Pentagon's Finance Management "An Embarrassment"
- Pentagon's Finance Management "An Embarrassment"
A New Report Says the Pentagon's Finances are in Disarray
By Drew Brown
Friday 12 May 2006
Washington - The Defense Department's accounting practices are in
such disarray that defense officials can't track how much equipment
the military owns, where it all is or exactly how they spend defense
dollars every year, according to a report Thursday by a
The report by Business Leaders for Sensible Priorities called the
Pentagon's financial-management practices "an embarrassment" that
wouldn't pass muster in the private sector.
"Today, if the Defense Department were a private business it would
be involved in a major scandal," said Kwai Chan, a former top official
with the Government Accountability Office and the report's author.
A Defense Department spokesman said officials hadn't had time to
examine the report. "It would be inappropriate for me to comment on
something that we have not had time to adequately analyze," Lt. Col.
Brian Maka said.
The nonpartisan group, made up of more than 600 current and
retired business executives from U.S. companies, thinks that federal
spending priorities are undermining national security. The group wants
Congress to shift money from the defense budget to spend more on
schools, health care, energy independence, deficit reduction and other
Financial waste at the Pentagon lends credibility to defense
analysts who argue that billions of dollars are wasted every year on
weapons "that are irrelevant to fighting terrorists and the Iraq war,"
The United States plans to spend $441 billion on defense this
year, excluding war costs, which are expected to top $120 billion in
2006. That's an increase of about 48 percent since 2001, Chan said.
U.S. defense spending this year will reach its highest level since the
The Bush administration says the money is needed to fight the war
on terrorism, but some analysts estimate that more than $60 billion in
fiscal year 2007 will be spent on weapons originally designed to fight
the Soviet Union, including the F-22 stealth fighter, the
Virginia-class submarine, the V-22 Osprey and ballistic-missile
defenses. The Soviet Union collapsed in 1991.
Nearly all the information in Chan's report came from government
documents. A report this year from the White House's Office of
Management and Budget found that 20 out of 23 defense programs that
auditors looked at - including shipbuilding, missile defense, depot
maintenance, housing, health, air, land and ship operations - didn't
use strong financial-management practices.
In reports to Congress in recent years, the GAO found:
94 percent of Army National Guard and Army Reserve soldiers
experienced pay problems in 2004.
$100 million that could be collected annually from defense contractors
who underpaid federal taxes. The federal government had collected less
than 1 percent of that - less than $700,000.
$1.2 billion in Army supplies shipped to Iraq that couldn't be
accounted for. As a result, military units ended up short on "tires,
tank tracks, helicopter spare parts, radio batteries and other basic
$35 billion worth of excess supplies and equipment, plus an inability
to track the movement of supplies.
$100 million in airline tickets that were never used.
Since 1990, Congress has required government agencies to apply the
same "financial discipline" as private companies, but the Pentagon
hasn't yet balanced its books under acceptable accounting standards.
Much of the problem stems from the sheer size of the Defense
Department and the extent of its activities. There are more than 1.2
million people in uniform. More than 20,000 people work at the
Lawrence J. Korb, who was a Pentagon official in the Reagan
administration, said Defense Secretary Donald H. Rumsfeld has said he
could save $20 billion a year alone by overhauling the Pentagon's
procurement and business practices.
"And I'm saying to myself, OK, why doesn't he do it," said Korb,
who's now a defense analyst at the Center for American Progress, a
Washington public-policy research group.
The Defense Department's Office of the Inspector General has
pronounced the department "un-auditable," Chan said. Officials have
told Congress that the Pentagon is trying to streamline more than 250
accounting systems it used a decade ago into several dozen.
The report can be found online at sensiblepriorities.org.
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