Want to Cut Government Waste? Find the $8.5 Trillion the Pentagon Can’t Account For

Lauren Lyster
Daily Ticker
November 25, 2013

Yahoo Money’ The Daily Ticker  is reporting that is has discovered a Reuters investigation that reveals $8.5 trillion – that’s trillion with a “T” – in taxpayer money doled out by Congress to the Pentagon since 1996 that has never been accounted for.
You read that right. While Republican politicians  rush to slash food stamps for the 47 million Americans living in poverty – the highest amount in nearly two decades –  Republican U.S. Secretary of Defense Chuck Hagel has the audacity to complain that $20 billion dollars in automatic sequester cuts to the massive and secretive $565.8 billion Defense Department budget are ” too steep, too deep, and too abrupt,” all while the Pentagon and the Defense Department are overseeing massive fraud, waste, and abuse.
For anyone wondering, Reuters reports that the D.O.D.’s 2012 budget totaled $565.8 billion, more than the annual defense budgets of the 10 next largest military spenders combined, including Russia and China.

In an interview, Linda Woodford, an employee at the Defense Finance and Accounting Service – the Pentagon’s main accounting agency – reveals to Reuters that she spent the last 15 years of her career simply “plugging in” false numbers every month to balance the books;

“A lot of times there were issues of numbers being inaccurate. We didn’t have the detail … for a lot of it.”

In the REAL WORLD, that would be called MASSIVE FRAUD.

Woodford’s involvement in the fraud doesn’t even begin to scratch the surface. The report also reveals that “a single DFAS office in Columbus, Ohio, made at least $1.59 trillion – yes, trillion – in errors,  including $538 billion in plugs, in financial reports for the Air Force in 2009.”

Want to Cut Government Waste? Find the $8.5 Trillion the Pentagon Can’t Account For

The Daily Ticker’s Lauren Lyster discusses waste and lack of accountability at the Pentagon with Reuters reporter Scot Paltrow.

If you thought the botched rollout of Obamacare, the government shutdown, or the sequester represented Washington dysfunction at its worst, wait until you hear about the taxpayer waste at the Defense Department.

Special Enterprise Reporter Scot Paltrow unearthed the “high cost of the Pentagon’s bad bookkeeping” in a Reuters investigation. It amounts to $8.5 trillion in taxpayer money doled out by Congress to the Pentagon since 1996 that has never been accounted for. (The year 1996 was the first that the Pentagon should have been audited under a law requiring audits of all government departments. Oh, and by the way, the Pentagon is the only federal agency that has not complied with this law.)

We talk to Paltrow in the accompanying video about his findings.

Here are some some highlights he found among the billions of dollars of waste and dysfunctional accounting at the Pentagon:

  • The DOD has amassed a backlog of more than $500 billion in unaudited contracts with outside vendors. How much of that money paid for actual goods and services delivered isn’t known.
  • Over the past 10 years the DOD has signed contracts for provisions of more than $3 trillion in goods and services. How much of that money is wasted in overpayments to contractors, or was never spent and never remitted to the Treasury is a mystery.
  • The Pentagon uses a standard operating procedure to enter false numbers, or “plugs,” to cover lost or missing information in their accounting in order to submit a balanced budget to the Treasury. In 2012, the Pentagon reported $9.22 billion in these reconciling amounts. That was up from $7.41 billion the year before.
  • The accounting dysfunction leads the DOD to buy too much stuff. One example: the “vehicular control arm” to supply Humvees. In 2008, the DOD had 15,000 parts — a 14-year supply (anything more than three years is considered excess supply). Yet from 2010 to 2012, it bought 7,437 more of these parts and at higher prices than they paid for the ones they already had.

The Defense Department’s 2012 budget was $565.8 billion. Paltrow points out that’s more than the annual defense budgets of the next 10 biggest military spenders combined. He tells us the Pentagon “almost certainly is” the biggest source of waste in the government based on his reporting.

Looking forward, defense spending in the fiscal 2014 budget is set to be cut $20 billion from 2013 levels due to the sequester. In response, military officials, including Defense Secretary Chuck Hagel, have raised an alarm over the impact of these cuts. Hagel told a conference the cuts are “too steep, too deep, and too abrupt.”

The Wall Street Journal reports Marine Corps Commandant Gen. James F. Amos told a House panel in September the “abruptness and inflexibility of sequestration…could erode our readiness to dangerous levels.”

Does Paltrow think that’s true?

“So much of that could be cut, that the impact of the sequester would be much less than [what] Pentagon officials are claiming.” He adds that officials are basing their budget requests on their own priorities, rather than firm knowledge of what’s needed because leaders don’t know what money is slushing around.

The good news is that because of arguments over the deficit and the budget, Paltrow sees signs that members of Congress are getting serious about waste at the Pentagon.

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