IMPORTANT BENEFIT UPCOMING AT CHAMELEON’S … plus … THE CONCLUDING PART OF OUR SERIES ON PENTAGON WASTE, FRAUD, AND CORRUPTIONPENTAGON PT 3
By DAN VALENTI
PLANET VALENTI NEWS AND COMMENTARY
(FORTRESS OF SOLITUDE, FRIDAY, DEC. 6, 2013) — Before we present the finale of our Reuters series on waste, corruption, and fraud in The Pentagon and the Department of Defense, we pay our respects to this exact date, Friday, Dec. 6, 45 years ago.
THE PLANET is currently at work on a book-length memoir, in which we shall share more of the significance of this date on our physical, emotional, moral, and spiritual lives. For now, let us simply dedicate today’s column to
SO SHE COULD SEE
WHAT SHE WAS EATING
We wish her all love, goodness, and peace.
Have a great weekend, my friends. Be sure to tune in next week. THE PLANET has unearthed all manner of shocking news as it pertains to “official” Pittsfield. While it may or may not be enough to “bring governments down,” it will, at minimum, entertain with a morbid curiosity, that voters should be so wise that the majority of them — more than 75% in the past municipal election — should choose not to vote at all. You won’t find it anywhere else but here. If we wished to but wave out pen, we could end despotic reign!
One last thing: Tonight, go to Chameleon’s for the benefit the redoubtable Andy Poncherello is producing for Madison, daughter of Teresa Burke. Here’s a link:
By Scot J. Paltrow
Reuters News Service
Part 3 of 3
(LETTERKENNY ARMY DEPOT, Chambersburg, Pennsylvania) — The Army’s General Fund Enterprise Business System is often held up as an example of rare success. Up and running in 2012, GFEBS is now used in Army posts all over the world to handle basic accounting functions.
Some things it does well, but the inspector general said in March last year that the system didn’t provide department management with required information and may not resolve “longstanding weaknesses” in the Army’s financial management, “despite costing the Army $630.4 million as of October 2011.”
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.”
The Navy started again in 2004 with the Navy Enterprise Resources Planning project to handle all Navy accounting – at first. The Navy later decided on a system design that would cover only about half of the service’s budget because a single, service-wide system would be too difficult and time-consuming, according to former Navy personnel who worked on the project. Accounting for property and other physical assets was dropped, too.
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 Navy declined to comment.
Even an effort to coordinate all these projects ended in failure. In 2006, Deputy Secretary of Defense Gordon England established the Business Transformation Agency to force the military branches and other agencies to upgrade their business operations, adhere to common standards and make the department audit-ready.
Three years later, 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, (o)verall the result is close to business as usual.”
Defense Secretary Gates shut it down in 2011 – after the Pentagon had spent $700 million on it. England declined to comment on the episode.
Former BTA officials blamed the failure on their lack of authority to enforce their decisions and resistance from the individual services.
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.
The Defense Contract Management Agency handles audits of fixed-price contracts, which are relatively problem-free. 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. The Navy and Air Force did not have estimates of their backlogs.
“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. DCAA says that by concentrating its auditors on the biggest contracts, it will recoup the largest sums of money, and that it will conduct selective audits of smaller contracts, based on perceived risk and other factors. Still, 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. “We must make sure that the Department of Defense is actively assessing risks and making sure that contractors who fall underneath the threshold remain accountable for their work.”
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. In many cases, Reuters found, the perpetrators were caught only after outside law-enforcement agencies stumbled onto them, or outsiders brought them to the attention of prosecutors.
In May this year, Ralph Mariano, who worked as a civilian Navy employee for 38 years, pleaded guilty in federal court in Rhode Island to charges of conspiracy and theft of government funds related to a kickback scheme that cost the Navy $18 million from 1996 to 2011. Mariano was sentenced November 1 to 10 years in prison and fined $18 million.
Mariano admitted that as an engineer at the Naval Undersea Warfare Center in Newport, Rhode Island, he added money to contracts held by Advanced Solutions for Tomorrow. The Georgia-based company then paid kickbacks to Mariano and others, including friends and relatives.
Mariano was charged more than five years after the allegations against him first emerged in a 2006 civil whistleblower lawsuit in federal court in Georgia that had been kept under seal. Court documents suggest one reason why the conspiracy went undetected for so long: The Navy not only gave Mariano authority to award money to contractors; it also put him in charge of confirming that the contractors did the work. The Navy never audited any of the contracts until after Mariano was arrested, a Navy spokeswoman confirmed.
On the opposite side of the country, federal prosecutors in San Diego, California, in 2009 accused Gary Alexander, a Navy civilian employee, of arranging with subcontractors to have them bill the Defense Department for services never performed and then pay him kickbacks from money the subcontractors received. Alexander masterminded the scheme while he was head of the Air Surveillance and Reconnaissance Branch of the Navy’s Space and Naval Warfare Systems Center, based in San Diego.
Alexander in 2010 pleaded guilty to defrauding the Navy and filing false tax returns. He was sentenced to 75 months in prison and was required to pay restitution and forfeitures totaling more than $500,000.
Robert Ciaffa, a federal prosecutor assigned to the case, said the bills were easily padded because DFAS didn’t require detailed invoices. The case came to light, he said, only after “a woman friend” of one of Alexander’s associates went to prosecutors in 2008 with information about the fraud.
A Navy spokeswoman said that Navy Secretary Ray Mabus has taken steps to avert such fraud, including creating a contract review board, requiring closer oversight of employees who manage contracts and establishing antifraud units within Navy contracting services.
Ciaffa said the Alexander case prompted his office in 2009 to set up a toll-free fraud tip line that has so far have yielded at least six cases. One led to guilty pleas in March 2012 by four civilian employees of the North Island Naval Air Station, near San Diego, after they were accused of receiving $1 million in kickbacks from contractors.
In its 2007 audit-readiness plan, the Defense Department called on DFAS to eliminate plugs by June 2008. That hasn’t happened.
In its financial report for 2012, the Army said each month it “adjusts its Fund Balance With Treasury to agree with the U.S. Treasury accounts.” In its 2012 annual report, the Defense Logistics Agency said it does the same. “On a monthly basis, DLA’s (Fund Balance With Treasury) is adjusted to agree with the U.S. Treasury accounts.”
The Navy, in a footnote in its 2012 financial report, “acknowledges that it has a material internal control weakness in that it does not reconcile its” numbers with the Treasury’s. The footnote said the Navy inserts inaccurate numbers in its monthly reports so that they agree with the Treasury’s. It said it is working with DFAS to try to eliminate the problems.
The Treasury says it requires the monthly reports from Pentagon agencies to ensure that it is “providing accurate financial information to Congress and the general public.” The reports verify that the military is using money for its intended purposes; spending money on things other than what it was appropriated for is, with rare exceptions, a violation of the Antideficiency Act, which forbids anyone but Congress to appropriate money. The law carries penalties for individuals involved in violating it.
Because of the lack of accurate accounting, a 2012 GAO report said, “the Department of the Navy is at increased risk of Antideficiency Act violations.”
Without a functioning, unified bookkeeping system, the Pentagon’s accountants have no option but to continue taking that risk.
Woodford, the former accountant in DFAS’s Cleveland office, says that in the frenzy to complete the Navy’s monthly financial reports to the Treasury, much of the blame rested with the “old antiquated systems” the Pentagon used. A common reason for inserting plugs was that “you knew what the numbers were, but you didn’t have the supporting documents.”
The Navy data, pouring in through dozens of jury-rigged pipelines into similarly disparate systems, required many “manual workarounds” – typing data from one system into another, which only added to the potential for errors.
“They do so much manual work, it’s just ridiculous,” says Toni Medley, who retired five years ago after 30 years doing an assortment of jobs at the same DFAS office. It’s tedious work, she says, and the people doing it “make a lot of mistakes.”
The Navy declined to comment.
Yokel, the retired official at the DFAS Cleveland office, worked as a consultant on the Navy Enterprise Resource Planning project, the new accounting system that fell short of expectations. He says that in recent years, the new system has managed to reduce the number of plugs, though they still can add up to a lot in dollar terms. And nearly half the Navy’s budget isn’t covered by the system.
(Edited by John Blanton)