"All this costs money. It costs more than we have."
September 10, 2002 9:06 AM   Subscribe

"All this costs money. It costs more than we have." One year ago today, U.S. Defense Secretary Donald Rumsfeld warned of a "subtle and implacable" adversary whose "brutal consistency...stifles free thought...and places the lives of men and women in uniform at risk." It wasn't freedom's obvious foes; he was referring to waste in the Pentagon. The DOD uses so many different financial systems and interfaces it won't have auditable books for another five to 10 years. It still manually enters purchases made with electronic purchase cards. It fires whistleblowers who call attention to shady missile defense deals. And every year, it completely loses track of a quarter of the world's biggest military budget.
posted by mediareport (7 comments total)
I can't decide which is funnier, reliving Bert and Osama or a sentence like, "The tangled web of Defense Department financial systems has grown even more complex now that DOD officials have found another 200 financial management systems above and beyond the 673 they already knew existed..."
posted by mediareport at 9:18 AM on September 10, 2002

How convenient, considering most of their budget comes from the Federal Reserves, which is nothing more than one helluva con job.
posted by freakystyley at 9:55 AM on September 10, 2002

The GAO report {PDF} on Pentagon financial reform.

That "loses track of one quarter of its budget" is an extremely misleading statement. The Pentagon's office of the inspector general testified before Congress in May '01 {PDF} that

Department-level accounting adjustment entries used to compile the financial statements were $4.4 trillion, with $1.1 trillion of those unsupported by reliable explanatory information and audit trails. This is an improvement from FY 1999, when $7.6 trillion of adjustments were made with $2.3 trillion unsupported, but remains a good indication of the need for wholesale changes to the financial data reporting systems.

Since the annual budget is itself less than $400B, this can't refer to annual spending -- it must refer to capital management and interdepartmental transactions. Whether it's been "completely lost track of" may be a matter of semantics -- if it's cash, that's one thing, but if it's a tank, it's probably just been moved and we don't know where to. A lot of that is probably consumables and sure, some of it is what retail genteelly terms "shrinkage". But more likely it falls into that same black hole that swallows corporate laptops and boxes of paperclips whole.

Federal Computer Week reporting on the inspector general's report notes how Excel is a key part of many departments' internal accounting, but isn't at all universal, and certainly Excel is not an exceptionally rigorous double-entry system all by itself.

Insight article from last year says, rather more dramatically,

Without ever using the word "money," a practice common among inspectors general (IGs), the deputy IG at the Pentagon read an eight-page summary of DOD fiduciary failures. He admitted that $4.4 trillion in adjustments to the Pentagon's books had to be cooked to compile the required financial statements and that $1.1 trillion of that amount could not be supported by reliable information. In other words, at the end of the last full year on Bill Clinton's watch, more than $1 trillion was simply gone and no one can be sure of when, where or to whom the money went.

One irony here is that military reform {top-down} and military transformation {culture, tactics, structure} were what Rumsfeld expected to be the major priorities of his term in office: In fact, the GAO report notes that he presented a financial systems reform plan on September 10 of last year.

Oh, goody! I see Metafilter has attracted more of the tinfoil hat crowd. The budget of the Pentagon comes from the Federal Reserve banking system? What a crock of fetid crap. Know what you're talking about, kook.
posted by dhartung at 10:01 AM on September 10, 2002

Don't you guys watch the movies? That "lost" quarter of the budget goes to black ops. How else can governments fund the la femme nikita sorts of departments?
posted by small_ruminant at 10:31 AM on September 10, 2002

Thanks for the additional links and info, dhartung, but you're spinning more than a bit yourself on Rumsfeld's seriousness about cutting the waste and fraud inherent in the Pentagon. Here's a June Cato report (pdf) that raises "questions about his commitment to transformation" and strongly implies that he deliberately killed his own 9/10 initiative:

Expert Washington players—and Rumsfeld was reputed to be one of the best during his tenure as Secretary of Defense during the Ford administration—realize that studying any initiative at length will effectively kill it. The White House allowed Rumsfeld to study defense transformation so long that vested interests defeated it before it was even formally proposed.

I should have been more careful on the "one-quarter" thing, I'll grant you that. But I'll stand by "completely lost track of" as a fair synonym for "not supported by adequate audit trails or sufficient evidence to determine their validity."

The horrendous waste, fraud and giveaways to select corporations in the DOD's procurement system need to be addressed in much more serious ways than Rumsfeld's apparent lip service. Did you read my Federal Computer Week link? The GAO said even *trying* to audit the books at this point was a waste of money.
posted by mediareport at 11:00 AM on September 10, 2002

One more relevant quote on Rumsfeld from the Cato report:

"Secretary Rumsfeld then put the final nail in the coffin of defense transformation by turning over decisions concerning tradeoffs among military readiness (how ready the forces are to fight a war), force structure (number and size of units) and modernizing the forces (R & D and procurement of new weapons) to the military services. Without transformation directed from the top, the services would continue to conduct business as usual. The Army would buy heavy armored vehicles when it should be getting lighter, the Air Force would produce fighters instead of bombers (which were the stars of the war in Afghanistan), the Navy would retain too many carriers at the expense of other more important priorities, and the Marine Corps would plan to conduct largescale amphibious assaults that have not been used since the Korean War."
posted by mediareport at 11:01 AM on September 10, 2002

I'm not arguing with you that there's waste -- what I will say is that Rumsfeld honestly came to office with intent to do something about it, even if it's on terms that you'd disagree with. 9/11 changed a lot of things, and one of them was that Rummy had to trade-off some of his agenda -- as in your last link. Whether that will result in a weakening of the transformation is an open question.

I'm not blaming you for misrepresentation, but the op-ed you took it from. Of course that's damned serious, but "unsupported accounting adjustments" are not really the same thing as monies lost. It's more of a the back door was open -- we could have been robbed than we wuz robbed!. It's horrendously bad accounting and auditing. But it isn't proof of money that went blowing away in the wind, more of poor cash management, like realizing your wallet's empty when you just went to the ATM. If you stop and think about it, you realize, slurpee @ 7-11, newspaper @ honor box, tip @ chili's and it all adds up; you just don't have a receipt for everything. Here's a link to an '00 audit of one Air Force center {PDF} that shows how the process falls far short of GAAP; in this case, some 6% of $1.2T in assets was "adjusted", and some 2/3 of the adjustment is attributed to "incomplete documentation". That doesn't meet GAAP, that's piss-poor mismanagement, but it's not the same as "completely lost track of", either. They actually have a pretty good idea where that money went, in this case -- either the "buyer" or the "seller" (which of course simply means in most cases one USAF unit to another) had information that the other didn't. That probably generally holds true throughout this $1.1T adjustment referred to. I'll go with "doesn't have full confidence in its own audit", for example. Yes, a semantic argument, but again -- I'm indicting the exaggeration in the op-ed, which vastly oversimplified what was said to Congress.

I fully support Congress keeping its microsope fired up, and I hope there's continued scrutiny. There's really no excuse for bureaucratic failure of this magnitude. But government doesn't have the advantage of the private sector; Enron could fail, the Pentagon can't. (Unless you're advocating something out of Cato's fringe, i.e. privatized, competing militaries ... Hoo-ah! We got the Iraq contract! Suit up, boys!). Reform, or transformation, whichever you're on, is going to be incremental; and Rumsfeld knew he had an uphill struggle going in, but it was one he seemed to relish. Sitting on the outside, it's a popular Washington parlor game to reform the Pentagon ...
posted by dhartung at 2:42 PM on September 10, 2002

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