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PART 1 of 3 — ANTIQUATED PENTAGON ACCOUNTING SYSTEM ALLOWS DEFENSE DEPARTMENT TO HIDE $8 TRILLION IN TAXPAYER MONEY, ALL OF WHICH IS UNACCOUNTED

By DAN VALENTI

PLANET VALENTI News and Commentary

(First of Three Parts)

(FORTRESS OF SOLITUDE, DATE, 2013) — How much is $1 trillion? One trillion dollars is:

— A one followed by 12 zeroes.

— One million millions. If the Fed printed million dollar bills, $1 trillion would not fit in a large bathtub.

— A wait of 31,688 years if in all that time you made $1 each second.

— Enough money to buy 66.7 billion copies of your favorite DVD, 28,571 flights into space as a tourist, 769 new Fenway Parks, 3.1 million Ferrari 599 GTB autos, and 282 billion Big Macs (about what the increasingly out-of-shape student population of Pittsfield eats in one school year or more than 40 for every person on the planet … and THE PLANET, for that matter).

In other words, $1 trillion is a lot of money. What would you say to $8 trillion? How about $8 trillion in tax dollars that you sent to Washington, which in turn gave it to The Pentagon, which in turn could not account for a penny of it? You’d be plenty mad, eh? Mad enough to think of armed revolution, or worse, deciding to vote in the next election?

With that preamble, we present this important story from Reuters. You may have missed this exhaustive, well-written and researched piece about an egregious waste of money by the Defense Department. THE PLANET presents this piece in three parts. We commend Reuters for publishing Paltrow’s article. We guarantee an eye-opening, although we must warn those with high blood pressure to consult a doctor before reading:

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By Scot J. Paltrow

Reuters News Service

LETTERKENNY ARMY DEPOT, CHAMBERSBURG, PA — 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, office of the Defense Finance and Accounting Service, the Pentagon’s main accounting agency. Using the data they received, Woodford and her fellow DFAS accountants there set about preparing monthly reports to square the Navy’s books with the U.S. Treasury’s – a balancing-the-checkbook maneuver required of all the military services and other Pentagon agencies.

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. “A lot of times there were issues of numbers being inaccurate,” Woodford says. “We didn’t have the detail … for a lot of it.”

The data flooded in just two days before deadline. As the clock ticked down, Woodford says, staff were able to resolve a lot of the false entries through hurried calls and emails to Navy personnel, but many mystery numbers remained. For those, Woodford and her colleagues were told by superiors to take “unsubstantiated change actions” – in other words, enter false numbers, commonly called “plugs,” to make the Navy’s totals match the Treasury’s.

Jeff Yokel, who spent 17 years in senior positions in DFAS’s Cleveland office before retiring in 2009, says supervisors were required to approve every “plug” – thousands a month. “If the amounts didn’t balance, Treasury would hit it back to you,” he says.

After the monthly reports were sent to the Treasury, the accountants continued to seek accurate information to correct the entries. In some instances, they succeeded. In others, they didn’t, and the unresolved numbers stood on the books.

View gallery.”

Worker David Lloyd handles an order in the active items …

Worker David Lloyd handles an order in the active items area of the Defense Logistics Agency’s huge  …

STANDARD PROCEDURE

At the DFAS offices that handle accounting for the Army, Navy, Air Force and other defense agencies, fudging the accounts with false entries is standard operating procedure, Reuters has found. And plugging isn’t confined to DFAS (pronounced DEE-fass). Former military service officials say record-keeping at the operational level throughout the services is rife with made-up numbers to cover lost or missing information.

A review of multiple reports from oversight agencies in recent years shows that the Pentagon also has systematically ignored warnings about its accounting practices. “These types of adjustments, made without supporting documentation … can mask much larger problems in the original accounting data,” the Government Accountability Office, the investigative arm of Congress, said in a December 2011 report.

Plugs also are symptomatic of one very large problem: the Pentagon’s chronic failure to keep track of its money – how much it has, how much it pays out and how much is wasted or stolen.

This is the second installment in a series in which Reuters delves into the Defense Department’s inability to account for itself. The first article examined how the Pentagon’s record-keeping dysfunction results in widespread pay errors that inflict financial hardship on soldiers and sap morale. This account is based on interviews with scores of current and former Defense Department officials, as well as Reuters analyses of Pentagon logistics practices, bookkeeping methods, court cases and reports by federal agencies.

As the use of plugs indicates, pay errors are only a small part of the sums that annually disappear into the vast bureaucracy that manages more than half of all annual government outlays approved by Congress. The Defense Department’s 2012 budget totaled $565.8 billion, more than the annual defense budgets of the 10 next largest military spenders combined, including Russia and China. How much of that money is spent as intended is impossible to determine.

View gallery.”

Worker David Lloyd handles an order in the active items …

Worker David Lloyd handles an order in the active items area of the Defense Logistics Agency’s giant …

In its investigation, Reuters has found that the Pentagon is largely incapable of keeping track of its vast stores of weapons, ammunition and other supplies; thus it continues to spend money on new supplies it doesn’t need and on storing others long out of date. It has amassed a backlog of more than half a trillion dollars in unaudited contracts with outside vendors; how much of that money paid for actual goods and services delivered isn’t known. And it repeatedly falls prey to fraud and theft that can go undiscovered for years, often eventually detected by external law enforcement agencies.

The consequences aren’t only financial; bad bookkeeping can affect the nation’s defense. In one example of many, the Army lost track of $5.8 billion of supplies between 2003 and 2011 as it shuffled equipment between reserve and regular units. Affected units “may experience equipment shortages that could hinder their ability to train soldiers and respond to emergencies,” the Pentagon inspector general said in a September 2012 report.

Because of its persistent inability to tally its accounts, the Pentagon is the only federal agency that has not complied with a law that requires annual audits of all government departments. That means that the $8.5 trillion in taxpayer money doled out by Congress to the Pentagon since 1996, the first year it was supposed to be audited, has never been accounted for. That sum exceeds the value of China’s economic output last year.

Congress in 2009 passed a law requiring that the Defense Department be audit-ready by 2017. Then-Defense Secretary Leon Panetta in 2011 tightened the screws when ordered that the department make a key part of its books audit-ready in 2014.

Reuters has found that the Pentagon probably won’t meet its deadlines. (See related article [ID:nL2N0J00PX].) The main reason is rooted in the Pentagon’s continuing reliance on a tangle of thousands of disparate, obsolete, largely incompatible accounting and business-management systems. Many of these systems were built in the 1970s and use outmoded computer languages such as COBOL on old mainframes. They use antiquated file systems that make it difficult or impossible to search for data. Much of their data is corrupted and erroneous.

“It’s like if every electrical socket in the Pentagon had a different shape and voltage,” says a former defense official who until recently led efforts to modernize defense accounting.

View gallery.”

Materiel handlers Snyder and Ellis load Patriot missiles …

Materiel handlers Darren Snyder (L) and Stephen Ellis (R) load Patriot missiles for transport deep i …

“AMALGAM OF FIEFDOMS”

No one can even agree on how many of these accounting and business systems are in use. The Pentagon itself puts the number at 2,200 spread throughout the military services and other defense agencies. A January 2012 report by a task force of the Defense Business Board, an advisory group of business leaders appointed by the secretary of defense, put the number at around 5,000.

“There are thousands and thousands of systems,” former Deputy Secretary of Defense Gordon England said in an interview. “I’m not sure anybody knows how many systems there are.”

In a May 2011 speech, then-Secretary of Defense Robert Gates described the Pentagon’s business operations as “an amalgam of fiefdoms without centralized mechanisms to allocate resources, track expenditures, and measure results. … My staff and I learned that it was nearly impossible to get accurate information and answers to questions such as ‘How much money did you spend’ and ‘How many people do you have?’ ”

The Pentagon has spent tens of billions of dollars to upgrade to new, more efficient technology in order to become audit-ready. But many of these new systems have failed, either unable to perform all the jobs they were meant to do or scrapped altogether – only adding to the waste they were meant to stop.

Mired in a mess largely of its own making, the Pentagon is left to make do with old technology and plugs – lots of them. In the Cleveland DFAS office where Woodford worked, for example, “unsupported adjustments” to “make balances agree” totaled $1.03 billion in 2010 alone, according to a December 2011 GAO report.

Materiel handlers Snyder and Ellis load Patriot missiles …

PHOTO: Materiel handlers Darren Snyder (R) and Stephen Ellis (L) load Patriot missiles for transport.

In its annual report of department-wide finances for 2012, the Pentagon reported $9.22 billion in “reconciling amounts” to make its own numbers match the Treasury’s, up from $7.41 billion a year earlier. It said that $585.6 million of the 2012 figure was attributable to missing records. The remaining $8 billion-plus represented what Pentagon officials say are legitimate discrepancies. However, a source with knowledge of the Pentagon’s accounting processes said that because the report and others like it aren’t audited, they may conceal large amounts of additional plugs and other accounting problems.

The secretary of defense’s office and the heads of the military and DFAS have for years knowingly signed off on false entries. “I don’t think they’re lying and cheating and stealing necessarily, but it’s not the right thing to do,” Pentagon Comptroller Robert Hale said in an interview. “We’ve got to fix the processes so we don’t have to do that.”

Congress has been much more lenient on the Defense Department than on publicly traded corporations. The Sarbanes-Oxley Act of 2002, a response to the Enron Corp and other turn-of-the-century accounting scandals, imposes criminal penalties on corporate managers who certify false financial reports. “The concept of Sarbanes-Oxley is completely foreign” to the Pentagon, says Mike Young, a former Air Force logistics officer who for years has been a consultant on, and written about, Defense Department logistics.

Defense officials point out that most plugs represent pending transactions – like checks waiting to clear with a bank – and other legitimate maneuvers, many of which are eventually resolved. The dollar amounts, too, don’t necessarily represent actual money lost, but multiple accounting entries for money in and money out, often duplicated across several ledgers. That’s how, for example, a single DFAS office in Columbus, Ohio, made at least $1.59 trillion – yes, trillion – in errors, including $538 billion in plugs, in financial reports for the Air Force in 2009, according to a December 2011 Pentagon inspector general report. Those amounts far exceeded the Air Force’s total budget for that year.

Defense Secretary Chuck Hagel declined to comment for this article. In an August 2013 video message to the entire Defense Department, he said: “The Department of Defense is the only federal agency that has not produced audit-ready financial statements, which are required by law. That’s unacceptable.”

DFAS Director Teresa McKay declined to be interviewed for this article.

Materiel handlers Snyder and Ellis load Patriot missiles …

PHOTO: Materiel handlers Darren Snyder (L) and Stephen Ellis (R) load Patriot missiles for transport.

In an email response to questions from Reuters, a Treasury spokesman said: “The Department of Defense is continuing to take steps to strengthen its financial reporting. … We’re supportive of those efforts and will continue to work with DOD as they make additional progress.” While the Treasury knowingly accepts false entries, it rejects accounts containing blank spaces for unknown numbers and totals that don’t match its own.

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This shocking escapade is but one example of why government at any level cannot be trusted. “They” are giving us nothing but lies. Tomorrow, this series continues with Part 2.

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Proudly and happily looking around,
She waded out into the wet,
But the water was very, very profound,
And her feet and her forehead met!Ambrose Bierce, from “A Bubble.”

“OPEN THE WINDOW, AUNT MILLIE.”

LOVE TO ALL.

23 Responses to “PART 1 of 3 — ANTIQUATED PENTAGON ACCOUNTING SYSTEM ALLOWS DEFENSE DEPARTMENT TO HIDE $8 TRILLION IN TAXPAYER MONEY, ALL OF WHICH IS UNACCOUNTED”

  1. scott
    December 4, 2013 at 11:30 am #

    Why do you think they want to disarm us? If you really think its because they want us all to live long properous lives of luxury youre crazier Than any gun nut and theres no hope for you.

  2. We Love Pittsfield
    December 4, 2013 at 11:31 am #

    An atrocious waste of our, OUR, money. And you wonder why people are disgusted with politics at all levels.

  3. Charles Trzcinka
    December 4, 2013 at 1:38 pm #

    The government cannot get its act together even on something as important as the military. Its no wonder it can’t run a website. Unfortunately we can’t privatize the military. Here’s what one trillion looks like:
    http://www.pagetutor.com/trillion/index.html

    • danvalenti
      December 4, 2013 at 8:48 pm #

      Thanks, CHUCK.

  4. chuck garivaltis
    December 4, 2013 at 4:17 pm #

    Adding a multitude of zeros after a single diget happens so often it dosen’t shock all of us anymore. Take a look at baseball.Jacoby Ellsbury signs a 7 year contract for 156 million. Now Jacoby isn’t bad but he’s not even a lifetime 300 hitter. A few years ago the Red Sox lost Johny Damon, another average outfielderf who can’t hit 300 to the same Yankees who can’t even buy a championship. And the Yanks are still stuck with AROD who will sue them for a number with a lot of zeros.

    The price of tickets is going to eliminate ballgames as a family outing Is it any wonder a bottle of water costs $5.00 , a hot dog $6.00, and a couple of beers just makes the cost of seeing a major league ballgame out of reach for a working man and his family.. It’s not just the Sox and Yankees who are going to ruin the game. Most big league teams are involved in the multiple zeros madness and it just can’t continue this way. I think the baseball owners are a group of damn fools. It is big business with a problem and they cannot handle it.

    Advertisers are paying these foolish salaries but the bill is passed to you in higher consumer costs. Years ago the Yankees had an outfield of Joe D., Tommy Heinrich, and Charlie Keller This was before Mickey and Yogi.. Ellsbury, ,Damon , and the rest of the ridiculously overpaid mediocre playerscouldn’t wear their spikes.

    As for me I’ll see a game at Wahconah Park. It’s only a couple of bucks and the ballgame is just as good. At least these kids are not juiced and they give it their best.

    • danvalenti
      December 4, 2013 at 8:50 pm #

      You could also submit the Williams, Piersall, Jensen OF of the 1950s Red Sox. Ellsbury is fragile, doesn’t play hurt, and is on the north side of 30. The Yanks will be regretting this move.

      • chuck garivaltis
        December 5, 2013 at 6:26 am #

        Regretting it for sure, Dan. If Ted Williams, a hitter with no peer, was playing today the Sox would have to give him part ownership of the team.Steinbrenner, Sr. threw money around but he never threw it away. These new guys, I think they are his sons, are damn fools. One can’t blame the players for going for the gold but favorite teams and favorite players are of the past when the players, however mediocre, get on a gypsey merry-go-round and wind up wearing 3 or 4 or 5 uniforms. This is so stupid. Ellsbury is injury prone, over 30,and not a 300 hitter, And the Yanks give him $156,000,000 for a 7 year contract. And it is going to cost us over $5.00 for a drink of water at a game some of us are still foolish enough to attend. A day at the game is no longer a family outing, And don’t forget a $40.00 parking ticket if it’s around the park. Our national pastime is becomming a natrional joke that cannot end well. Greed never ends well.

        • danvalenti
          December 5, 2013 at 9:10 am #

          Well said, CHUCK. Money has ruined it. It “trickles down” to the average fan, who must fork over hundreds for a decent seat, and then, for the privilege, pay $8 for an 8-ouce Bud Lite. Add parking, food, a souvenir or two, and the trip to and from, and a family of four will get hit with a bill of $700 — for one baseball game. Greed never ends well, as you say, and in fact, it never ends.

  5. nota
    December 4, 2013 at 4:26 pm #

    Chuck, try a Little League game, doesn’t get any better than that!

    • chuck garivaltis
      December 5, 2013 at 7:46 am #

      Nota
      I agree. These kids give 100% I enjoyed LL games for for a period of 12 years when my little ones were growing up. Great fun. For sure It does not get any better.

  6. Joe Blow
    December 4, 2013 at 4:42 pm #

    On Tuesday, Michael Cannon, Cato Institute’s Director of Health Policy Studies, testified before a congressional committee about the dangers of the president’s legal behavior.

    “There is one last thing to which the people can resort if the government does not respect the restrains that the constitution places on the government,” Cannon said. “Abraham Lincoln talked about our right to alter our government or our revolutionary right to overthrow it.”

    “That is certainly something that no one wants to contemplate,” he continued. “If the people come to believe that the government is no longer constrained by the laws then they will conclude that neither are they.”

    “That is a very dangerous sort of thing for the president to do, to wantonly ignore the laws,” Cannon concluded, “to try to impose obligation upon people that the legislature did not approve.”

    http://www.mediaite.com/tv/expert-testifies-to-congress-that-obamas-ignoring-laws-could-lead-to-overthrow-of-government/

  7. nota
    December 4, 2013 at 5:11 pm #

    Yeah, dangerous, like Bush ignoring NATO and invading Iraq, just saying.

    • scott
      December 4, 2013 at 5:20 pm #

      Yes Bush is a fool too. I feel like theybare one in the same. Every eligbe person should have or get a firearms permit and buy a rifle chambered in .223 as well as a good quality pistol. Its your duty.

      Listening to the sandyhook 911 calls is disturbing thetecshould be armed gaurds in all schools thats what has changed over the years thetes less armed people.

  8. joetaxpayer
    December 4, 2013 at 6:02 pm #

    Bush is gone, we have to deal with Obama. I never thought anyone could make Bush look good. That’s one accomplishment Obama has achieved.

  9. Rivetor
    December 4, 2013 at 7:26 pm #

    Well it is maddening about , as Chuck G puts it, all them zeros at the end of the numbers, but $8 trillion. Trillion!! Like what the Cato Institute guy said, but how can you get people to revolt when they won’t even bother to vote?

    • danvalenti
      December 4, 2013 at 8:50 pm #

      Good point.

    • Scott
      December 5, 2013 at 4:23 am #

      That’s the point people don’t understand when they give up Liberty and fall into the system dependent on gov’t for food, medical care, housing and protection. Then one day they say ok these people are too much of a burden and propaganda machines like the eagle who pass themselves off as humanitarians will justify the killing of the unsavory lower class that are burdening society. It’s all about making society dependent and weak so you can control it and use it to benefit a select group.

      • danvalenti
        December 5, 2013 at 9:07 am #

        Dependence: A wretched state of security.

  10. dusty
    December 5, 2013 at 2:53 am #

    That’s 8 trillion at the Federal level. My guess is that there is proportionate numbers for state and local governments as well. i know local govt is audited every year but it is the same friendly outfit and I would feel better if we tried a new approach.

    • danvalenti
      December 5, 2013 at 9:06 am #

      DUSTY
      You add a vital point to this discussion. Is state and municipal waste equally corrupt and proportionate? The thinking person answers: “No doubt.”

  11. MrG1188
    December 5, 2013 at 6:49 am #

    I don’t know about everyone else, but what this proves to me is that the defense budget should NOT be a sacred cow. For as long as I can remember, every candidate for president, senate and US rep, with very few exceptions, has said they wouldn’t cut defense spending; that strong defense is their “primary objective. BS. That budget needs to be scrutinized and savaged like a Conservative going after Food Stamps programs! Wouldn’t we still feel pretty safe by spending as much as the next 5 biggest spenders?!?

    • danvalenti
      December 5, 2013 at 9:11 am #

      MRG
      Agreed. The Defense budget is largely a scam. Strong defense, yes! Corrupt Defense Dept? No!

  12. joetaxpayer
    December 5, 2013 at 9:02 am #

    Republican’s and Democrats should scutinize the entire budget.Schools Military and Food stamps. Let’s not forget all the pork projects too.