

In one part of the audit, completed in mid-December, Ernst & Young found that misstatements in the agency’s books totaled at least $465 million for construction projects it financed for the Army Corps of Engineers and other agencies. For construction projects designated as still “in progress,” meanwhile, it didn’t have sufficient documentation — or any documentation at all — for another $384 million worth of spending.

The agency also couldn’t produce supporting evidence for many items that are documented in some form — including records for $100 million worth of assets in the computer systems that conduct the agency’s day-to-day business.

“The documentation, such as the evidence demonstrating that the asset was tested and accepted, is not retained or available,” it said.

At the end of the fiscal year in September 2016, the auditors “found that $46 million in computer assets were ‘inappropriately recorded’ as belonging” to the agency.

I worked in procurement in Chevron’s IT department for about four years and I remember the hassle we received if we couldn’t produce documentation for every penny spent. We couldn’t process payments unless the invoice had a signature and this went for even the smallest of payments.

Unfortunately, the mess in the Pentagon will probably not have a resolution any time soon. The auditors “could not obtain sufficient, competent evidential matter to support the reported amounts within the DLA financial statements.” They also discovered “gaping holes” in the agency’s bookkeeping and believe that there’s more.

The DLA said it’s not surprised by the outcome due to the agency’s “size and complexity” and promised to use the results “to focus our remediation efforts and corrective action plans, and maximize the value from the audits.”

NOW they’re going to be responsible? Good Lord.

Pentagon top budget official David Norquist said that the Pentagon will do annual audits, but it won’t be cheap:

That Pentagon-wide effort, which will require an army of about 1,200 auditors across the department, will also be expensive — to the tune of nearly $1 billion.

Norquist said it will cost an estimated $367 million to carry out the audits — including the cost of hiring independent accounting firms like Ernst & Young — and an additional $551 million to go back and fix broken accounting systems that are crucial to better financial management.

Unfortunately for the Pentagon, this isn’t the first time they’ve gotten in trouble with their budget. In December 2016, I blogged about a Washington Post report that found the Pentagon hid $125 billion in wasteful spending because officials feared Congress would use the evidence “to slash the budget.” WaPo reported:

The report, issued in January 2015, identified “a clear path” for the Defense Department to save $125 billion over five years. The plan would not have required layoffs of civil servants or reductions in military personnel. Instead, it would have streamlined the bureaucracy through attrition and early retirements, curtailed high-priced contractors and made better use of information technology.

The study was produced last year by the Defense Business Board, a federal advisory panel of corporate executives, and consultants from McKinsey and Company. Based on reams of personnel and cost data, their 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 Pentagon paid 1,014,000 contractors, civilians, and uniformed personnel for desk jobs at the Pentagon to support only 1.3 million troops on active duty, which is “the fewest since 1940.”

The Defense Business Board wanted to help the Pentagon save $125 billion to help troops and weapons, especially “to rebuild the nation’s aging nuclear arsenal, or the operating expenses for 50 Army brigades.”

Despite the good that could come out of the study, those in charge buried it:

But some Pentagon leaders said they fretted that by spotlighting so much waste, the study would undermine their repeated public assertions that years of budget austerity had left the armed forces starved of funds. Instead of providing more money, they said, they worried Congress and the White House might decide to cut deeper.

So the plan was killed. The Pentagon imposed secrecy restrictions on the data making up the study, which ensured no one could replicate the findings. A 77-page summary report that had been made public was removed from a Pentagon website.

In August 2016, I blogged that the Pentagon had not audited $6.5 trillion it spent on wars and equipment due to horrible bookkeeping practices. The Defense Finance and Accounting Service “did not document or support why the Defense Departmental Reporting system-Budgetary (DDRS-B), a budgetary reporting system, removed at least 16,513 of 1.3 million records during third quarter FY 2015.”

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Comments

The audit raises new questions about whether the Defense Department can responsibly manage its $700 billion annual budget — let alone the additional billions that Trump plans to propose this month.

I’m shocked! shocked! that there was mismanagement going on during the previous administrations. Despite that we are saying that we have no clue about where anything went wrong, it be fixed immediately or supper for you!

    Bucky Barkingham in reply to elle. | February 5, 2018 at 12:21 pm

    IMHO this incompetence is not due to any particular Administration. It’s endemic to the bureaucracy of DOD. $800 million is just a small rounding error in their budget.

Make sure you give due credit to a Congress which has made their accounting so complex that they literally CANNOT use Commercial Of The Shelf accounting packages.

I’m of the belief that lots of money doesn’t just go missing for no reason. There are swamps throughout the Pentagon just like all government bureaucracies.

JustShootMeNow | February 5, 2018 at 11:32 am

They didn’t loose track of s**t, they just haven’t asked the right person where it went.

DieJustAsHappy | February 5, 2018 at 11:40 am

Add to this the missing finds at HUD, the State Department, and we can be certain other agencies as well and it’s no wonder the taxes are “just too damn high!”

buckeyeminuteman | February 5, 2018 at 11:50 am

Didn’t really need a big expensive audit to tell us that the DOD wastes so much money…

4th armored div | February 5, 2018 at 11:50 am

how many e5’s and o6’s who have retired as millionaires with off shore bank accounts ?

in any large organization there are many ways to game the system.
in the Obama admin this was no surprise.

lets not forget that after 9/11 and all hands on deck was also a prime way for those who cared more about their wallets then our protection to take a little vigorish on the way.

now that we have a businessman as POTUS who understands the way of the world and what is needed to get things accomplished on time and within budget, hopefully things will approve or as on ‘the apprentice’ you’re fired!

buckeyeminuteman | February 5, 2018 at 11:59 am

Honestly though, the federal fiscal year holds a lot of the blame. We have to blow through our budget by late September on things we don’t need. Spend all of your money or you won’t get as much next year. Then when we need to make large purchases throughout the year there often isn’t enough funds. If we had been able to save funds past 1 Oct instead of blowing thorough them, we could buy the big tickets items we need instead of having a bunch of junk sitting around collecting dust.

    THIS. I’d like to see 5-year budgeting for the Pentagon and maybe some other agencies, but that’s a non-starter for politicians. They like things just as they are. Inefficient and sloshy and ripe for massaging.

      SDN in reply to RobM. | February 5, 2018 at 3:05 pm

      That would require a Constitutional Amendment, since the original Articles prohibit funding the Army for over two years…. and it does apply.

      buckeyeminuteman in reply to RobM. | February 6, 2018 at 9:14 am

      2 year. 3 year. 5 year. Anything is better than the status quo. There’s no reason for me to be purchasing printer cartridges and notepads I’ll never get around to needing. But if I had two or three years worth of funds I could buy us the new engineering equipment and plotter printer we actually need but are too expensive to purchase on one year’s budget on top of the usual expenditures.

      Don’t we teach our children to save and budget for the expensive things they want? We as a nation just keep putting everything on the credit card.

“The audit raises new questions about whether the Defense Department can responsibly manage its $700 billion annual budget — let alone the additional billions that Trump plans to propose this month.”

Just Politico shilling for more domestic spending and a smaller military. I’d like to see how some of these welfare agencies handle a proper audit.

There is an element to Pentagon accounting that clouds the issue and makes it difficult to understand. I worked for a number of years on B-52s. When we needed to replace a part, they’re taken from B-52s that are stored in aircraft ‘grave yards’ and shipped to us, they are not manufactured. Some accountant somewhere has to account for the cost of this part moving between agencies, and usually the amount he *arbitrarily* chooses is fantasy. This is how you read about $50 screws and $200 toilet seats. People don’t understand, nobody was paid these amounts by the Pentagon, it’s only a crude attempt at tracking assets that move between organizations under the Pentagon.

In such a climate, wide-spread disparaties are the rule, not the norm, but in the end, it’s just +$50 in assets to one agency, and -$50 to assets of another, it’s a wash.

Now if you show me some irregularities in the Cash Flows of these agencies, I might be more interested.

This is systemic in the Federal Government. EVERY agency. Either through out and out fraud, skimming, or flat out incompetence.

All I want is this: In the year 2024, all set up, where every agency is audited on the same schedule that banks are. Normalized accounting procedures and tripwires for audits.

It is going to take several years to lasso this thing, but it can be done, and once in place, should be very hard to return to the old ways. IF the Trump administration does what I think they want to do on audits and waste, it will be a great legacy… and completely ignored by most. #MAGA

OnTheLeftCoast | February 5, 2018 at 12:53 pm

This is found at all levels of government.

A while back, one of the school districts in my area had a three year stretch for which they had no record of who they had been writing non-payroll checks to.

Other people’s money, baby. Nothin’ like it.

“a million here, a million there and pretty soon it adds up to real money.”

It is easy & valid to complain about fraud, waste & abuse in the govt but people also need to understand the scope of the minutia purchased/stocked/issued by the military agencies, DLA specifically. They are accountable for things that probably should be funded & bought at the local level but it is sometimes hard to find a Staples in a war zone. Employees lose things, steal things, break things – especially when they are dealing with antiquated systems.

They certainly don’t need an increased budget, they just need a forensic audit. Sounds like they probably have enough of a budget for 2 years, all they have to do is look.

casualobserver | February 5, 2018 at 2:51 pm

It has been about 20 years or so, but I was close to design/build projects for a couple of larger firms. They always prioritized getting federal contracts over private contracts as far as how many resources they put into the effort to get the job (quotes, etc.).

Why?? PROFIT. Massive difference. I always wondered how much was above board and how much below.

State Department has had problems, too.

September 14, 2014
State Department can’t account for $6 billion in last 6 years
By Lee Cary

http://www.americanthinker.com/blog/2014/09/state_department_cant_account_for_6_billion_in_last_6_years.html

This is one of the reasons I favored having a businessman to head up the Executive Branch for a while. I thought it might be refreshing to have a President who knows what accountants are good for.

We’re talking about 2/10ths of one percent of the DoD budget? So now they recommend spending an additional 2/10ths of one percent of the budget in an attempt to recover some of the original loss.

Heck, if they recover all of the loss, we just might break even. Of course, all of the privates, lance corporals and so forth will have to maintain an inventory of every round of ammunition they were issued. Will each rifle platoon have its own accountant?

    buckeyeminuteman in reply to MSO. | February 6, 2018 at 9:25 am

    Every private had better maintain an inventory of issued ammo. Missing ammo is a BFD. If you’re not throwing lead at the enemy and ammo is missing, where the hell is it going? Who’s firing at unauthorized targets, who’s saving it for malicious activities, who is taking it home for personal use or for sale? Who got shot and we don’t know about it? Missing ammo from the SWAT team at Lackland AFB, TX is what led to the discovery that Airmen were shooting wild pigs on base during duty hours with government weapons. That’s court martial stuff right there.

“How do you lose track of almost a billion dollars?!”

You don’t, you embezzle it. I assume the tens of millions of dollars the State Department is “missing” was embezzled at least in part by Hilary Clinton. Note that neither the State Department nor the Pentagon is bothering with a proper forensic audit of the missing funds, which would presumably uncover a whole lot of corruption reaching to the very top.

The same way $9,000,000,000 somehow hot lost under W.

Or how $9,000,000,000 somehow got lost under W

Pish tosh! Millions? Billions? Remember on September 10th 2001, Secretary of Defense Donald Rumsfeld reported that the DoD was unable to track some $2.3 trillion in transactions.

At least it’s down to reasonable numbers now.

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