DOD
finally has a handle on its finances for the first time in decades. See below.
DoD Completes First
Full Financial Statement Audit; Findings Will Directly Benefit Readiness,
11/16/18.
More than 1,200 auditors conducted over 900 site visits at over 600 locations across the DOD and examined hundreds of thousands of items.
Auditors evaluated data for accuracy and completeness to verify counts, location and condition of military equipment, real property and inventory. Auditors also tested for security vulnerabilities in DOD business systems and validated the accuracy of personnel records and actions, such as promotions and separations.
“The release of the first-ever Department of Defense audit is a historic accomplishment and indicates our commitment to accountability and reform. We conducted the audit to facilitate transparency with Congress and the American taxpayer and to determine corrective actions to instill long-term discipline,” Patrick M. Shanahan, deputy secretary of defense, said.
Multiple DOD organizations received the highest rating of unmodified or “clean” audit opinions, including the U.S. Army Corps of Engineers – Civil Works; the Military Retirement Fund; Defense Health Agency – Contract Resource Management; Defense Contract Audit Agency; and the Defense Finance and Accounting Services Working Capital Fund. The Medicare-Eligible Retiree Health Care Fund and the Defense Commissary Agency received modified opinions, which means they do not comply with generally accepted accounting principles but financial statements are fairly presented.
With a department-wide audit, some organizations are new to the audit process. These organizations received a disclaimer, meaning multiple issues need to be fixed. The auditors provided favorable feedback that Army, Navy and Air Force properly accounted for major military equipment and military and civilian pay. Auditors found no evidence of fraud. They identified issues the department needs to address, including inventory, real property and information technology security.
The department started the audit in December 2017 in order to find problems and fix them. DOD is committed to fixing these issues and continuing to improve the ability to defend the nation while being good stewards of the taxpayers’ money.
The DOD-wide audit report and links to component audit reports will be available at http://comptroller.defense.gov/odcfo/AFR2018.aspx.
U.S. Army fudged its accounts in 2013 by trillions of dollars, auditor finds, by Scot J. Paltrow, 8/19/16.
“THE GRAND PLUG” - Jack Armstrong, a former Defense Inspector General official in charge of auditing the Army General Fund, said the same type of unjustified changes to Army financial statements already were being made when he retired in 2010.
This
week, the Department of Defense fulfilled its commitment to the American people
by completing a full-scope, department-wide, financial statement
audit.
DOD past
Audit Problems were outlined in 2016 articles below.
Pentagon
Cannot Account for $6.5 Trillion Dollars in Taxpayer Money, by Jay Syrmopoulos,
Edited by Ronnie Greene, 8/8/16.
A new Department of
Defense Inspector General’s report, released
last week, has left Americans stunned at the jaw-dropping lack of
accountability and oversight. The glaring report revealed the Pentagon couldn’t
account for $6.5 trillion dollars worth of Army general fund transactions and
data, according to a report by the Fiscal Times.
The Pentagon, which has
been notoriously lax in its accounting practices, has never completed an audit,
would reveal how the agency has specifically spent the trillions of dollars
allocated for wars, equipment, personnel, housing, healthcare and procurements
allotted to them by Congress.
Beginning in 1996 all
federal agencies were mandated by law to conduct regular financial audits.
However, the Pentagon has NEVER complied with that federal law. In 20 years, it
has never accounted for the trillions of dollars in taxpayer funds it has
spent, in part because “fudging” the numbers has become standard operating
procedure at the Department of Defense, as revealed in a 2013 Reuters investigation by
Scot Paltrow.
According to the report by
the Fiscal Times: An increasingly
impatient Congress has demanded that the Army achieve “audit readiness” for the
first time by Sept. 30, 2017, so that lawmakers can get a better handle on
military spending. But Pentagon watchdogs think that may be mission impossible,
and for good reason.
The Defense Finance and Accounting Service (DFAS),
the behemoth Indianapolis-based agency that provides finance and accounting
services for the Pentagon’s civilian and military members, could not provide
adequate documentation for $6.5 trillion worth of year-end adjustments to Army
general fund transactions and data.
The DFAS has the sole responsibility for paying all
DOD military and personnel, retirees and annuitants, along with Pentagon
contractors and vendors. The agency is also in charge of electronic government
initiatives, including within the Executive Office of the President, the
Department of Energy and the Departing of Veterans Affairs.
While there is nothing in
the IG’s report specifying that the money has been stolen, the mere fact that
the Pentagon can’t account for how it spent the money reveals a potentially far
greater problem than simple theft alone.
For every transaction, a
so-called “journal voucher” that provides serial numbers, transaction dates and
the amount of the expenditure is supposed to be produced. The report specifies
that the agency has done such a poor job in providing documentation of their
transactions, that there is no way to actually know how $6.5 trillion dollars
has been spent. Essentially, the government has no way of knowing how the
Pentagon has spent the trillions of taxpayer dollars allocated by Congress for
national defense.
In turn, employees of the
DFAS were routinely told by superiors to take “unsubstantiated change actions”
commonly referred to as “plugging” the numbers. These “plugs” – which amounted
to falsifying financial records – were then used to create the appearance that
the military’s financial data matched that of the U.S. Treasury Department’s
numbers when discrepancies in the financial data couldn’t be accounted for.
According to that Reuters investigation:
For two decades, the U.S. military has been unable
to submit to an audit, flouting federal law and concealing waste and fraud
totaling billions of dollars.
Linda Woodford spent the last 15 years of her
career inserting phony numbers in the U.S. Department of Defense’s accounts.
Every month until she retired in 2011, she says,
the day came when the Navy would start dumping numbers on the Cleveland, Ohio
DFAS…. Using the data they received, Woodford and her fellow accountants there
set about preparing monthly reports to square the Navy’s books with the U.S.
Treasury’s…. And every month, they encountered the same problem. Numbers were
missing. Numbers were clearly wrong. Numbers came with no explanation of how
the money had been spent or which congressional appropriation it came from.
While many of the problems
occurred due to bookkeeping errors rather than actual financial losses, the
DFAS has failed to provide the necessary tracking information essential to
performing an accurate audit of Pentagon spending and obligations, according to
the IG’s report.
“Army and Defense Finance
and Accounting Service Indianapolis personnel did not adequately support $2.8
trillion in third quarter adjustments and $6.5 trillion in year-end adjustments
made to Army General Fund data during FY 2015 financial statement compilation,”
wrote Lorin T. Venable, the assistant inspector general for financial
management and reporting. “We conducted this audit in accordance with generally
accepted government auditing standards.”
The Pentagon has a chronic
failure to keep track of its money – how much it has, how much it pays out and
how much is wasted or stolen. Adding to the appearance of impropriety is the
fact that thousands of documents that should be on file have been removed and
disappeared without any reasonable explanation.
DFAS “did not document or
support why the Defense Departmental Reporting System removed at least 16,513
of 1.3 million records during Q3 FY 2015. As a result, the data used to prepare
the FY 2015 AGF third quarter and year-end financial statements were unreliable
and lacked an adequate audit trail,” according to the IG’s report stated.
The accounting errors and
manipulated numbers, though obviously problems in their own right, highlight a
far greater problem for the Defense Department than only bad recording keeping
and wasteful spending habits. In reality, they are a representation of the poor
decision making, and lack of oversight and accountability that plague our
nation’s government as a whole.
While the Department of
Defense can’t account for $6.5 trillion dollars of taxpayer funds in 2014 there were 47
million people, including over 15 million children, living in poverty in the
U.S. – %15 of the U.S. population, which is the largest total number in poverty
since records began being kept 52 years ago.
Please share this story if
you are appalled by the fact that there are Americans that are homeless and
hungry, including U.S. combat veterans while the government is unable to
account for $6.5 trillion dollars of taxpayer money.
NEW YORK
(Reuters) - The United States Army’s finances are so jumbled it had to make
trillions of dollars of improper accounting adjustments to create an illusion
that its books are balanced.
The
Defense Department’s Inspector General, in a June report, said the Army made
$2.8 trillion in wrongful adjustments to accounting entries in one quarter
alone in 2015, and $6.5 trillion for the year. Yet the Army lacked receipts and
invoices to support those numbers or simply made them up.
As a
result, the Army’s financial statements for 2015 were “materially misstated,”
the report concluded. The “forced” adjustments rendered the statements useless
because “DoD and Army managers could not rely on the data in their accounting
systems when making management and resource decisions.”
Disclosure
of the Army’s manipulation of numbers is the latest example of the severe
accounting problems plaguing the Defense Department for decades.
The report
affirms a 2013 Reuters series revealing how the Defense Department falsified
accounting on a large scale as it scrambled to close its books. As a result,
there has been no way to know how the Defense Department far and away the
biggest chunk of Congress’ annual budget spends the public’s money.
The new
report focused on the Army’s General Fund, the bigger of its two main accounts,
with assets of $282.6 billion in 2015. The Army lost or didn’t keep required
data, and much of the data it had was inaccurate, the IG said.
“Where is
the money going? Nobody knows,” said Franklin Spinney, a retired military
analyst for the Pentagon and critic of Defense Department planning.
The
significance of the accounting problem goes beyond mere concern for balancing
books, Spinney said. Both presidential candidates have called for increasing
defense spending amid current global tension.
An
accurate accounting could reveal deeper problems in how the Defense Department
spends its money. Its 2016 budget is $573 billion, more than half of the annual
budget appropriated by Congress.
The Army
account’s errors will likely carry consequences for the entire Defense
Department.
Congress
set a September 30, 2017 deadline for the department to be prepared to undergo
an audit. The Army accounting problems raise doubts about whether it can meet
the deadline – a black mark for Defense, as every other federal agency
undergoes an audit annually.
For years,
the Inspector General – the Defense Department’s official auditor – has
inserted a disclaimer on all military annual reports. The accounting is so
unreliable that “the basic financial statements may have undetected
misstatements that are both material and pervasive.”
In an
e-mailed statement, a spokesman said the Army “remains committed to asserting
audit readiness” by the deadline and is taking steps to root out the problems.
The
spokesman downplayed the significance of the improper changes, which he said
net out to $62.4 billion. “Though there is a high number of adjustments, we
believe the financial statement information is more accurate than implied in
this report,” he said.
The Army
issues two types of reports – a budget report and a financial one. The budget
one was completed first. Armstrong said he believes fudged numbers were
inserted into the financial report to make the numbers match.
“They
don’t know what the heck the balances should be,” Armstrong said.
Some
employees of the Defense Finance and Accounting Services (DFAS), which handles
a wide range of
Defense
Department accounting services, referred sardonically to preparation of the
Army’s year-end statements as “the grand plug,” Armstrong said. “Plug” is
accounting jargon for inserting made-up numbers.
At first
glance adjustments totaling trillions may seem impossible. The amounts dwarf
the Defense Department’s entire budget. Making changes to one account also
require making changes to multiple levels of sub-accounts, however.
That
created a domino effect where, essentially, falsifications kept falling down
the line. In many instances this daisy-chain was repeated multiple times for
the same accounting item.
The IG
report also blamed DFAS, saying it too made unjustified changes to numbers. For
example, two DFAS computer systems showed different values of supplies for
missiles and ammunition, the report noted – but rather than solving the
disparity, DFAS personnel inserted a false “correction” to make the numbers
match.
DFAS also
could not make accurate year-end Army financial statements because more than
16,000 financial data files had vanished from its computer system. Faulty
computer programming and employees’ inability to detect the flaw were at fault,
the IG said.
DFAS is
studying the report “and has no comment at this time,” a spokesman said.
Norb Leahy, Dunwoody
GA Tea Party Leader
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