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

By Scot J. Paltrow/Reuters

“It’s like if every electrical socket in the Pentagon had a different shape and voltage,” says a former defence official who until recently led efforts to modernize defence accounting.

“AMALGAM OF FIEFDOMS”

No one can even agree on how many of these accounting and business systems are in use. The Pentagon itself puts the number at 2,200 spread throughout the military services and other defence agencies. A January 2012 report by a task force of the Defense Business Board, an advisory group of business leaders appointed by the secretary of defence, put the number at around 5,000.

“There are thousands and thousands of systems,” former Deputy Secretary of Defense Gordon England said in an interview. “I’m not sure anybody knows how many systems there are.”

In a May 2011 speech, then-Secretary of Defense Robert Gates described the Pentagon’s business operations as “an amalgam of fiefdoms without centralized mechanisms to allocate resources, track expenditures, and measure results. ... My staff and I learned that it was nearly impossible to get accurate information and answers to questions such as ‘How much money did you spend’ and ‘How many people do you have?’ “

The Pentagon has spent tens of billions of dollars to upgrade to new, more efficient technology in order to become audit-ready. But many of these new systems have failed, either unable to perform all the jobs they were meant to do or scrapped altogether - only adding to the waste they were meant to stop.

Mired in a mess largely of its own making, the Pentagon is left to make do with old technology and plugs - lots of them. In the Cleveland DFAS office where Woodford worked, for example, “unsupported adjustments” to “make balances agree” totalled $1.03 billion in 2010 alone, according to a December 2011 GAO report.

In its annual report of department-wide finances for 2012, the Pentagon reported $9.22 billion in “reconciling amounts” to make its own numbers match the Treasury’s, up from $7.41 billion a year earlier. It said that $585.6 million of the 2012 figure was attributable to missing records. The remaining $8 billion-plus represented what Pentagon officials say are legitimate discrepancies. However, a source with knowledge of the Pentagon’s accounting processes said that because the report and others like it aren’t audited, they may conceal large amounts of additional plugs and other accounting problems.


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