In its 2007 audit-readiness plan, the Defense Department called on DFAS to eliminate plugs by June 2008. That hasn’t happened.
In its financial report for 2012, the Army said each month it “adjusts its Fund Balance With Treasury to agree with the U.S. Treasury accounts.” In its 2012 annual report, the Defense Logistics Agency said it does the same. “On a monthly basis, DLA’s (Fund Balance With Treasury) is adjusted to agree with the U.S. Treasury accounts.”
The Navy, in a footnote in its 2012 financial report, “acknowledges that it has a material internal control weakness in that it does not reconcile its” numbers with the Treasury’s. The footnote said the Navy inserts inaccurate numbers in its monthly reports so that they agree with the Treasury’s. It said it is working with DFAS to try to eliminate the problems.
The Treasury says it requires the monthly reports from Pentagon agencies to ensure that it is “providing accurate financial information to Congress and the general public.” The reports verify that the military is using money for its intended purposes; spending money on things other than what it was appropriated for is, with rare exceptions, a violation of the Antideficiency Act, which forbids anyone but Congress to appropriate money. The law carries penalties for individuals involved in violating it.
Because of the lack of accurate accounting, a 2012 GAO report said, “the Department of the Navy is at increased risk of Antideficiency Act violations.”
Without a functioning, unified bookkeeping system, the Pentagon’s accountants have no option but to continue taking that risk.
Woodford, the former accountant in DFAS’s Cleveland office, says that in the frenzy to complete the Navy’s monthly financial reports to the Treasury, much of the blame rested with the “old antiquated systems” the Pentagon used. A common reason for inserting plugs was that “you knew what the numbers were, but you didn’t have the supporting documents.”