Special Report: The Pentagon's Doctored Ledgers Conceal Epic Waste

By Scot J. Paltrow/Reuters

Former BTA officials blamed the failure on their lack of authority to enforce their decisions and resistance from the individual services.

CONTRACT HITS

Over the past 10 years, the Defense Department has signed contracts for the provision 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. That’s because of a massive backlog of “closeouts” - audits meant to ensure that a contract was fulfilled and the money ended up in the right place.

The Defense Contract Management Agency handles audits of fixed-price contracts, which are relatively problem-free. It’s the Defense Contract Audit Agency that handles closeouts for department-wide contracts that pay the company or individual for expenses incurred. At the end of fiscal 2011, the agency’s backlog totalled 24,722 contracts worth $573.3 billion, according to DCAA figures. Some of them date as far back as 1996.

The individual military services close out their own contracts, and the backlogs have piled up there, too. The Army’s backlog was 450,000 contracts, the GAO said in a December 2012 report. The Navy and Air Force did not have estimates of their backlogs.

“This backlog represents hundreds of billions of dollars in unsettled costs,” the GAO report said. Timely closeouts also reduce the government’s financial risk by avoiding interest on late payments to contractors.

To trim its backlog, the DCAA last year raised to $250 million from $15 million the threshold value at which a contract is automatically audited. DCAA says that by concentrating its auditors on the biggest contracts, it will recoup the largest sums of money, and that it will conduct selective audits of smaller contracts, based on perceived risk and other factors. Still, hundreds of thousands of contracts that would eventually have been audited now won’t be.

“Having billions of dollars of open, unaudited contracts stretching back to the 1990s is clearly unacceptable, and places taxpayer dollars at risk of misuse and mismanagement,” Senator Thomas Carper, a Delaware Democrat and chairman of the Homeland Security and Governmental Affairs Committee, said in an email response to questions. “We must make sure that the Department of Defense is actively assessing risks and making sure that contractors who fall underneath the threshold remain accountable for their work.”


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