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Pentagon fraud and waste

There is virtually no accountability for the Pentagon budget.
Four years ago today the U.S. Government Accountability Office produced the following report called “DEFENSE MANAGEMENT,
Widespread DCAA Audit Problems Leave Billions of Taxpayer Dollars Vulnerable to Fraud, Waste, Abuse, and Mismanagement.”

GAO audit Fraud, Waste, Abuse and Mismanagement at DOD

Hundreds of billions spent but the Department of Defense financial statements have not been audited for the last 9 years.

Generally if you give somebody a million dollars of your hard earned money you’d like to know before hand what they are planning to spend it on and you’d like to know afterwards what they actually spent it on.  That’s for a million dollars.  For a billion dollars (or a hundred billion) here’s how the game is played in Washington, D.C.

There is an incredible story contained in the following document:

It is the OIG Independent Auditor’s October 19, 2009 document which summarized the OIG’s 255 audit reports issued during FY 2004 through FY 2008.  It is Report No. D-2010-002 found at

http://www.dodig.mil/audit/reports/fy10/10-002.pdf

You can also download this document from our website.

10-002 DODIG Audits FY 2004 – 2008

The OIG is the Office of Inspector General.  Many large agencies in the Federal Government each have their own OIG.  One of the OIG’s responsibilities is to audit the agency.  The DOD is the Department of Defense.  The DOD OIG includes an Independent Auditor (IA) whose does these audits.  Or used to until . . .

Here’s the basic story.  You can find this on page 1-2 of the document which shows up as pages 8-9 in your browser using Adobe Reader.

From 1991 to 2001 the DOD OIG (IA) audited the financial statements of the Department of Defense.  The last 3 years that the Office of Inspector General actually audited the DOD financial statements were Fiscal Years 1998, 1999 and 2000.  In those audits the OIG found $1.7 trillion, $2.3 trillion, and $1.1 trillion unaccounted for.  OIG described those entries as “unsupported”, “improper”, “did not contain adequate documentation and audit trails, or did not follow accounting principles” among other terms.

It can’t be said any better than the OIG said it:

Beginning of quotes from Report No. D-2010-02 from the Inspector General, U.S. Department of Defense, October 9, 2009.

”Beginning in 1991, DOD began preparing and submitting financial statements for audit. However, DOD OIG audits of those financial statements for FYs 1991 through 2001 identified pervasive and long-standing material weaknesses which caused those financial statements to be unauditable. As a result, Congress passed the ‘National Defense Authorization Act for Fiscal Year 2002,’ on December 28, 2001, that limits the amount of audit work performed by the DOD OIG under the CFO Act based on management’s representation regarding the reliability of the financial statements.

For FY 2002, the Under Secretary of Defense (Comptroller)/DOD Chief Financial Officer (USD[C]/CFO) represented to the DOD OIG that 8 of the 9 required financial statements1 were not reliable due to the 13 material weaknesses that the DOD OIG had previously identified. Accordingly, the DOD OIG limited audit work and issued a disclaimer of opinion on those eight financial statements. The Military Retirement Fund received a clean audit opinion.

”Since FY 2002, DOD has made minimal progress in achieving auditability at the entity financial statement level or at the DOD Agency-wide level. USD(C)/CFO has continued to represent that the DOD Agency-wide financial statements remain unreliable because of the 13 auditor-identified material weaknesses. For FY 2008, USD(C)/CFO represented that 7 of the 9 financial statements remained unreliable. As a result, the DOD OIG issued a disclaimer of opinion for those seven financial statements.”

End of quotes from Report No. D-2010-02 from the Inspector General, U.S. Department of Defense, October 9, 2009.

There are two absolutely incredible statements in here.  One is that Congress, shortly after the terrorist attacks of September 11, 2001, allowed the Department of Defense to opt out of its previously legally required audits.  The DOD can just say, “We are not very good bookkeepers.  Come back next year and maybe we’ll have done a better job.”  With that the OIG (IA) is gone.  They are prevented by law from performing any audit.

The second incredible statement is, “Since FY 2002, DOD has made minimal progress in achieving auditability at the entity financial statement level or at the DOD Agency-wide level.”  Remember that this document was written by the OIG in October, 2009.  That covers a period of 7 years.

Question:  with all the employees, talent, and money available at the DOD, do you think they are trying to achieve auditability?

This is an exemption that has continued.  The net effect is that despite getting literally hundreds of billions of taxpayer dollars every year, the Department of Defense financial statements have not been audited since Fiscal Year 2000, or 9 years.

Compare this to school districts all across the nation that have been forced to make cuts on top of cuts on top of cuts.  They must account for every dollar spent.  As Teachers and other Educators, you have to do more with less every day.  The situation in Washington is just about the opposite.