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U.S. Army Fudged Its Accounts By Trillions Of Dollars, Auditor Finds

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U.S. Army Fudged Its Accounts By Trillions Of Dollars, Auditor Finds

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A U.S. army soldier stands guard in front of a F-22 stealth fighter jet flies over Osan Air Base in Pyeongtaek

By Scott J. Paltrow

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 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.

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.

(Edited by Ronnie Greene.)

Photo: A U.S. army soldier stands guard in front of a F-22 stealth fighter jet flies over Osan Air Base in Pyeongtaek

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24 Comments

  1. Insinnergy August 21, 2016

    Ridiculous.
    So, the country hands just over half of it’s entire expenditure to the military… and they don’t even know what they’ve done with it… so just make it up?

    Is this not the definition of government excess and waste and lack of accountability?

    Where is the conservative outrage?

    Reply
    1. roguerunners August 21, 2016

      No need for conservatives outrage. They will just blame it on Obama and Clinton like they do everything.

      Reply
      1. Box August 21, 2016

        Lets see…..Secy of State, Clinton….President, Obama…..their time, their watch, their wars, their armies…….yet they shouldnt be blamed one bit, eh?

        Reply
        1. Daniel Jones August 22, 2016

          BOX!!

          The entire time Presidents Clinton and Obama have been trying to fix the deliberately sabotaged economic system, they have been fought tooth and nail by the Industral Overlords, the Corporate Sponsors, the Top Leeches.

          You think the top parasites of the Military-Industrial Psychosis aren’t among that number?

          Reply
          1. plc97477 August 22, 2016

            The problem is that boxie doesn’t think period.

            Reply
          2. Doug Stevens August 25, 2016

            Clinton and Obama trying to fix . . .economy???? …. What bullsht!
            The only fixing they were doing is the next line for the nostril in between prancing to distract the population while all real value is being extracted.

            Reply
        2. roguerunners August 22, 2016

          I rest my case.

          Reply
    2. Aaron_of_Portsmouth August 21, 2016

      Wasting trillions is the conservative definition of fiscal responsibility.

      Reply
    3. Tom S August 21, 2016

      Why, their faux outrage is expressed all the time in their monthly reports to their constituents – and at least weekly in their TV reports to friendly reporters “back in the hustings”.

      Reply
    4. Dominick Vila August 21, 2016

      The worst problem, in addition to our paranoia and willingness to outspend the rest of the combined on “defensive” measures, is the fact that the Pentagon has been spending much more than the huge budgets allocated by Congress for decades, and nobody has ever done anything to punish those responsible for it.

      Reply
      1. CrankyToo August 21, 2016

        Indeed. Someone’s stealing a ton of money. Perhaps many someones.

        Reply
        1. Dominick Vila August 21, 2016

          One of the biggest jokes is the number of high ranking military officers that go to work for the contractors they awarded lucrative contracts to while they were serving.
          Corruption is rampant, and it does not involve the grunts who usually make the ultimate sacrifice, while the big wheels pave the way to riches.
          Needless to say, most officers don’t engage in pay to play, but many do. everybody

          Reply
      2. Insinnergy August 22, 2016

        I agree. Surely there has to be some criminal element to this?

        Reply
        1. Dominick Vila August 22, 2016

          I would think so.

          Reply
  2. bojimbo26 August 21, 2016

    Sounds like `Donald the Dumpster` had a hand in it .

    Reply
  3. Aaron_of_Portsmouth August 21, 2016

    Good chance the discrepancy is in the campaign coffers of party affiliates who busily foment fear, maintain tensions in the world in order to keep the war industries humming, while reaping the rewards for personal benefits in the whole process from start to finish.

    Many Russians are forced to eat bark and lichen as a result of decades of weapons spending—Americans may soon end up munching on woody tissue at the rate money is being siphoned off, while political operatives dine on caviar, saying to each other— “Let Them Eat Cake”.

    Reply
  4. Tom S August 21, 2016

    It is no wonder. The services “consolidated” much of the financial business end of DoD.
    The Payroll and Logistics (Order, Inventory, Shipping, Payables) systems are decades beyond “antiquated”. The Payroll system is close to a disaster – certainly, one waiting to happen. Service personnel are mis-paid with regularity. If one of those regularities happen coincidentally to one of their last paychecks before exit, there is no attempt to seek a reasonable resolution. They are thrown to piratezed collection agencies who hound them like leeches.

    Numerous times “efforts” have been made to replace these systems, but they all have been sabotaged – either by Lobbyists rigging the RFPs or RFQs, of by Colonels and Generals who do not like their fifedoms being invaded by the Enemy.

    A couple of years ago, there was an effort to replace the Logistics system. Payroll is Payroll. Logistics is Logistics. While certainly differences exist, the operational functions and flows are the same.
    Somehow, a Miracle happened. DoD bought a packaged Logistics system!! What could that cost? $100K?? $1M?? Who cares – they are cheap. The Taxpayer was going to get One Bargain from Military Procurement in our Lifetimes!!

    Dreamer! The Generals and the Colonels had to have it “customized” because it just didn’t tell them all of the things so necessary to National Defense … like accurate Accounting. $2.5Billion later, DoD pulled the plug on the replacement Logistics system.

    Similar has occurred in the multiple attempts to replace the Payroll system.

    I cannot begin to describe how much of that $2.5B was pure flushing of Taxpayer Money, but well over 95%.

    Similar has been occurring in New Jersey, under Christie, on the State’s effort to create a healthcare/welfare system. Two years ago, the existing project being managed by HP was shutdown years behind schedule and $Billions over Budget.

    So, this article does not surprise me at all.

    Reply
    1. CrankyToo August 21, 2016

      That’s fascinating. Thank you for that post.

      Reply
  5. jeffromac23 August 21, 2016

    Before 9/11 Gates I belive it was said there is 2 trillion the DOD can not account for than 9/11 happened and everybody forgot about it even though the part of the Pentagon that was hit was where all the accounting documents were.
    Now it has been reported that the 2 trillion that was unaccounted for now is 13 trillion unaccounted for and yet there is no reporting on this. Think about that for a minute 13 trillion of our almost 20 trillion in debt is missing and unaccounted for by our military yet all the Republicans want to cut is programs that protect it’s most vulnerable citizens and increase military spending so war profiteers can make even more profit.
    If the military can not account for what it has already spent shouldn’t their budgets be frozen or cut until they can account for what we have already given them. Wouldn’t that make more sense than what we are doing now.

    Reply
    1. antisandman August 22, 2016

      The Pentagon is a very big place. Did they check all the broom closets and brass bathrooms for the money? All this gets attributed to incompetence. Yeah! Lets see the leaders in the Pentagon in general showed competence in the military to earn their spot. They showed competence in the military academies, among the best education institutions in the world. They showed competence in high school to earn a spot in the academy. They just don’t seem to be able to show competence in the Pentagon. Then they retire and become an executive at Boeing, Raytheon or the like and become competent again and even find much of the money that they couldn’t keep track of at the Pentagon. I think there needs to be a few courts martial to solve this problem so that the competency to be incompetent is slowed a bit.

      Reply
  6. Box August 21, 2016

    And who was the commander in chief? Who should know about this? Who should do something? Oh sorry, its the Inconvenient Obama. Again.

    Reply
    1. Daniel Jones August 22, 2016

      This feces has been occurring for decades, you short-sighted arse.

      Read *The Pentagon Papers*, add black budgets and outright ripoffs, and realize that defense scams are not the exception, they’re the goddamn RULE.

      Reply
    2. roguerunners August 22, 2016

      And here it is again! So predictable.

      Reply
  7. Doug Stevens August 25, 2016

    To get these numbers in perspective:

    One Million seconds is about eleven and a half Days.

    One Trillion seconds is around Thirty One Thousand Years.

    When will the US tax payer become aware of the giant, drooling parasite sneering right in front of their face.

    Reply

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