Report blasts military accounting

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 released last week by a nongovernmental group.

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 programs.

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,” Chan said.

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 Korean War.

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 items.”

•$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 Pentagon alone.

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.