An Inconvenient Audit

April 16, 2008 2:49 PM

The Pentagon's $1 Trillion Problem.Even as the Defense Department prepares to send Congress its $481.4B FY2008 budget request, it also prepares to admit -- for the 18th year in a row -- that its finances are in such poor shape that it is effectively impossible to audit or account for over a trillion dollars in past expenses.

"For the first three quarters of 2007, $1.1 trillion in Army accounting entries hadn't been properly reviewed and substantiated, according to the Department of Defense's inspector general. In 2006, $258.2 billion of recorded withdrawals and payments from the Army's main account were unsupported. It's as if the Army had submitted multibillion-dollar expense reports without any receipts."

Not that it's a new problem, however:
"In 1990, Congress enacted legislation requiring all federal agencies to pass independent audits. Every year, the Defense inspector general dispatched dozens of auditors to the military's financial and accounting centers. Every year, they reported back that the job couldn't be done. Defense Department records were in such disarray and were so lacking in documentation that any attempt would be futile. In 2000, the inspector general told Congress that his auditors stopped counting after finding $2.3 trillion in unsupported entries made to force financial data to agree." Annual audits were suspended indefinitely in 2002.

And in an interesting historical note: the 'Mechanization of Contract Administration Services' (MOCAS) system, which "pays invoices and vouchers for hardware supplies and services"*, was originally brought on-line in 1958, making it half a century old this year.

posted by Kadin2048 (38 comments total)

A trillion here, a trillion there, and soon you're talking real money. I would suggest looking into the books of Halliburton, Blackwater, the defense companies, and Dick Cheney's offshore bank accounts for the money. Either that or just ask the Fed to open up that investment bank "loan" window for more. It's not like the country is not already totally bankrupt anyway.
posted by ornate insect at 2:55 PM on April 16, 2008

The Bush administration has emptied the US bank account. This is the kind of thing you'd expect to happen in a poor just-recently-modernized African country, but they've managed to do it here. Kudos.
posted by Citizen Premier at 2:56 PM on April 16, 2008 [1 favorite has favorites]

Oversight and accountability brings good practice, and so we have open audit reports and such. Secrecy lets you hide things, and thus lets bad practices remain due to lack of a feedback loop. Given this, it is unsurprising that the Pentegon budget is so poorly put together, quite apart from black funding issues and the like.
posted by jaduncan at 2:59 PM on April 16, 2008 [1 favorite has favorites]

What $1.2 Trillion Can Buy.
posted by ericb at 3:14 PM on April 16, 2008

And you all put up with it. Nothing will ever be done about it. Ever.
posted by you just lost the game at 3:16 PM on April 16, 2008 [5 favorites has favorites]

The Bush administration has emptied the US bank account.

Probably true, but not substantiated (and therefore slightly incongruous in this thread) by the quoted text of this FPP:

it also prepares to admit -- for the 18th year in a row -- that its finances are in such poor shape that it is effectively impossible to audit or account for over a trillion dollars in past expenses.

AND

Every year, they reported back that the job couldn't be done. Defense Department records were in such disarray and were so lacking in documentation that any attempt would be futile.

There is a time and a place for Bush bashing, but this ain't it.
posted by KokuRyu at 3:19 PM on April 16, 2008 [2 favorites has favorites]

I wished I worked at the Pentagon!
posted by WalterMitty at 3:22 PM on April 16, 2008

What $1.2 Trillion Can Buy.

Yeah, but that would be Socialism to spend money on healthcare and schools. Giving taxpayer money to fly-by-night, legally indemnified security and energy contractors and their shareholders is Patriotic.
posted by Blazecock Pileon at 3:27 PM on April 16, 2008 [8 favorites has favorites]

They should just start importing drugs into the country like the CIA does with cocaine when it needs money.

(Actually, I've heard the rumor that until recently the carry-on baggage of military personnel returning home was not searched, but they started because the troops were coming back from Afghanistan with backpacks full of heroin and offloading it with their gang connections. I tried to look up any such rule change but couldn't find anything about it, not that I expected to.)
posted by TheOnlyCoolTim at 3:32 PM on April 16, 2008

If you'd like to see what it's like to go on a multi-trillion dollar shopping spree, here's a little tool to let you have a taste of what's it like.
posted by junesix at 3:37 PM on April 16, 2008

What are you, Blazecock, some sort of pansy?

Wait, aren't pansies those who need to hide behind weapons instead of being comfortable with providing social services the country needs for its citizens? I'm so confused.
posted by maxwelton at 4:12 PM on April 16, 2008

but that would be Socialism...

Yeah. Geez. A government by the people, for the military. I mean, really, how can (USA) people even begin to be against single-payer healthcare when the US government just pisses away money like this? Plus y'all call it "soda". It's pop people, pop.
posted by GuyZero at 4:20 PM on April 16, 2008

for the 18th year in a row
So we can Clinton Bash and Bush Sr. Bash too? Cool!
posted by wendell at 4:25 PM on April 16, 2008

Ah, socialism. The expense of any tax dollar that doesn't go to corporations or war.
posted by Astro Zombie at 4:32 PM on April 16, 2008 [2 favorites has favorites]

This is a very interesting article here about bureaucratic nightmares and the cost of using outdated, incompatible software. I suggest reading it.
posted by drjimmy11 at 4:32 PM on April 16, 2008 [2 favorites has favorites]

Not a problem. Early in his presidency, Bush said that in the event of war, national disaster, or unseasonably bad weather, we can throw the budget out the window. I'm sure he also has a plan to get back on budget once everything settles down.
posted by p3t3 at 4:44 PM on April 16, 2008

Don't worry. The Feds are hot in pursuit of tax defiers. Assistant Attorney General Nathan Hochman told reporters: "Taxes are the lifeblood of the American civilized society." Gotta get those defiers so the gummint have money for the poor ole military.
posted by binturong at 4:45 PM on April 16, 2008

They're only greenbacks. Give it a few years and this'll all seem silly.
posted by pompomtom at 5:04 PM on April 16, 2008 [2 favorites has favorites]

A public company auditor by trade I have to point out the $2.3 trillion of unsupported entries do not necessarily indicate "lost money." That said, there certainly is no shortage of indicators that money was lost, misappropriated, or simply stolen. You may be surprised by the fact these are different, but I don't think differentiation matters. Corruption and negligence pervades, and we pay. Customers always pay, whether consumers of corporate goods and services, or the government's customers.

Cleaning this up could be compared to building skyscrapers in the 30s. People would die, and it would seem impossible. But, because I'm an auditor, I would seriously love to see it done and maybe even help the team that does it. Postponing audits indefinitely is the worst response - a free pass.
posted by IndpMed at 5:17 PM on April 16, 2008 [1 favorite has favorites]

My experience in the corporate world is that instituting compliance procedures and enforcing them costs more than the money lost due to mismanagement and fraud. Based on this I fear the government trying to clean this up given their tendency to add bureaucracy to everything already.
posted by Octoparrot at 6:11 PM on April 16, 2008

Huh.

I work for a publicly-traded company, and our auditors won't let anything over a couple grand (I think that's the benchmark) pass. Seriously.

All of you (Americans) own the Pentagon, and you're letting your elected officials let them get away with way too many zeroes? WTF America?
posted by dirtynumbangelboy at 7:30 PM on April 16, 2008

My experience in the corporate world is that instituting compliance procedures and enforcing them costs more than the money lost due to mismanagement and fraud.

This is grossly inaccurate. Responsible corporations (I believe there are a few left) balance the cost of enforcement with the losses from fraud, and try to keep the costs and losses somewhat balanced. Checking every expense report for receipts for every meal might not be cost-effective; due diligence on acquisitions is mandatory.
posted by Mental Wimp at 7:32 PM on April 16, 2008

Man. If just a small, small percentage of that lost money could just somehow end up in the account for my federal student loans, I'd be a happy guy.
posted by snwod at 12:02 AM on April 17, 2008

Have you ever noticed that when influential people do something really stupid or illegal, their PR people very quickly classify it as a "mistake"? The most recent example that comes to mind was when Mel Gibson went off on some anti-semitic rant. Within hours we was apologizing for his "mistake" and encouraging everyone to begin "healing".
I think it's the same thing here, and most people are taking the bait. Although it pisses everyone off to think that the government is criminally mismanaging trillions of dollars, people accept the underlying assumption that it's ineptitude or incompetence.
Well. If you were a powerful guy who needed a few more billion to maintain the lifestyle to which you had become accustomed, would you want taxpayers to be able to trace it? Didn't think so. It's obviously to their advantage that nobody knows what the hell's going on.
This money isn't disappearing. It's going from the pockets of taxpayers to the protected bank accounts of extremely, extremely, extremely wealthy arms dealers and contractors, and the latter couldn't be happier.
"Preoccupied with protecting their turf, the Army, Navy, Air Force, and Marines continue to maintain separate, increasingly outdated systems that can't talk to each other, trace disbursements, or detect overbilling by contractors."
How very convenient.
posted by arcadia at 12:31 AM on April 17, 2008

This isn't exactly a problem unique to the US government...

BBC: "For 12 years the European Union's auditors have refused to endorse the spending of large parts of the EU budget. "
posted by NotMyselfRightNow at 5:06 AM on April 17, 2008

As far as the pentagon's computer systems being 50 years old, the book Dreaming in Code touches on the fact that most of the government's computer systems are really old, but that attempts to replace them haven't worked at all. There's good potential for a magazine article (or book?) for someone who would want to do a more thorough investigation.
posted by drezdn at 5:52 AM on April 17, 2008 [1 favorite has favorites]

Nothing will ever be done about it. Ever.
posted by you just lost the game

it's perfect. really.
posted by matteo at 6:36 AM on April 17, 2008

drezdn: "As far as the pentagon's computer systems being 50 years old, the book Dreaming in Code touches on the fact that most of the government's computer systems are really old, but that attempts to replace them haven't worked at all. There's good potential for a magazine article (or book?) for someone who would want to do a more thorough investigation."

The holy platform war that proposals to upgrade is horrifying to even imagine. (Not even thinking about the cost.) Also, imagine, given network capabilities these days, scenarios being spun to the public along the lines of the movie "The Net." People would be voting for congresscritters, etc. based on vows to fight the dangerous new computer system, courtesy fears from a decade old Sandra Bullock popcorn flick.
posted by Dreama at 8:39 AM on April 17, 2008

What amazes me is that many people seemed surprised by this. How often do you go into a government run agency, and you see it is full of bureaucracy? This seems to be the same thing, just on a grander scale.
posted by Todd Lokken at 12:57 PM on April 17, 2008

How often do you go into a government run agency, and you see it is full of bureaucracy?

Every day I go to work?
posted by fixedgear at 2:26 PM on April 17, 2008 [2 favorites has favorites]

Here we have one of our most (allegedly) important defense institutions duffing its proverbial worn-out sneaker in the dirt, eyes downcast, drawling, "Aw, shucks, Mr Tax Auditor, I'da tell you where the money went but I ain't so good with maths."
posted by amyh at 4:24 AM on April 18, 2008

The Pentagon Strangles Our Economy: Why the U.S. Has Gone Broke. 60 years of enormous military spending is taking a dramatic toll on the rest of the economy.
posted by homunculus at 11:37 AM on April 28, 2008

Another Iraq Contractor Avoiding Millions In Taxes Through Off-Shore Havens
posted by homunculus at 2:42 PM on May 4, 2008

Pentagon Backs Plan To Build U.S. ‘Zone Of Influence’ Of Hotels And Resorts In Baghdad
posted by homunculus at 2:05 PM on May 5, 2008

Some nice hotels and swimming pools for the sundry viceroys of the American Raj. The natives will be glad to work as butlers, maids, and waiters, and as a bonus will score whatever drugs and hookers are desired by the aspiring imperialists.
posted by TheOnlyCoolTim at 2:13 PM on May 5, 2008

Pentagon Warns Of ‘Harm’ From Webb’s Effort To Give Educational Benefits To Soldiers After ‘Only’ 2 Years
posted by homunculus at 4:32 PM on May 6, 2008

The Air Force Above All: Dominating the Air, Space, and Cyberspace
posted by homunculus at 5:54 PM on May 7, 2008

Air Force's Scare-Mongering Space Ad Shoves Facts Out of the Airlock
posted by homunculus at 6:08 PM on May 7, 2008