Source: iStockphoto/The Fiscal Times
On November 15, Ernst & Young and other private firms that were hired to audit the Pentagon announced that they could not complete the job. Congress had ordered an independent audit of the Department of Defense, the governments largest single cost centerthe Pentagon receives two of every three federal tax dollars collectedafter the Pentagon failed for decades to audit itself. The firms concluded, however, that the DoDs financial records were riddled with so many bookkeeping deficiencies,irregularities, and errors that a reliable audit was simply impossible.
Deputy Secretary of Defense Patrick Shanahan declared that We failed the audit, but we never expected to pass it. It was an audit on a $2.7 trillion organization, so the fact that we did the audit is substantial.
As Republican Senator Charles Grassley of Iowa, a frequent critic of the DoDs financial practices, said on the Senate floor in September 2017, the Pentagons long-standing failure to conduct a proper audit reflects twenty-six years of hard-core foot-dragging on the part of the DoD, where internal resistance to auditing the books runs deep. In 1990, Congress passed the Chief Financial Officers Act, which required all departments and agencies of the federal government to develop audit able accounting systems and submit to annual audits. Since then, every department and agency has come into complianceexcept the Pentagon.
Now, a Nation investigation has uncovered an explanation for the Pentagons foot-dragging: For decades, the DoDs leaders and accountants have been perpetrating a gigantic,unconstitutional accounting fraud, deliberately cooking the books to mislead the Congress and drive the DoDs budgets ever higher, regardless of military necessity. DoD has literally been making up numbers in its annual financial reports to Congressrepresenting trillions of dollars worth of seemingly nonexistent transactionsknowing that Congress would rely on those misleading reports when deciding how much money to give the DoD the following year,according to government records and interviews with current and former DoD officials, congressional sources, and independent experts.
If the DOD were being honest, they would go to Congress and say, All these proposed budgets weve been presenting to you are a bunch of garbage, said Jack Armstrong, who spent more than five years in the Defense Departments Office of Inspector General as a supervisory director of audits before retiring in 2011.
According to The Nation, the fraud works like this: When the DoD submits its annual budget requests to Congress, it sends along the prior years financial reports, which contain fabricated numbers. The fabricated numbers disguise the fact that the DoD does not always spend all of the money Congress allocates in a given year. However, instead of returning such unspent funds to the US Treasury, as the law requires, the Pentagon sometimes launders and shifts such moneys to other parts of the DoDs budget.
Veteran Pentagon staffers say that this practice violates Article I Section 9 of the US Constitution, which stipulates that:
No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.
Among the laundering tactics the Pentagon uses: So-called one-year moneyfunds that Congress intends to be spent in a single fiscal yeargets shifted into a pool of five-year money. This maneuver exploits the fact that federal law does not require the return of unspent five-year money during that five-year allocation period.
The phony numbers are referred to inside the Pentagon asplugs, as in plugging a hole, said current and former officials. Nippering,a reference to a sharp-nosed tool used to snip off bits of wire or metal, is Pentagon slang for shifting money from its congressional authorized purpose to a different purpose. Such nippering can be repeated multiple times until the funds become virtually untraceable, says one Pentagon-budgeting veteran who insisted on anonymity in order to keep his job as a lobbyist at the Pentagon.
In this way, the DoD propels US military spending higher year after year, even when the country is not fighting any major wars, says FranklinChuck Spinney, a former Pentagon whistle-blower. Spinneys revelations to Congress and the news media about wildly inflated Pentagon spending helped spark public outrage in the 1980s. Theyre making up the numbers and then just asking for more money each year, Spinney told The Nation. The funds the Pentagon has been a massing over the years through its bogus bookkeeping maneuvers could easily be as much as $100 billion, Spinney estimated.
Congress appropriated a record amount$716 billionfor the DoD in the current fiscal year of 2019. That was up $24 billion from fiscal year 2018s $692 billion, which itself was up $6 billion from fiscal year 2017s$686 billion. Such largess is what drives US military spending higher than the next ten highest-spending countries combined, added Spinney.
The United States government collects trillions of dollars each year for the purpose of funding essential functions, including national-security efforts at the Defense Department, Senator Grassley told The Nation. When unelected bureaucrats misuse, mismanage and misallocate taxpayer funds, it not only takes resources away from vital government functions, it weakens citizens faith and trust in their government.
In all, at least a mind-boggling $21 trillion of Pentagon financial transactions between 1998 and 2015 could not be traced, documented, or explained, concluded Skidmore. To convey the vastness of that sum, $21 trillion is roughly five times more than the entire federal government spends in a year. It is greater than the US Gross National Product, the worlds largest at an estimated $18.8 trillion. And that $21 trillion includes only plugs that were disclosed in reports by the Office of Inspector General, which does not review all of the Pentagons spending.
As things stand, no one knows for sure how the biggest single-line item in the US federal budget is actually being spent. Whats more, Congress as a whole has shown little interest in investigating this epic scandal. The absurdly huge plugs never even get asked about at Armed Services and Budget Committee hearings.
There is a Pentagon budget that a former DOD internal-audit supervisor, Jack Armstrong, bluntly labels garbage. There is a Congress unable to evaluate each new fiscal years proposed Pentagon budget because it cannot know how much money was actually spent during prior years. And there is a Department of Defense that gives only lip service to fixing any of this. Why should it? The status quo has been generating ever-higher DoD budgets for decades, not to mention bigger profits for Boeing, Lockheed, and other military contractors.
The Pentagons accounting fraud diverts many billions of dollars that could be devoted to other national needs: health care, education, job creation, climate action, infrastructure modernization, and more. Indeed, the Pentagons accounting fraud amounts to theft on a grand scaletheft not only from Americas taxpayers, but also from the nations well-being and its future.
As President Dwight D. Eisenhower, who retired from the military as a five-star general after leading Allied forces to victory in World War II, said in a 1953 speech, Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. What would Eisenhower say today about a Pentagon that deliberately misleads the peoples representatives in Congress in order to grab more money for itself while hunger, want, climate breakdown, and other ills increasingly afflict the nation?