U.S. Army Audit Finds Trillions of Dollars in "Wrongful" Financial Adjustments

With these kind of numbers, a balanced military budget is simply illusory.

Kashamalasha/Dreamstime.com

Trillions of dollars in U.S. Army financial records are "materially misstated" or invented from whole cloth, according to a Department of Defense (DoD)'s Inspector General report from this past June.

In just one 2015 fiscal quarter, $2.8 trillion "wrongful adjustments" were made to create the false appearance of a balanced budget. Such questionable accounting ended up amounting to $6.5 trillion by the end of the year, Reuters reports. A lack of receipts and other documentation was largely the reason for the accounting chicanery, which made senior military and DoD officials unable to make accurate decisions on how to deploy resources commensurate with the budget.

But even with the Inspector General's report revealing eye-popping levels of fiscal mismanagement, the trillions of dollars in discovered voodoo accounting might actually be understating the problem.

Reuters notes that all the IG's reports on annual military accounting include a disclaimer because "the basic financial statements may have undetected misstatements that are both material and pervasive." Reuters also quotes a former Defense Department Inspector General, who referred to the annual practice of disingenuously making the budget appear to be balanced using invented numbers as "the grand plug."

The Defense Department's current annual budget continues to creep upwards toward almost $600 billion, and both major party presidential candidates have called for increased military spending, but have made no issue of the problem of wasteful defense spending.

Hillary Clinton's campaign website promises "the best-trained, best-equipped, and strongest military the world has ever known," while the totality of Donald Trump's stated position on military spending is encapsulated in the video below:

Comments

[Hugh Akston]

73% of polled Americans express confidence in the military

[commodious needs a drink]

Nobody likes to feel buyer's remorse.

[The Last American Hero]

I have tremendous confidence that the military is capable of defending us from foreign invasion and destroying any hostile nation on the planet.

I have no confidence that they can operate in a cost-effective manner.

[Red Rocks Okey-Dokein]

I have no confidence that they can operate in a cost-effective manner

I don't think there's been a military capable of that since Belisarius was re-appropriating old Roman territories with bare-bones forces.

[0x90]

It's spelled poled.

[Florida Hipster]

Maybe the military needs a smaller budget since they can't keep track of large sums of money.

[Chipwooder]

Even at the low level of the average enlisted man, the scope of waste in the military is breathtaking. When I was in Iraq, my squadron had a connex box full of MREs out at the site despite the fact that we had complete access to four meal times at the DFAC. We could take them as we pleased, so we'd rifle through the MREs to take the items we actually wanted (pound cake, combos, M, jalapeno cheese, etc), stuff the rest of it back into the box, and throw the box onto a pile of similarly raided MREs in between some of our maintenance vans. The only time the higher-ups cracked down on this was when the pile of discarded boxes spurred a huge surge in the rat population. We were one squadron with 90 or so members deployed.

[Florida Hipster]

Did it keep your fighting spirit up? If so, money well spent.

[Chipwooder]

Absolutely. There's nothing in the world like MRE fudge spread over the lemon pound cake.

[Bobarian (Would Chip Her)]

There's nothing in the world like MRE fudge spread over the lemon pound cake.

Sure... when you're out in the Suck and burning 4500 calories a day. I used to think ranger pudding over pound cake was the shit.

Ranger pudding: C-ration cocoa beverage powder, packet of non-dairy creamer, packet of instant coffee, and packet of sugar. add small amount of hot water.

C-ration Pound Cake - like eating a sandy sponge.

[Certified Public Asshat]

Speaking of euphemisms...

[Agammamon]

We've left behind connex' full of bottled water - simply because it was less expensive to buy a whole new box of water back home compared to shipping it back.

But the military does love to put the squeeze on us randomly.

One exercise, we're suddenly told that we're going to be charged for our MRE's - because the unit failed to stop ComRats when we deployed. At $7 a pop. Keep in mind that ComRats is something like $370 a month and no one had brought more than a small amount of cash as we were operating in the middle of nowhere.

[Agammamon]

Oh, and we were going to get charged for eating them even if we skipped the meal - by choice or because the optempo interfered.

[Trigger Warning]

Whenever I read about shit like this, I get so angry. I travel for Army work fairly frequently and I am forced to use the government travel card for lodging, rental cars, etc. My signed vouchers, complete with itemized receipts detailing every expense down to the penny, sit unapproved for weeks at a time while one bureaucrat after another audits them. They invariably take so long that the bill comes due and I am forced to pay the balance out of pocket. I get reimbursed several weeks to months later. Most of the time.

They do this for amounts that rarely exceed three or low four digits. They question and demand an accounting for every dime. Seems like they could use some of those people
at higher eschelons.

[IWasADemocrat]

You won't get meaningful number of votes with that kind of talk.

You certainly won't get big 'donations' from certain big industries with that kind of talk.

[Florida Hipster]

This is why I'll never run for office. Well that and the sex offender thang.

[The Late P Brooks]

"This spreadsheet won't balance."

"You're doing it wrong. Start at the bottom, and work your way up."

[Mr. Flanders]

If the Defense Department's budget is truly $600 million, then its a deal. Did the article mean to say $600 billion?

[smalleyd]

Don't you mean $600 billion?

[Sevo]

Have you met Mr. Flanders?

[The Late P Brooks]

The Defense Department's current annual budget continues to creep upwards toward almost $600 million, and both major party presidential candidates have called for increased military spending, but have made no issue of the problem of wasteful defense spending.

How could you put a price tag on peace of mind? Do you seriously expect middle managers at Northrop Grumman to send their kids to Iowa State?

[Swiss Servator]

*chokes on coffee, rises to applaud*

[Ken Shultz]

"In just one 2015 fiscal quarter, $2.8 trillion "wrongful adjustments" were made to create the false appearance of a balanced budget.

You can't do that in publicly traded companies because misstating costs and revenues impacts taxation and because "fraud" is a crime. If people buy your company's stock because they think you're more profitable than you are, you've defrauded them.

That's more than enough to keep publicly traded companies accountable, but Congress, in their infinite stupidity, also saw fit to saddle us with Title III of Sarbanes-Oxley.

"Title III consists of eight sections and mandates that senior executives take individual responsibility for the accuracy and completeness of corporate financial reports."

https://en.wikipedia.org/wiki/Sarbanes?Oxley_Act

Just because it's stupid and unnecessary to do that to the executives of publicly traded companies doesn't mean it's stupid and unnecessary to do it to government officials. If you're a government official who doesn't understand why lying to the American people about how their taxes are being spent it wrong, then maybe the government should give you however many years free of distractions to think about it.

[Lee Genes]

They could afford to send some brass to jail over this. It would probably even lower their operating budget.

[Agammamon]

But you can cook the books to your heart's content in order to ensure that 'the full faith and credit of the government' is behind the currency it will not allow competitor's for.

[MiloMinderbinder]

What's a balanced military budget? I was unaware that the military collected any taxes or had a dedicated fundins source.

[Ken Shultz]

I"m still trying to figure out where Obama got $400 million in cash to give to the Iranians.

[Chipwooder]

George Soros' walking-around money?

[bassjoe]

I believe that was a frozen account from an almost 40 year old contractual dispute.

[IndyEleven]

That's the story, but does that mean the funds are frozen like sitting in an account at the local Foreign Leaders Credit Union for 40 years, or frozen like in a social security 'lockbox'?

[bassjoe]

I don't think the feds borrowed against the frozen funds; they were most likely just sitting in a bank somewhere collecting interest.

[Lee Genes]

Oval Office couch change

[Eman]

That's what, like a third of a billion dollars? That's significantly lower than 1% of the annual military budget, so its definitely change.

[Bobarian (Would Chip Her)]

As a current employee of the US Army, imma warn you; you should not be giving us any ideas.

[Swiss Servator]

Give me a pen and a phone, I could lop off 40% of the military "budget" and employees and get a better force. Of course, I would be lynched by enraged GS-13s and contractors.

[Lee Genes]

If you could just eliminate about 395 pages of Reps and Certs from your average DOD purchase request, I would vote for you.

[Florida Hipster]

I'm willing to pay that price.

[Ken Shultz]

If shrinking the size of government, in reality, requires us to gain the support of the people who will suffer the most from that shrinking, we'll never end up shrinking the size of government.

It's a fundamental libertarian conundrum.

Ultimately, we'll need to pay government employees to be unproductive at home.

And we should do that, because paying ex-government employees to be unproductive at home is better than paying them to be unproductive at work. It's better that they're unproductive at home because then, at least, we get the long term benefits of smaller government.

Anyway, it doesn't really matter right now. Neither Hillary nor Trump are threatening to lay off useless government workers any time soon, and talking about any issue that isn't about homophobia or racism is inherently homophobic or racist by implication--for suggesting that anything might be more important than homophobia or racism.

GS-13s and contractors?!

Progressives are homophobes because they tolerate Muslims.

Progressives love Muslims because Trumpists are anti-Muslim bigots.

Pick a side, get with the program, and stop pretending that anything else matters--you racist homophobe.

[NotAnotherSkippy]

Only by cutting your pension and healthcare.

[bassjoe]

This is unsurprising. Historically, one of the biggest areas of corruption and graft has been the maintenance of the armed forces. The larger the budget, the more opportunities for unscrupulous actors -- within and without the military -- to make profit.

With a budget to big to imagine for countless vendors pretty much everywhere in the world to maintain our "Wars" on Terrorism and Drugs, the US Armed Forces is probably the biggest source of corruption in the history of the civilized world.

[Krabappel]

Their budget is $585B. How are they making trillions of dollars of adjustments to that?

[bassjoe]

Years' worth of restatements under pressure from the auditors.

[Florida Hipster]

I'm guessing the accumulated "assests". Equipment, weapons, etc.

[The Last American Hero]

My understanding is that the absolute value of the misstatements - some over, some under is many multiples of their actual budget.

[OneOut]

That certainly is A Fist Full Of Dollars.

[Swiss Servator]

We prefer a Fist full of Etiquette.

[Wizard4169]

We could get it right, for a few dollars more.

[Lee Genes]

I've watched base construction projects for years and dealt with innumerable contractors working on base. It is an absolute clusterfuck.

Just to describe one, a decades old building was being demolished down to the slab for a new warehouse. The slab however, was in horrible condition and probably wouldn't support the weight of a forklift when crossing any number of old plumbing trenches. I mentioned it to the GC because we had been asked for a product to seal the concrete per spec. His response was that it was known that the slab was bad, but by removing it the money would no longer come out of the maintenance budget and there was no money in the new building construction budget. Instead, they would finish the building and immediately afterwards request emergency funding to tear the slab out of the finished building because it was now a hazard.

[bassjoe]

Now that's imaginative thinking!

[Bobarian (Would Chip Her)]

At FT Irwin, many a moon ago, they were building a bunch of new quarters and refurbishing some old ones.

The refurbishing cost roughly 50% more than tearing them down and replacing them, but for the same reasons, there was no way to move money from rebuild to new.

Extra bonus, the old refurbished quarters were much worse than the new ones.

[Cynical Asshole]

His response was that it was known that the slab was bad, but by removing it the money would no longer come out of the maintenance budget and there was no money in the new building construction budget. Instead, they would finish the building and immediately afterwards request emergency funding to tear the slab out of the finished building because it was now a hazard.

*facepalm*

Thanks for that, I wasn't pissed off and surly enough just being at work, I needed to be kicked in the 'nads too.

[Not an Economist]

That is just one of the issues with the way the DoD budgets. They have different "pots" of money directed toward different spending. And you can't transfer money without an act of Congress. You could have a small deficit with one pot and a large excess in another and it doesn't matter because you can't transfer the money. Plus you get all the political games such as spreading the money across several different pots to hide the true costs, or forcing the spending onto another pot to make yourself look good.

The DoD acquisition system is designed (not on purpose) to maximize inefficiency and cost.

[rxc]

The entire government runs like this. Each pot of money is allocated to a particular function, and can be reprogrammed within that function, to a certain extent, but you cannot use maintenance money to build buildings. It has to do with the politics of the appropriation.

The "trillions" of dollars of waste sounds stupid, considering that the entire Federal budget is only about 4 trillion. I bet this is just some sort of accounting exercise to make up big scary numbers. It is true that the govt wastes a lot of money, but the major reason is not that the money is stolen, but that the Congress makes the military and the bureaucrats do a lot of stupid stuff, in the name of "fairness" and to pay off political supporters.One man's waste is another man's job.

[Jerryskids]

In other "a billion here and a billion there and pretty soon you're talking about real money" news, there's apparently some questions being raised about some of the money being spent on the hurricane recovery effort. No, not the latest one, silly - Katrina, the one that hit 11 years ago. Seems they appropriated $29mil to fix up 2,000 houses and $31mil later, less than half of them have been fixed and the guy they put in charge of the checkbook ain't coming off any receipts or canceled checks to explain where all the money went. The paper ain't even asking the question of why the hell we're still paying to fix up houses 11 years after the hurricane, as if the only outrage is how much we're paying.

[Cynical Asshole]

The Defense Department's current annual budget continues to creep upwards toward almost $600 million...

I'm assuming that was supposed to be "billion," not "million." $600 million sounds like a bargain, comparatively speaking.

[NotAnotherSkippy]

Thankfully we can continue to ignore entitlement spending. It's fighter jetz all the way down.

[Guy Behind the Guy, Jr.]

Yeah, but I'll bet this is the one and only department with accounting issues. We are dealing with taxpayer dollars here. Yours and mine. Do you realize what kind of hell they'd find themselves in the unlikely event that other agencies and departments mismanaged that money? Why, the press would be all over it! It would be a great big scandal!

[AD-RtR/OS!]

Sounds like they employ "Hollywood Accountants".
Jim Rockford, call your office.

[Alan@.4]

Who is responsible for this "clusterfuck"? Have they been punished? If not,why?