Pentagon Accounting Fraud

Pentagon Accounting Fraud

On november 15, ernst & young and the other private firms hired to audit the pentagon announced that they couldn’t complete the job. Congress had ordered an independent audit of the Department of Defense, the government’s largest discretionary-cost center—which receives 54 cents out of every dollar in federal appropriations—because the Pentagon had failed for decades to audit itself. The firms concluded, however, that the DOD’s financial records were so

riddled with bookkeeping deficiencies, irregularities, and errors that a reliable audit was simply impossible.

Deputy Secretary of Defense Patrick Shanahan tried to put the best face on things, telling reporters, “We

failed the audit, but we never expected to pass it.” Shanahan suggested that the department should get credit for

the effort, saying, “It was an audit on a $2.7 trillion organization, so the fact that we did the audit is substantial.”

The truth, however, is that the DOD was dragged kicking and screaming to this audit by bipartisan frustration in

Congress—and had this been a major corporation, the result likely would have been a crashed stock.

         As this

exposé made clear (and as

articles in The Washington

Post and Vox soon reiterated),

there is no $21 trillion

pot of money hidden

inside the Pentagon. What

there has been instead is

a systematic, long-standing,

unconstitutional effort by

the Department of Defense

to feed Congress phony

numbers and thereby inflate

the DOD’s budget by billions of dollars each

year. How many billions? No one knows for sure,

though informed estimates put it as high as $100 billion—

not enough to fund Medicare for All, but a good

down payment on the Green New Deal that Ocasio-

Cortez is championing to fight climate change.

The Pentagon’s accounting scam works like this:

When the DOD submits its annual budget requests to

Congress, it sends along the prior year’s financial reports,

which contain fabricated numbers. These numbers disguise

the fact that the DOD doesn’t always spend all of

the money that 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 this money to other parts of its budget.

Veteran Pentagon staffers say that this practice violates

Article I, Section 9, of the US Constitution, which

states: “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.”

How will Trump pay for his wall ? Well, here is some $21 Trillion.

Let that sink in for a moment: as things

stand, no one knows for sure how the single biggest

line item in the US government’s discretionary

budget is actually being spent. What’s more,

Congress as a whole has shown little interest in

investigating this epic scandal. The ridiculously huge plugs

in the Defense Department’s budgets are never even questioned

at Armed Services or Budget Committee hearings.

Among the laundering tactics that the Pentagon uses

is moving “one-year money”—funds that Congress intends

to be spent in a single year—into a pool of five-year

money, because unspent money in this pool doesn’t have

to be returned during the five-year allocation period.

Dave Lindorff

writes for Salon,

the London

Review of Books,

and Tarbell,

and is the author

of four books.

As Republican Senator Charles Grassley of Iowa, a

frequent critic of the Defense Department’s financial

practices, said on the Senate floor in September 2017,

the long-standing failure to conduct a proper audit reflects

“26 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 auditable

accounting systems and to submit to audits annually.

Since then, every department and agency has

come into compliance—except the Pentagon.

Now, an investigation by The Nation has uncovered

an explanation for this foot-dragging: For decades, the

DOD’s leaders and accountants have been perpetrating a

gigantic, unconstitutional accounting fraud, deliberately

cooking the books to mislead Congress and drive the

department’s budgets ever higher, regardless of military

necessity. The Defense Department has literally been

making up numbers in its annual financial reports to Congress—

representing trillions of dollars’ worth of seemingly

nonexistent transactions—knowing that Congress

would rely on those misleading reports when deciding

how much money to give it the following year, according

to government records and interviews with current

and former Defense Department officials, congressional

sources, and independent experts.

“If the DOD were being honest, they would go to

Congress and say, ‘All these proposed budgets we’ve

been presenting to you are a bunch of garbage,’” says

Jack Armstrong, who spent more than five years in the

department’s Office of the Inspector General as a supervisory

director of audits before retiring in 2011.

As a result of the Pentagon’s accounting shenanigans,

some $21 trillion—yes, trillion—worth of financial transactions

cannot be accounted for. That number caught

the eye of Representative-elect Alexandria Ocasio-Cortez

after this article originally appeared on TheNation.com.

On December 2, she tweeted to her 1.47 million followers

that the missing $21 trillion could have been used to

help fund a Medicare for All program. 

Read the entire piece at The Nation.com