The US military industry _is_ 'complex'
August 22, 2016 9:41 AM   Subscribe

U.S. Army fudged its accounts by trillions of dollars, auditor finds - "The Defense Department's Inspector General, in a [July 26 (pdf)] report, said the Army made $2.8 trillion in wrongful adjustments to accounting entries in one quarter alone in 2015, and $6.5 trillion for the year. Yet the Army lacked receipts and invoices to support those numbers or simply made them up... The report affirms a 2013 Reuters series revealing how the Defense Department falsified accounting on a large scale as it scrambled to close its books. As a result, there has been no way to know how the Defense Department – far and away the biggest chunk of Congress' annual budget – spends the public's money."
posted by kliuless (47 comments total) 41 users marked this as a favorite
 
But free college is too expense.

And medical care is too expensive.

And infrastructure is too expensive.
posted by T.D. Strange at 9:43 AM on August 22, 2016 [120 favorites]


About 20 years back (i.e., after the first Gulf War and before the second, around the time of the last drawdown), a bunch of us got to spend a day filling shopping carts at a sporting goods store. Sure, it was nice to have better equipment for physical training, but the actual reason for it was that we were coming up on the end of a fiscal year and my unit still had a few grand left in a few relevant accounts.

And if we didn't spend it, we weren't rewarded for not spending the taxpayers' money, we were penalized -- "Oh, you didn't need all that money? Well, I guess we'll cut your budget for next year." The idea that maybe if we didn't need all that money, then we wouldn't need all that money next year either? That didn't factor into the decision.

So that's how they spend a little of your money: making sure we get more of it next year.
posted by Etrigan at 9:49 AM on August 22, 2016 [22 favorites]


Somehow I'm not surprised at all. I mean, I wouldn't say I predicted it, but I'm not surprised.
posted by HypotheticalWoman at 9:49 AM on August 22, 2016 [1 favorite]




For example, two DFAS computer systems showed different values of supplies for missiles and ammunition, the report noted – but rather than solving the disparity, DFAS personnel inserted a false “correction” to make the numbers match.

NBD, we all did the same thing on lab reports in college, right?
posted by dudemanlives at 9:56 AM on August 22, 2016 [1 favorite]


But welfare fraud is the problem here!
posted by praemunire at 9:56 AM on August 22, 2016 [28 favorites]


I wouldn't say I predicted it

Not going to speak for you, but a good reason why folks aren't predicitve on subjects like this is that they're too busy scrambling to afford the necessities of life that the government, at least from some points of view, is apathetic (at best) about securing or preserving for them in the first place.
posted by RolandOfEld at 9:57 AM on August 22, 2016 [1 favorite]


@Etrigan

I think a lot of people are familiar with this idea in government agencies, trying to "prove" you need the budget. I guess my question is, where does this attitude stem from? Also, why don't the people who would cut the funding just see through the BS purchases at the end of the year? Is everyone at the government level really that thick-headed to think that this is somehow a good way to handle things? To either force wasteful spending on things that aren't absolute needs to agencies or to cut their funding below what they actually need? It just seems like two sides of a shitty coin to me. I don't understand how this attitude continues to exist in governance.
posted by deadaluspark at 9:58 AM on August 22, 2016 [4 favorites]


But free college is too expense.

And medical care is too expensive.

And infrastructure is too expensive.


And if you add up all that "missing" money, you could cut a check to every American citizen for around $20,000 each.
posted by deadaluspark at 10:01 AM on August 22, 2016 [16 favorites]


I guess my question is, where does this attitude stem from?

Having one unit's budget cut because they were underspending will spook everyone who was in that unit and everyone they ever tell the story to.

Also, why don't the people who would cut the funding just see through the BS purchases at the end of the year?

Partially because they didn't look at purchasing at that level of granularity. But mostly because it's easy for a commander to say "Well, I waited until the end of the fiscal year to make sure I had enough money to buy these important items." And frankly, they did know, but they knew that everyone was doing it, and no commander at a higher level is going to say "All of my subordinate units need less money", because that means they get less money for their unit as well.

Is everyone at the government level really that thick-headed to think that this is somehow a good way to handle things?

Of course not, but when you're absolutely certain that all those other guys are doing the same thing, it's harder to stand on principle. It's the Prisoner's dilemma.
posted by Etrigan at 10:10 AM on August 22, 2016 [1 favorite]


You have to be careful how you interpret the $6.5 trillion figure, which is far larger than the entire military budget. The figure is so large because it represents cumulative errors: the same error gets added multiple times as it precipitates through multiple accounts. It's impossible to know for sure (which is part of the problem), but the actual error is probably "only" in the ~$60-100 billion range.
posted by jedicus at 10:10 AM on August 22, 2016 [22 favorites]


And infrastructure is too expensive.

I hear the "infrastructure spending!" thing a lot, but I wonder whether that wouldn't just be another huge accounting shitshow with construction contractors swapped for military contractors. I mean yeah, fix what's broken, but huge new outlays? Better hope there's better accountability than what we've got now.
posted by indubitable at 10:10 AM on August 22, 2016 [1 favorite]


Also, why don't the people who would cut the funding just see through the BS purchases at the end of the year?

when grantees give the granting agency/org an annual spending breakdown it's not shown to you by WHEN the purchases were made. it's shown under category listings like equipment or salaries or operating expenses or whatever.
posted by poffin boffin at 10:12 AM on August 22, 2016 [2 favorites]


This also makes me wonder if they have enough accountants. The year-end scramble here has gotten tougher and tougher as we've faced personnel cuts - and it's much easier for mistakes to get made during the year because we don't have enough accountants to do oversight. (Note, I am not in the army, but I am studying accounting!) If you have a couple of very expensive computer systems that don't talk to each other and take a lot of effort/expense to upgrade, and you don't really have enough accountants, you're going to end up with problems - and while those should be corrected at year-end, doing things properly during the year increases the likelihood that they will be. I'm not saying there's no malfeasance - we here don't just throw up our hands and make up numbers - but there are ways to build structures that are more resistant to malfeasance.

In re year-end spending: one reason that it doesn't get observed and cut is that it's often for things that are relatively necessary, at least around here. Let's say you could really use a new [program thing] but you aren't sure it's in the budget. Well, right at year-end you say to yourself "wow, we came in under budget this year, let's get the program thing now while we have the money!"

I've often wondered why they don't do some kind of rolling rebudget, where your spending is evaluated every five years, let's say, and if you regularly don't need all your budget, only then is it cut.
posted by Frowner at 10:13 AM on August 22, 2016 [2 favorites]


This is always a no-win situation (for other parts of the government at least). If you're fiscally responsible and send money back, then congress really does just cut your budget by whatever you sent back because they look good for doing so and they don't want to be called out for not "trimming the fat."

The problem is, maybe you didn't need that money in 2016, but maybe in 2017 you will. Budgeting is tough and unexpected expenses do come up.

I've worked many places and I can attest that this happens in the private sector as well. What's funny is they know we're doing it, we know they know we're doing it and yet, no one says, fuck, can we just do something else where everyone is not winking and turning a blind eye? Perhaps it is the case that there is not a better way.
posted by BeReasonable at 10:17 AM on August 22, 2016 [3 favorites]


And if we didn't spend it, we weren't rewarded for not spending the taxpayers' money, we were penalized

This is exactly the same in every government organization I have ever encountered.

It's a bad consequence of good intentions. The idea is that a government should always know exactly what its budget is. It is therefore simplest to have annual budget cycles with on carry-over. If there were carry-over accounts, bureaucrats could hoard money year on year. So they aren't allowed to. Use the money allocated or lose it.

This has many bad consequences. Blowouts at year-end. Inability to get bargains based on multi-year pricing for service agreements, etc... The worst however is the punishment of thriftiness. If a department is careful with its budget, its reward is a smaller budget next year (and for the future) as they obviously didn't need that money.

There are no explicit rewards in the public service, personally or organizationally---they're seen as politically indefensible. There can be no bonuses given to efficient managers. Good money management usually results in operational penalties, reduced operating budgets and/or more responsibility. In contrast, bad money management does not result in significant penalties. So there is little incentive for an officer to maker certain that they come in on budget, beyond a mild level of hassle from their supervisors. The best management practices, therefore, are to slightly overspend budgets each year.
posted by bonehead at 10:21 AM on August 22, 2016 [15 favorites]


why does this auditor hate our troops?
posted by entropicamericana at 10:21 AM on August 22, 2016 [3 favorites]


Also, why don't the people who would cut the funding just see through the BS purchases at the end of the year?

It's not an intrinsically bad idea to hold off on some essential but non-urgent purchases until late in the fiscal year, so that really just circles back to 'why didn't they notice there was a problem,' period -- and if there was a moratorium on purchases in the last month of the FY, people would just push through purchases in the penultimate month instead.
posted by cjelli at 10:23 AM on August 22, 2016 [2 favorites]


I hear the "infrastructure spending!" thing a lot, but I wonder whether that wouldn't just be another huge accounting shitshow with construction contractors swapped for military contractors. I mean yeah, fix what's broken, but huge new outlays? Better hope there's better accountability than what we've got now.

Oh it's invariably going to be a shitshow. But you have a much better chance of getting economic benefit out of an overpriced train train than out of an overpriced tank. Or even an underpriced tank.

In my cynicism I think everything's a shitshow - but the military has jingoism and private companies have marketing departments. Civil bureaucracy has... honesty? Sometimes? If you do it right? Which doesn't really sell.
posted by Zalzidrax at 10:23 AM on August 22, 2016 [3 favorites]


This is exactly the same in every government organization I have ever encountered.

This is common in private companies, too. It's an organizational problem, not a particular sector's. I had one colleague who could have taken a hot shit on the boss's desk and wouldn't get fired because "headcount".
posted by fatbird at 10:28 AM on August 22, 2016 [3 favorites]


Oh it's invariably going to be a shitshow. But you have a much better chance of getting economic benefit out of an overpriced train train than out of an overpriced tank. Or even an underpriced tank.

Economic benefits here are all about margins, though — how much more benefit did we extract from this project than we invested? How much more did we get relative to other projects in which we could have invested? If you raise the amount of graft high enough, there is no longer a benefit. If there is a planning failure and your project is addressing a need that does not exist, there is no longer a benefit. These problems don't go away when you leave the military sector.
posted by indubitable at 10:35 AM on August 22, 2016


It's a bad consequence of good intentions. The idea is that a government should always know exactly what its budget is. It is therefore simplest to have annual budget cycles with on carry-over. If there were carry-over accounts, bureaucrats could hoard money year on year. So they aren't allowed to. Use the money allocated or lose it.

If I ran the world, I would be all "go ahead, hoard money", at least up to a certain point. NIH allows a certain amount of carryover on grants, university fund accounting allows carryover on many accounts, and the purpose is always to deal with unexpected stuff. It's not as though you can say "well, I have $25,000 in carryover on this grant, guess I'll buy a car" - you still have to spend it on, like, science.
posted by Frowner at 10:35 AM on August 22, 2016 [6 favorites]


Also, you guys, this thread made me get my fall enrollment all set up, and I was just thinking "I cannot wait until next year when I can take the internal audits class! And the law of contracts and agency!

And then I realized that I am officially the most boring person ever. I have a newly minted accountant buddy who just went through the certification process that I'm doing (more or less) and sometimes we sit and talk accounting. It's totally the best.
posted by Frowner at 10:37 AM on August 22, 2016 [18 favorites]


Billions Over Baghdad

Between April 2003 and June 2004, $12 billion in U.S. currency—much of it belonging to the Iraqi people—was shipped from the Federal Reserve to Baghdad, where it was dispensed by the Coalition Provisional Authority. Some of the cash went to pay for projects and keep ministries afloat, but, incredibly, at least $9 billion has gone missing, unaccounted for, in a frenzy of mismanagement and greed. Following a trail that leads from a safe in one of Saddam's palaces to a house near San Diego, to a P.O. box in the Bahamas, the authors discover just how little anyone cared about how the money was handled.
posted by a lungful of dragon at 10:42 AM on August 22, 2016 [5 favorites]


I hear the "infrastructure spending!" thing a lot, but I wonder whether that wouldn't just be another huge accounting shitshow with construction contractors swapped for military contractors. I mean yeah, fix what's broken, but huge new outlays? Better hope there's better accountability than what we've got now.

Who cares? At least we'd have some bridges and tunnels and sewer systems to show for it, along with the jobs that are required to make things like that come into existence.

If we're building an unaccountable welfare make-work system filled with grift and corruption, I'd rather have bridges at the end of it than a trillion dollar fighter plane that doesn't work.

The only defense of the current military spending regime is as a jobs stimulus that's acceptable to Republican war mongers who would otherwise oppose government spending to a tenth of the degree on any other program.
posted by T.D. Strange at 10:51 AM on August 22, 2016 [39 favorites]


Or better yet, we could have a single payer health care system. Let's throw some of that money at our citizens who have repeatedly deferred needed medical care for their entire lives.
posted by T.D. Strange at 10:55 AM on August 22, 2016 [9 favorites]


The more money the DoD can hide, the greater the chance they've built a Stargate.
posted by Damienmce at 10:56 AM on August 22, 2016 [10 favorites]


This is why you audit everything at least ever 6 months by an independent auditor. It's not difficult, just complex.
posted by blue_beetle at 11:06 AM on August 22, 2016 [1 favorite]


Accounting in government is in general, pretty fucked up. I work for a contractor and we have to have our books scrupulously clean. We're audited every year by the DCAA and they are crazy thorough. However, when it comes time to actually pay us it's a different story. we had to go on furlough last year simply because the government couldn't move money between two internal accounts to pay us. It took literally two months before we could start work again.
posted by Dr. Twist at 11:06 AM on August 22, 2016 [2 favorites]


But they've lost trillions of dollars before, and it was no big deal...
posted by littlejohnnyjewel at 11:09 AM on August 22, 2016 [1 favorite]


I think a lot of people are familiar with this idea in government agencies, trying to "prove" you need the budget. I guess my question is, where does this attitude stem from?

From the inflexibility built into yearly budgets: Suppose you do the right thing and let go of that X amount of unspent money at the end of the year. Then next year comes, and you actually do need it because of unplanned situation Y - but now there's no way to claim it, because your budget has been reduced. Clearly, the prudent thing to do is to waste X amount of other peoples money if you want to be sure you will be able to do your job next year.
posted by Dr Dracator at 11:11 AM on August 22, 2016


And if we didn't spend it, we weren't rewarded for not spending the taxpayers' money, we were penalized --
"Oh, you didn't need all that money? Well, I guess we'll cut your budget for next year."


To be honest, I don't actually have a huge problem with use-it-or-lose-it budgeting. Yeah, it's laziness at the top, and yeah, it creates weird incentives. But to the extent that the fiscal year end shopping sprees actually result in upgraded equipment, or paying for training, or other things that are "nice to haves" but not budgetary priorities it's an ok way of empowering the money spenders to be smart during the year so that there is more to go around come fiscal year end time.

What really seems to be the problem here is the lack of proper record keeping. Which is inexcusable in a 10 employee company, let alone the largest portion of the federal budget. Like yeah, maybe Charlie Co. got a bunch of new Nautilus machines, but those machines are government property and should be recorded and depreciated accordingly and liquidated at the appropriate rate when their useful life is up. But instead is seems like a whole lot of money is just disappearing.

DFAS also could not make accurate year-end Army financial statements because more than 16,000 financial data files had vanished from its computer system. Faulty computer programming and employees’ inability to detect the flaw were at fault, the IG said.

Maybe we should ask Russia to find them?
posted by sparklemotion at 11:31 AM on August 22, 2016 [3 favorites]


The DoD hands out budgets with no regard for where the money goes because it is predominantly using an automatic procurement system, which means that most things are replaced immediately when broken. But it has also placed a system of checks and balances into place that are almost optional, because it would uncover vast unchecked expenses that are small amounts of money. A latte every day at the service station on the way to meet a new recruit. Sometimes the line is crossed, a recruiter is spending too much time at a strip club and it's all over the news. These small items that people later feel guilty about are allowed because the rules for reporting them are ignored. The simple reason for this is the government does not have the technical power to manage credit cards and purchasing as a government program. Here in the UK many American companies and quite a few British ones have tried and utterly failed to privatise military procurement. The US government was counting on the weapons and weapon system industry to be able to do the job of managing its accounts without bias. It all failed the test. The government is recruiting people to put this together. Getting DoD accounting straight should be an X Prize.
posted by parmanparman at 11:45 AM on August 22, 2016 [1 favorite]


I'd rather have bridges at the end of it than a trillion dollar fighter plane that doesn't work.

There was a f-35 at the Chicago air and water show this weekend. It went in flat circles. That's all. It was flying with a WWII P-51 Mustang and you'd think it would out sexy it but nope. Just faster in doing the circles.

The other jets, the obsolete ones like the almost 40 year old f-18 or the 32 f-16, they put on a show in 3 dimensions as opposed to merely 2.
posted by srboisvert at 12:21 PM on August 22, 2016 [4 favorites]


Complete list of all nations whose nominal gross domestic product exceeds the amount of money the US Army vanished into thin air in one year:

-China
-USA
posted by Sys Rq at 12:22 PM on August 22, 2016 [8 favorites]


What's an 'automatic procurement system?' I'm not familiar with that. We still issue requisitions for hundred dollar procurements that get processed by real actual humans. If you think things are fucked up now wait until military procurement is privatized. Can't wait to retire in four more years.
posted by fixedgear at 12:55 PM on August 22, 2016 [1 favorite]


Let's point fingers at the third worlders again.
posted by infini at 1:05 PM on August 22, 2016


It was flying with a WWII P-51 Mustang and you'd think it would out sexy it but nope

Heyho got a nice shot of this from her apartment.

[On top of everything else the F-35 is just not a sexy plane IMHO. Certainly no A-10 Warthog]
posted by Flashman at 1:18 PM on August 22, 2016 [1 favorite]


Similar to Etrigan's story before, I once had the job of "burning all remaining ammo so we'd get the same amount the following year." It is remarkably hard to fire ALL OF THE AMMO. My friend Scott and I would fire our M16s at full burst over and over until the barrels glowed, put them down, pick up our spares and repeat the process. We eventually had to grab a group of privates and just tell them to go batshit down range to expend it all. Then we lit up the rocket launchers. Then the flares and smoke grenades.

Good lord it was fun.
posted by Abehammerb Lincoln at 1:31 PM on August 22, 2016 [14 favorites]


Budget
Check
War on IS
Check
Enough art supplies
Check
[picks up the Red phone]
posted by clavdivs at 2:36 PM on August 22, 2016


Ya'll aren't going to be so upset about this when Jeff Goldblum and Will Smith show you what the government's been doing with that money.
posted by Pope Guilty at 3:42 PM on August 22, 2016 [2 favorites]


because the government couldn't move money between two internal accounts for reals this is something I've been dealing with lately. we have the money for [project X] could we just spend it already?

but as far as the actual article(s) - “They don’t know what the heck the balances should be” is a mind-boggling thing to read in an article about trillions of dollars.
posted by epersonae at 4:06 PM on August 22, 2016 [1 favorite]


I hear the "infrastructure spending!" thing a lot, but I wonder whether that wouldn't just be another huge accounting shitshow with construction contractors swapped for military contractors.

Bovis Lend Lease has ripped off governments, but they ain't never laid waste to swathes of the Middle East to justify the graft.
posted by save alive nothing that breatheth at 4:07 PM on August 22, 2016 [2 favorites]


I don't want to get any more specific than this: I am astounded at what people will journal entry away. For my partner and I, our work balances to the penny or we damn sure know exactly why.
posted by ob1quixote at 3:35 PM on August 23, 2016


Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.

This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter with a half-million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people. . . . This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.
-- President Dwight D. Eisenhower, "Chance for Peace" speech, April 16, 1953
posted by kirkaracha at 5:31 PM on August 23, 2016 [10 favorites]


And then I realized that I am officially the most boring person ever. I have a newly minted accountant buddy who just went through the certification process that I'm doing (more or less) and sometimes we sit and talk accounting. It's totally the best.

Heh, my SO and I used to do that when she was in school and for her first few years as an auditor. The rules, ridiculous exceptions, sampling, IFRS vs US GAAP, and other accounting stuff is actually pretty damn interesting up to a point. It's the arithmetic grind that is boring as fuck. Audit has less of that, but it makes up for it with all the ticking and tying. Ugh. I'd probably shoot myself in the head if I had to be an associate, but I'd not mind being an audit manager in the least.
posted by wierdo at 4:36 AM on August 24, 2016


fwiw, i'm far from an accounting nerd, but i find this stuff fascinating! (if not mind blowing ;)
  • "eventually it is the intangible asset of life that is amortized on each of our balance sheets"
  • "It starts with an accounting distinction..."
  • "familiarity with the system of measurement helps in understanding"
  • "Start by thinking in terms of Household Net Worth. This measure has the virtue of encapsulating and telescoping all private-sector net worth, because households ultimately own firms, at zero or more removes, but firms don't own households (yet...)"
  • "Private sector net financial assets are 'special' precisely because they are not backed by domestic real assets, but instead by promises that are credibly independent of domestic real asset values, especially promises of states."
  • "The power of QE comes from interest-paying reserves being a special public asset, neither substitutable by currency nor by government debt."
  • "Central banks are protected from insolvency due to their ability to create money and can therefore operate with negative equity."
posted by kliuless at 10:50 PM on August 24, 2016


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