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Military waste under fire / $1 trillion missing -- Bush plan targets Pentagon
accounting
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Military waste under fire
$1 trillion missing -- Bush plan targets Pentagon accounting
Tom Abate, Chronicle Staff Writer
Sunday, May 18, 2003
©2003 San Francisco Chronicle | Feedback
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2003/05/18/MN251738.DTL
The Department of Defense, already infamous for spending $640 for a toilet
seat, once again finds itself under intense scrutiny, only this time because
it couldn't account for more than a trillion dollars in financial
transactions, not to mention dozens of tanks, missiles and planes.
The Pentagon's unenviable reputation for waste will top the congressional
agenda this week, when the House and Senate are expected to begin floor debate
on a Bush administration proposal to make sweeping changes in how the Pentagon
spends money, manages contracts and treats civilian employees.
The Bush proposal, called the Defense Transformation for the 21st Century Act,
arrives at a time when the nonpartisan General Accounting Office has raised
the volume of its perennial complaints about the financial woes at Defense,
which recently failed its seventh audit in as many years.
"Overhauling DOD's financial management operations represent a challenge that
goes far beyond financial accounting to the very fiber of (its) . . . business
operations and culture," GAO chief David Walker told lawmakers in March.
WHAT HAPPENED TO $1 TRILLION?
Though Defense has long been notorious for waste, recent government reports
suggest the Pentagon's money management woes have reached astronomical
proportions. A study by the Defense Department's inspector general found that
the Pentagon couldn't properly account for more than a trillion dollars in
monies spent. A GAO report found Defense inventory systems so lax that the
U.S.
Army lost track of 56 airplanes, 32 tanks, and 36 Javelin missile command
launch-units.
And before the Iraq war, when military leaders were scrambling to find enough
chemical and biological warfare suits to protect U.S. troops, the department
was caught selling these suits as surplus on the Internet "for pennies on the
dollar," a GAO official said.
Given these glaring gaps in the management of a Pentagon budget that is
approaching $400 billion, the coming debate is shaping up as a bid to gain the
high ground in the battle against waste, fraud and abuse.
"We are overhauling our financial management system precisely because people
like David Walker are rightly critical of it," said Dov Zakheim, the
Pentagon's chief financial officer and prime architect of the Defense
Department's self-styled fiscal transformation.
Among the provisions in the 207-page plan, the department is asking Congress
to allow Secretary of Defense Donald Rumsfeld to replace the civil service
system governing 700,000 nonmilitary employees with a new system to be
detailed later.
The plan would also eliminate or phase out more than a hundred reports that
now tell Congress, for instance, which Defense contractors support the Arab
boycott of Israel and when U.S. special forces train foreign soldiers, as well
as many studies of program costs.
The administration's proposal, which would also give Rumsfeld greater
authority to move money between accounts and exempt Defense from certain
environmental statutes, prompted influential House Democrats to write Speaker
Dennis Hastert last week complaining that the proposals would "increase the
level of waste, fraud, and abuse . . . by vastly reducing (Defense)
accountability."
"The Congress has increased defense spending from $300 billion to $400 billion
over three years at the same time that the Pentagon has failed to address
financial problems that dwarf those of Enron," said Rep. Henry Waxman, D-Los
Angeles, one of the letter's signatories.
Saying critics of the bill "were arguing for more paperwork," Hastert
spokesman John Feehery said his boss would support the Bush reforms on the
House floor. "The purpose is to streamline the Pentagon to become a less
bureaucratic and more efficient organization . . . while also making it more
accountable," Feehery said.
PROCESS WILL TAKE MONTHS
The debate will center around the defense authorization bill, the policy-
setting prelude to the defense appropriations measure that comes up later in
the session. With the House and Senate considering different versions of the
transformation proposals, it will be months before each passes its own bill
and reconciles any differences.
But few on Capitol Hill would deny that, when it comes to fiscal management,
Defense is long overdue for "transformation."
In congressional testimony Rumsfeld himself has said "the financial reporting
systems of the Pentagon are in disarray . . . they're not capable of providing
the kinds of financial management information that any large organization
would have."
GAO reports detail not only the woeful state of Defense fiscal controls, but
the cost of failed attempts to fix them.
For instance, in June 2002 the GAO reviewed the history of a proposed
Corporate Information Management system, or CIM. The initiative began in 1989
as an attempt to unify more than 2,000 overlapping systems then being used for
billing, inventory, personnel and similar functions. But after "spending about
$20 billion, the CIM initiative was eventually abandoned," the GAO said.
Gregory Kutz, director of GAO's financial management division and co-author of
that report, likened Defense to a dysfunctional corporation, with the Pentagon
cast as a holding company exercising only weak fiscal control over its
subsidiaries -- the Army, Navy, Air Force and Marines. Today, DOD has about
2,200 overlapping financial systems, Kutz said, and just running them costs
taxpayers $18 billion a year.
"The (Pentagon's) inability to even complete an audit shows just how far they
have to go," he said.
Kutz contrasted the department's loose inventory controls to state-of-the- art
systems at private corporations.
"I've been to Wal-Mart," Kutz said. "They were able to tell me how many tubes
of toothpaste were in Fairfax, Va., at that given moment. And DOD can't find
its chem-bio suits."
CRITICS CALLED UNPATRIOTIC
Danielle Brian, director of the Project on Governmental Oversight, a nonprofit
group in Washington, D.C., said waste has become ingrained in the Defense
budget because opposition to defense spending is portrayed as unpatriotic, and
legislators are often more concerned about winning Pentagon pork than
controlling defense waste.
"You have a black hole at the Pentagon for money and a blind Congress," Brian
said.
But things may be changing.
GAO's Kutz said Rumsfeld has "showed a commitment" to cutting waste and asked
Pentagon officials to save 5 percent of the defense budget, which would mean a
$20 billion savings.
Legislators are also calling attention to Defense waste. "Balancing the
military's books is not as exciting as designing or purchasing the next
generation of airplanes, tanks, or ships, but it is just as important," Sen.
Robert Byrd, D-W.V., said last week. In a hearing last month about cost
overruns, Rep. John Duncan, R-Tenn., of the House Committee on Government
Reform said: "I've always considered myself to be a pro-military type person,
but that doesn't mean I just want to sit back and watch the Pentagon waste
billions and billions of dollars."
But while Capitol Hill sees the need, and possibly has the will to reform the
Pentagon, the devil remains in the details, and the administration aroused
Democratic suspicions when it dropped its 207-page transformation bill on
lawmakers on April 10 -- leaving scant time to scrutinize proposals that touch
many aspects of the biggest department in government.
"We have as much problem with the process as with the substance," said said
Rep. John Spratt, D-S.C., who co-signed Waxman's letter calling the
transformation bill "an effort by the Department to substantially reduce
congressional oversight and public accountability."
Defense's Zakheim counters that the reform proposals would "remove the
barnacles of past practices (and provide) DOD with modern day management while
preserving congressional oversight and prerogatives."
But Waxman, a critic of the administration's handling of Iraqi reconstruction
contracts, called the proposals "a military wish list" to take advantage of
"the wartime feeling."
"Secretary Rumsfeld is hoping to march through Congress like he marched
through Iraq," Waxman said.
E-mail Tom Abate at tabate@sfchronicle.com.
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