The Pentagon Dominates GAO's 2019 High-Risk List, For Past 25 Years They "Cannot Accurately Account For & Report On Spending or Assets"
The Government Accountability Office recently released their "2019 High-Risk List." As usual, many Pentagon areas of operation were flagged as being "most vulnerable to waste, fraud and abuse."
The Government Accountability Office recently released their "2019 High-Risk List." As usual, many Pentagon areas of operation were flagged as being "most vulnerable to waste, fraud and abuse."
Here is a list of the most egregious Pentagon-related offenders:
DOD Financial Management
DOD Weapon Systems Acquisition
DOD Business Systems Modernization
DOD Support Infrastructure Management
DOD Approach to Business Transformation
Government-wide Personnel Security Clearance Process
Ensuring the Cybersecurity of the Nation
Strengthening Department of Homeland Security Management Functions
Ensuring the Effective Protection of Technologies Critical to U.S. National Security Interests
VA Acquisition Management
DOE’s Contract Management for the National Nuclear Security Administration
DOD Contract Management
Managing Risks and Improving VA Health Care
Management of Federal Oil and Gas Resources
Transforming EPA’s Processes for Assessing and Controlling Toxic Chemicals
If you are wondering how trillions of tax dollars can go unaccounted for, consider this GAO 2019 High-Risk statement, which is very similar to previous statements that have been featured in every High-Risk report since 1995:
"DOD's financial management continues to face long-standing issues — including its decentralized environment; cultural resistance to change; lack of skilled financial management staff; ineffective processes, systems, and controls; incomplete corrective action plans; and the need for more effective monitoring and reporting.
DOD financial management was first added to our High-Risk List in 1995.
DOD remains one of the few federal entities that cannot accurately account for and report on its spending or assets.
DOD’s discretionary spending makes up about half of the federal government’s discretionary spending, and its assets represent more than 70 percent of the federal government’s physical assets....
According to DOD Office of Inspector General (OIG) ineffective information technology systems’ controls hinder DOD’s ability to produce accurate, timely, and reliable financial information.
DOD’s auditors issued more than 1,100 systems-related findings and recommendations during the fiscal year 2018 financial statement audit and the DOD OIG has reported multiple material financial systems that do not comply with federal systems requirements.
These weaknesses pose a significant risk to DOD operations and could, for example, result in payments and collections being lost, stolen, or duplicated.
They may also open the department up to other cyber threats across different networks and systems...."
As previously reported, "solutions to known problems which can save tens of billions of dollars annually have not been implemented."
The Federal News Network reported on two of the 15 DOD-related High-Risk areas:
"The [High Risk] list, released Wednesday, states efforts to shore up problems with DoD weapons systems acquisition remain 'unchanged' since GAO's last high-risk list in 2017. GAO made the same assessment of the Pentagon’s contract management issues, though with a few positive caveats.
The two items on the high-risk list account for almost $2 trillion in taxpayer funds — about $1.66 trillion in investments of 86 major weapons systems and $300 billion in annual contracted services for the Pentagon. Both of the items have been on GAO’s high-risk list since the early 1990s....
DoD demonstrated progress was lackluster in the past two years. 'DoD programs continue to not fully implement knowledge-based acquisition practices, which increases the risk of undesirable cost and schedule outcomes,' the report states.
The military still has not implemented leading practices and lessons to make greater use of existing financial awards for good performance.... Additionally, DoD has not identified a plan with specific goals or performance measures to implement across its acquisition portfolio to achieve better results....
DoD faces many of the same problems with contract management. Even with congressional changes and authorities, the Pentagon’s improvements are lacking.... DoD still has not implemented ways to improve its acquisition workforce, service acquisitions or operational contract support.
'Over the years since we added this area to our high-risk list, we have made numerous recommendations related to these high-risk issues, 18 of which were made since the last high-risk update in February 2017,' the report states. 'As of November 2018, 41 recommendations related to this high-risk area are open.'
While DoD increased its acquisition leadership and bettered training, there is still no framework for the acquisition workforce that identifies key times frames, metrics or projected budgetary requirements associated with key goals or strategic priorities.
DoD still has not developed plans to use an annual inventory of contracted services for workforce and budget decisions, which is statutorily required, and the department still needs to develop metrics to track progress associated with shaping the future of the acquisition workforce...."
In another recent government report, the DOD IG summed up 2018 Pentagon audit findings:
"As described in this report, the audits identified many deficiencies in DoD financial management and reporting — 20 overall material weaknesses and more than 2,400 notices of findings and recommendations, including weak information technology controls, insufficient controls to ensure the accuracy and completeness of property, and incomplete universes of financial transactions.
It is critical for the DoD to implement corrective action plans and to monitor the implementation of those corrective actions….
In addition, DoD Components had 37 instances of non-compliance with laws and regulations…. Similar to material weaknesses, many of the instances of non-compliance with laws and regulations are similar between Components. For example, most Components did not fully comply with the Federal Managers' Financial Integrity Act of 1982 or the Federal Financial Management Improvement Act of 1996....
On November 15, 2018, the DoD OIG issued a disclaimer of opinion on the FY 2018 Agency Wide Basic Financial Statements, meaning an overall opinion could not be expressed on the financial statements under audit. After compiling over 2,400 DoD Component NFRs and 129 DoD Component material weakness, the DoD OIG identified 20 Agency Wide material weaknesses....
In addition to these material weaknesses, the DoD OIG identified five instances of non compliance with laws and regulations across the DoD. Specifically, the DoD did not comply with the Federal Managers' Financial Integrity Act of 1982, the Federal Financial Management Improvement Act of 1996, the Antideficiency Act, the Federal Information Security Modernization Act of 2014, and the Debt Collection Improvement Act of 1996....
Significant DoD Material Weaknesses
As noted… the DoD OIG identified 20 Agency Wide material weaknesses during the FY 2018 audit. DoD management is responsible for prioritizing the findings and corrective action plans to address these material weaknesses. Most of these weaknesses affect most of the DoD Components. Each can hinder the DoD's efforts to improve its business processes and achieve auditable financial statements and are critically important to correct.
In our judgment, six material weaknesses stand out as most significant.
1. Financial Management Systems and Information Technology (IT)
2. Universe of Transactions
3. Inventory
4. Property, Plant, and Equipment (PP&E)
5. Fund Balance with Treasury
6. Financial Statement Compilation...."
As noted repeatedly, these critical material weaknesses and non-compliance with laws and regulations have been known for years, yet have never been corrected.
The New York State Society of Certified Public Accountants highlighted the 20 "material weaknesses" that the auditors detected:
"* Multiple material financial management systems that did not comply with federal requirements, and did not implement internal controls over their IT environment to sufficiently deter fraud, waste and abuse, which prevent the DoD from collecting and reporting accurate financial information.
* Inability to validate the completeness of the 'universe of transactions underlying their financial statements,' which meant they could not perform reconciliations with financial statement line items, which in turn inhibited the auditors' ability to detect errors.
* Lack of process for properly compiling statements into the Agency-Wide Basic Financial Statements.
* Ineffective processes and controls for reconciling their fund balance with Treasury.
* Lack of proper controls to record, report, test or reconcile transactions that should be labeled as accounts receivable.
* Lack of ability to report Operating Materials and Supplies in accordance with standards, as the systems did not maintain historical cost data and did not implement a process to accurately value all opening balances.
* Lack of systems and controls to properly provide assurance over the existence, completeness and valuation of inventory and related property recorded in the financial statements, as well as lack of policies and procedures to manage to account for inventory held by other parts of the DoD as well as government contractors.
* Inability to record general property, plant and equipment at acquisition or historical cost, substantiate the existence and completeness of its assets, and assign or determine the value for all real property and general equipment assets.
* Lack of policies and procedures to confirm the existence of government property in possession of contractors.
* Unsupported accounts payable balances as well as a lack of financial management system capabilities to properly record accounts payable transactions.
* Lack of policies and procedures to substantiate and value the DoD's environmental and disposal liabilities.
* Failure to justify why the DoD was "unable to determine" the change of a negative outcome for legal actions against it, as standards require for accounting for legal contingencies.
* Lack of historical data in at least six agencies that support beginning balances on financial statements or give the ability to reconcile those beginning balances to closing balances at the end of the reporting period.
* $175 billion worth of unsupported journal vouchers, as well as journal vouchers posted before management could perform adequate reviews.
* Lack of ability to accurately identify, provide supporting documentation, or fully reconcile intragovernmental transactions among certain parts of the DoD.
* Failure on the part of three reporting entities to accumulate cost information and record transactions in compliance with GAAP for Statement of Net Cost.
* Because of the above item, three agencies that were unable to perform the required reconciliation with the budget.
* Failure to accurately determine total budgetary resources available during the period, and status of those resources within three of the reporting entities.
* Lack of sufficient entity-level controls to establish an internal control system that will produce reliable financial reporting.
* Lack of effective oversight and monitoring for material weaknesses."
Beyond the trillions of taxpayer dollars that have gone unaccounted for, to begin to understand how bad operational oversight of DOD assets has been, consider these two instances cited in the GAO High Risk report:
"For example, according to a DOD official, during an initial audit, the Army found 39 Blackhawk helicopters that had not been recorded in the property system. [$819 million in value]
Similarly, the Air Force identified 478 buildings and structures at 12 installations that were not in the real property systems...."
While the GAO did give credit to the DOD for locating 39 Blackhawk helicopters and 478 buildings that had been unaccounted for, they concluded their report by saying:
"That said, hundreds of the same problems were identified again in the fiscal year 2018 audits, and hundreds of the same recommendations were re-issued."
"Hundreds of the Same Problems"
In addition to the unaccounted for DOD assets that the GAO highlighted, the DOD IG has recently revealed several more stunning examples. As the Federal News Network reported:
"According to DoD's auditors, property accountability issues are still among the most serious problems preventing it from passing an audit. In the first year of the full-scope examination, auditors issued more than 170 separate findings and recommendations detailing the military services shortcomings in tracking their inventory and real estate.”
Other than the 478 buildings and structures that were unaccounted for, “Instances of bad or missing data about entire warehouses worth of parts came up more than once.” At Utah's Hill Air Force Base, it was recently discovered that $53 million in "a stockpile of missile motors was erroneously listed as unserviceable even though they were in perfectly good condition." The Navy also found an unaccounted for warehouse that had $26 million worth of parts.
At air bases in Japan, it was discovered that "14,000 munitions worth $2.2 billion" were unaccounted for.
Another recent DOD IG audit found that an estimated "3.45 million pieces" of F-35 weapons program equipment "worth an estimated $2.1 billion" are not accounted for.
Another common theme is accounted for assets that actually don't exist. For example, "Entire facilities that had been demolished years ago, but are still listed as active on the military's property books."
"'We've gone out and said, 'Give us a list of a certain asset and how many you have and where they're located.' And when we go, we either find that they have more than they thought, or the ones on their lists don't exist,' said Carmen Malone, the deputy assistant inspector general for audit.
'If you have something in your inventory records that actually can't be used, you're not going to order something, because you think you already have it. From an inventory standpoint, that is a big deal.' Malone said one of the reasons the IG considers the property issue so serious is that it has a direct bearing on military readiness...."
Not being able to account for billions of dollars in equipment and weapons obviously has a major impact on military readiness.
This is clearly a significant National Security issue, yet it has been a known critical issue for years and minimal corrective actions have been taken. In many key areas, known problems have become worse.
As shocking as these recent findings are, they are just the tip of the iceberg. As you will see, they're just the latest examples in a long-established, well-proven track record of systemic failure to account for trillions in taxpayer dollars and assets.
Perhaps most shocking of all, despite being an overall issue featuring hundreds of front page-worthy news stories, Reuters has been the only major media company to seriously investigate this crisis, and their reporting was done back in 2013. The critical problems that they uncovered then still exist, and many of them are more severe now.
To get a further understanding the overall inventory tracking crisis, here are excerpts from the Reuters investigation into the Pentagon's stunning lack of "inventory controls:"
"TOO MUCH STUFF
The practical impact of the Pentagon's accounting dysfunction is evident at the Defense Logistics Agency [DLA], which buys, stores and ships much of the Defense Department's supplies.… It has way too much stuff. 'We have about $14 billion of inventory for lots of reasons, and probably half of that is excess to what we need,' Navy Vice Admiral Mark Harnitchek, the director of the DLA, said…
And the DLA keeps buying more of what it already has too much of…. the DLA and the military services had $733 million worth of supplies and equipment on order that was already stocked in excess amounts on warehouse shelves. That figure was up 21% from $609 million a year earlier….
Consider the 'vehicular control arm,' part of the front suspension on the military's ubiquitous High Mobility Multipurpose Vehicles, or Humvees… the DLA had 15,000 of the parts in stock, equal to a 14-year supply…. And yet… the agency bought 7,437 more of them - at prices considerably higher than it paid for the thousands sitting on its shelves.
The DLA was making the new purchases as demand plunged by nearly half… The inspector general's report said the DLA's buyers hadn't checked current inventory when they signed a contract to acquire more.
Just outside Harrisburg, Pennsylvania, the DLA operates its Eastern Distribution Center, the Defense Department's biggest storage facility. In one of its warehouses, millions of small replacement parts for military equipment and other supplies are stored in hundreds of thousands of breadbox-size bins, stacked floor to ceiling on metal shelves in the 1.7 million-square-foot building.
Sonya Gish, director of the DLA's process and planning directorate, works at the complex. She says no system tracks whether newly received items are put in the correct bins, and she confirmed that because of the vast quantities of material stored, comprehensive inventories are impossible…. Gish also says the distribution center does not attempt to track or estimate losses from employee theft.
The Pentagon in 2004 ordered the entire Defense Department to adopt a modern labeling system that would allow all the military branches to see quickly and accurately what supplies are on hand at the DLA and each of the services. To date, the DLA has ignored the directive to use the system…
More than one-third of the weapons and munitions the Joint Munitions Commandstores at Letterkenny and its other depots are obsolete, according to Stephen Abney, command spokesman. Keeping all those useless bullets, explosives, missiles, rifles, rocket launchers and other munitions costs tens of millions of dollars a year.
The munitions sit, year after year, because in the short term, 'it's cheaper for the military to store it than to get rid of it,' said Keith Byers, Letterkenny's ammunition manager. 'What's counterproductive is that what you're looking at is stocks that are going to be destroyed eventually anyway.'…
To access ammunition and other inventory still in use, depot staff often must move old explosives, much of which is stored in flimsy, thin-slatted crates.
'Continuing to store unneeded ammunition creates potential safety, security and environmental concerns,' Brigadier General Gustave Perna said.... The cost and danger of storing old munitions 'frustrates me as a taxpayer,' he said....
Joint Munitions Command scrapped a computer system that kept track of inventory and automatically generated required shipping documents. It was replaced with one that Pike says doesn't do either.
His staff now must guess how much inventory and space Letterkenny has. The Army built at additional cost a second system to create shipping documents and an interface between the two systems. 'We're having problems with the interface,' Pike says…."
Six years later, the problems at the DLA still have not been solved. In fact, the DLA recently spent over $2 billion on yet another faulty accounting system. When a 2018 audit of the DLA was attempted, it failed spectacularly. As Politico reported:
"Ernst & Young found that the Defense Logistics Agency failed to properly document more than $800 million in construction projects, just one of a series of examples where it lacks a paper trail for millions of dollars….
Across the board, its financial management is so weak that its leaders and oversight bodies have no reliable way to track the huge sums [$40 billion-a-year in taxpayer money] it's responsible for, the firm warned in its initial audit… as the auditors found, the agency often has little solid evidence for where much of that money is going.”
The $2 billion spent on the DLA's latest failed accounting system is a reoccuring theme throughout most Pentagon agencies. In total, 15 Pentagon agencies failed their 2018 audit. When it comes to "fixing" Pentagon accounting systems, there is, once again, a well-established pattern of creating very expensive new systems, which end up costing billions of tax dollars more, yet still don't fix existing problems, and they often end up making the problem even worse. As the Reuters investigation pointed out:
"COSTLY REPAIRS
Media reports of Defense Department waste tend to focus on outrageous line items: $604 toilet seats for the Navy, $7,600 coffee makers for the Air Force. These headline-grabbing outliers amount to little next to the billions the Pentagon has spent on repeated efforts to fix its bookkeeping, with little to show for it.
The Air Force's Expeditionary Combat Support System was intended to provide for the first time a single system to oversee transportation, supplies, maintenance and acquisitions, replacing scores of costly legacy systems. Work got under way in 2005. Delays and costs mounted… the Air Force conducted a test run. The data that poured out was mostly gibberish. The Air Force killed the project.
The system 'has cost $1.03 billion… and has not yielded any significant military capability,' the Air Force said….
Fixing the system would cost an additional $1.1 billion, it said, and even then, it would do only about a quarter of the tasks originally intended, and not until 2020….
[In addition] more than $1 billion was wasted when the Pentagon in 2010 ditched the Defense Integrated Military Human Resources System, launched in 2003 as a single, department-wide pay and personnel system that would eliminate pay errors. Interagency squabbles and demands for thousands of changes eventually sank it.
The Air Force's Defense Enterprise Accounting and Management System was supposed to take over the Air Force's basic accounting functions in 2010. To date, $466 million has been spent on DEAMS, with a projected total cost of $1.77 billion to build and operate it, an Air Force spokeswoman said. The system lacks 'critical functional capabilities,' and its 'data lacks validity and reliability,' according to a... Defense Department inspector general report....
In 2000, the Navy began work on four separate projects to handle finances, supplies, maintenance of equipment and contracting. Instead, the systems took on overlapping duties that each performed in different ways, using different formats for the same data. Five years later, the GAO said: 'These efforts were failures.… $1 billion was largely wasted.'
Now in use, the Navy ERP relies on data fed to it from 44 old systems it was meant to replace. 'Navy officials spent $870 million… and still did not correct' the system's inability to account for $416 billion in equipment, the Pentagon inspector general said in a July 2013 report.
… the Center for Strategic and International Studies said that while the Defense Department was spending 'in excess of $10 billion per year on business systems modernization and maintenance, overall the result is close to business as usual.'"
Now, six years after that report, "business as usual" continues apace. National Security analyst Winslow T. Wheeler summed up the ongoing accounting crisis at the Pentagon by saying:
"There is no sense of urgency in the Pentagon to do anything about it. Indeed, in the 1990s, we were promised the accountability problem would be solved by 1997. In the early 2000s, we were promised it would be solved by 2007; then by 2016; then by 2017….
The question must be asked: if nothing has been done by the Pentagon to end the accountability problem after more than 20 years of promises, is top management simply incompetent, or is this the intended result of obfuscation to avert accountability?
A spending system that effectively audits its weapon programs and offices would also be one that systemically uncovers incompetent and crooked managers, false promises and those who made them.
It would also necessarily reveal reasons to dramatically alter, if not cease, funding for some programs, which of course would make lots of people in industry, Congress, and the executive branch unhappy.
The current system and its out of control finances mortally harm our defenses, defraud taxpayers, and bloat the Pentagon and federal budgets.
Any reform that fails to address this most fundamental problem is merely another doomed attempt that will only serve to perpetuate a system that thrives on falsehoods and deception....
It is as if the accountability and appropriations clauses of the U.S. Constitution were just window dressing, behind which this mind-numbing malfeasance thrives."
Another major problem briefly highlighted in the Reuters investigation -- concerning trillions of tax dollars in Pentagon contracts -- has also become worse since they reported on it. Here's what Reuters reported:
"Over the past 10 years, the Defense Department has signed contracts for the provision of more than $3 trillion in goods and services. How much of that money is wasted in overpayments to contractors, or was never spent and never remitted to the Treasury, is a mystery.
That's because of a massive backlog of 'closeouts' - audits meant to ensure that a contract was fulfilled and the money ended up in the right place….
It's the Defense Contract Audit Agency that handles closeouts for department-wide contracts that pay the company or individual for expenses incurred. At the end of fiscal 2011, the agency's backlog totaled 24,722 contracts worth $573.3 billion, according to DCAA figures. Some of them date as far back as 1996.
The individual military services close out their own contracts, and the backlogs have piled up there, too. The Army's backlog was 450,000 contracts, the GAO said in a December 2012 report.
'This backlog represents hundreds of billions of dollars in unsettled costs,' the GAO report said.
Timely closeouts also reduce the government's financial risk by avoiding interest on late payments to contractors. To trim its backlog, the DCAA last year raised to $250 million from $15 million the threshold value at which a contract is automatically audited… hundreds of thousands of contracts that would eventually have been audited now won't be.
'Having billions of dollars of open, unaudited contracts stretching back to the 1990s is clearly unacceptable, and places taxpayer dollars at risk of misuse and mismanagement,' Senator Thomas Carper, a Delaware Democrat and chairman of the Homeland Security and Governmental Affairs Committee, said in an email response to questions.…
Spotty monitoring of contracts is one reason Pentagon personnel and contractors are able to siphon off taxpayer dollars through fraud and theft - amounting to billions of dollars in losses, according to numerous GAO reports…."
Once again, since the Reuters report, the critical problems with unaudited Pentagon contracts have become worse. A recent Army investigation into the corrupt handling of contracts recommend that the Defense Contract Management Agency (DCMA), who oversees $5 trillion worth of contracts, no longer be able to issue contracts. As POGO reported:
"The Pentagon relies on the obscure Defense Contract Management Agency (DCMA) to negotiate and administer $5 trillion in contracts across the Defense Department as an average of $455 million in taxpayer dollars are paid out each day to contractors.
How well that agency does its job directly affects both how wisely taxpayer dollars are spent and whether our troops get what they need when they need it. Yet the cascading series of major, systemic failures within the agency, which has nearly 12,000 employees and an annual budget of roughly $1.5 billion, led an independent investigator from the Army to go so far as to recommend that it be prohibited from awarding its own contracts in the future."
As the evidence clearly proves, the critical problems reported on by Reuters in 2013 are more relevant now than ever; with hundreds of severe issues still unresolved. In future reports from this series, I will continue to document many more shocking examples of unaccounted for taxpayer dollars and assets, including weapons. From our nuclear facilities to multi-billion-dollar weapons programs, fraud, waste and corruption are rampant.
As previously revealed, over $20 trillion in unaccounted for spending has been reported by the DOD IG. The more you look into military spending, the crazier it gets. The Pentagon is an abyss with layer after layer of unfolding corruption. As former Defense Secretary Donald Rumsfeld once made clear, the Pentagon is an unaccountable black hole where tax dollars disappear by the trillions. The impact that this has on our overall quality of life and standard of living cannot be overstated.
The evidence is clear; corruption throughout military spending has significantly weakened combat readiness, while diverting trillions of tax dollars away from critical infrastructure and burying our nation in record-breaking debt. As a top National Security priority, Congress must fulfill their Constitutional duty to begin wide-scale investigations into the epidemic of systemic corruption throughout the Pentagon.
DOWNLOAD FULL REPORT
You can download this report and the full Global War Profiteers Vs. The People of the United States investigative series -- over 200-pages of evidence -- in PDF format for an amount of your choosing here:
As you can see from these extensive reports, I have been working hard to uncover vital information on this critical national security issue. All of this work is done independently and it is 100% reader-funded.
Please subscribe - your support is vital.