Turning off the Tap: The Pentagon Fails its 4th Consecutive Audit

by | Jan 19, 2022 | Analysis, Commentary

For the fourth Year in a Row, the Pentagon Failed a $200-Million Audit of its $780-Billion Budget and $3-Trillion Balance Sheet

One of the biggest blacked-out stories of 2021 surely has to be the news, on November 16, that the Pentagon once again had abysmally failed to pass an audit, despite the best efforts of 1,200 top-flight Wall Street auditors operating on a $220-million budget, to vet the Pentagon’s estimated $3 trillion balance sheet of assets and liabilities, and its fiscal year 2021 spending budget of $740 billion.

Pentagon spending accounts for half the entire annual discretionary budget of the U.S. government each year. (That is, spending annually appropriated by Congress, as opposed to mandated spending, which is largely out of Congress’s control, such as interest on the federal debt, payment of Social Security benefits, and payment of Medicare benefits, also funded by a special tax.) The fact that this largest agency in the U.S. government cannot and for decades has refused to provide the government with an auditable accounting of its expenditures doesn’t seem to count as major news in the U.S. corporate media. Indeed, for most domestic news organizations it isn’t news at all.

The New York Times has run no report on the Pentagon’s failure to pass a fourth audit in a row. Neither has the Washington Post. An exception to this editorial deep-sixing of an incredibly important piece of news was, as usual, the Reuters news service, which has been following this story doggedly for years. Its report, authored by Mike Stone and headlined “US Pentagon fails fourth audit,” still put a spritz of deodorant on the stench by quoting the Pentagon’s chief financial officer claiming the sprawling agency was making “steady progress” and offering that it might perhaps succeed in having a fully auditable budget by 2027.

That’s a whole administration and several new Congresses away from today. It’s a considerably longer time than the U.S. spent fighting in World War II.

Meanwhile the reality — as I wrote when I covered and explained the first epic full-audit failure of a similar outside audit team examining the Pentagon’s finances in 2018 in an article in the Nation magazine — for all the decades that the Pentagon has stonewalled Congressional demands that it produce standard, decipherable, and auditable accounting records, Congress has had no way it can do its Constitutional duty of overseeing and controlling the budget of the government’s single biggest and costliest agency.

As a number of my sources back then told me, it’s impossible for Congressional oversight bodies like the Congressional Budget Office, the House and Senate Armed Services Committees, the House and Senate Budget Committees, or even the White House and the Secretary of Defense (sic), to rationally determine how much of the funding that the Pentagon requests each year is actually needed without knowing how much it actually spent of the funds allocated for the prior fiscal year.

And it’s not as if the Pentagon is trying to have a decipherable budget to present to Congress. In fact, what used to be more accurately called America’s War Department does the exact opposite. Each year, as they’ve done for decades, Pentagon accountants based at an Army facility in Indiana go over all the numbers. Then, as routinely happens, when the numbers for allocated funds from the Treasury, and funds on everything from payments to weapons system contractors to salaries for personnel, don’t balance as they should, these accountants just insert what they call a “plug,” artificially making it look like everything was covered, or spent. But everyone knows these plugs — which over the years have totaled more than $50 trillion! — are fake numbers.

And although there’s no such term of art as “plug” in the accounting lexicon, nothing gets done about it.

If this kind of Alice in Wonderland nonsense were to happen in the budget of a federal agency like the Environmental Protection Agency, Bureau of Indian Affairs, the Department of Labor, Education, Health and Welfare, or some other equally unpopular outfit, the line of elected officials waiting to sound off in the empty well of their respective chamber for the cameras and for entry of their self-congratulatory blather in the Congressional Record would run out the door into the Capitol building rotunda. Instead, a majority of both parties’ representatives in the House this year, in an incredible slap in the face of taxpayers, actually added another $25 billion to the Pentagon’s already bloated record $754-billion request for funds. They did this, remember, in a year that the U.S. is, for the first time since 2001, at least officially not at war anywhere. They did it with no member of the House being able to state with a straight face that she or he knew what the Pentagon had done with the over $740 billion Congress gave the Pentagon the year before.

When I spent several months investigating this incredible scandal four years ago, I interviewed Asif Khan, who heads up the National Security budget unit of the Governmental Accountability Office (GAO). At that time, he explained that it was the complete lack of transparency and even decipherability of the Pentagon’s accounting that has for years put it on the GAO’s list of “high risk” agencies “prone to significant fraud, waste and abuse.”

For its part, the Pentagon isn’t expressing any concern, much less contrition, for failing its fourth audit in a row, at a cost over that period of almost a billion dollars in audit fees and expenses.

Nobody is being hauled before Congress to take responsibility for this outrage, no middle level people dare to come forward as whistleblowers to expose the scandal. Why would they, with Congress ready to approve — and even to embellish upon — whatever extravagant budgetary wish list the Pentagon hands it each year?

With this giant financial Roomba called the Pentagon, sitting across the Potomac vacuuming up public funds, money desperately needed for schools, higher-ed grants, climate action, national parks maintenance, financial relief for the jobless, vaccine assistance for poor nations overrun with pandemic diseases, or Social Security benefits is not available.

Americans seem to think of federal funding as children think of an ATM: something that just appears out of nothing from a slot for whoever punches the correct PIN. They need to realize it’s more like a house with a big family, four showers and a washing machine. The showers are all supplied by half-inch-diameter feeder lines, but the washer has a big one-inch supply line straight from the home’s pressure tank. The showers work great, even when everyone is taking one at the same time, but if someone decides to do a load of laundry in the morning too when everyone wants to shower and dress for the day, the flow for them slows to a trickle while the washtub fills.

The Pentagon is the washing machine in this parable, but unlike a home, it’s always on.  If everyone in the house wants to shower in the morning, they need to either unplug or turn off the washer, or replace its feeder line from the pump with the same half-inch piping that supplies the showers.

To take this analogy further, the family in this imaginary household might want to monitor who is washing what and determine whether someone is washing clothes too often or setting the water level on full when a half- or low-level option would do the job.

 

 

Dave Lindorff, who lives in an old house with funky plumbing and a well with a low fill rate, won a 2019 Izzy Award for his Nation article on the Pentagon’s 2018 accounting scandal. He warned at the time that the problem was not going to be fixed any time soon.

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