July 10, 2001

For years, there have been tales of massive shortages of spare parts, readiness and training funds in the Pentagon. These shortages have led to new infusions of funds for the Pentagon.

On July 5, the General Accounting Office published a report which sheds light on these shortages. While the Army has talked about insufficient funds for tank training, the GAO found "Over a 4-year period, fiscal years 1997 through 2000, the Army obligated almost $1 billion (about 21 percent) less than the nearly $4.8 billion that Congress provided for training." During that time, the Army trained on its tanks an annual average of 591 miles, well short of the goal of 800 miles.

This was not a new problem. According to the July 9 edition of Defense Week, in 1995 the GAO found $1.2 billion, about one-third of the training funds for the Army in Europe, was used for other purposes.

This diversion of funds from critical needs is one of many examples that suggest the Pentagon's problems are not a lack of money, but rather chaotic accounting and mismanagement that leaves the Pentagon in the dark about what it is buying, what assets it holds and what it needs for the future.

Today, the Senate is considering approving $5.9 billion additional for fiscal 2001 for defense appropriations. For fiscal 2002, the President has already requested a $33 billion increase in new budget authority compared to fiscal 2001, or a total of $343.5 billion.

But even these large appropriations are not enough for several Senators who will offer amendments to add billions of dollars to the supplementals.

But adding money to a broken system will only encourage misuse of funds.

Another example: even when money has been appropriated to cover Pentagon short- falls, there is little evidence that the funds were spent to achieve the original purpose. In fiscal year 1999, Congress approved a supplemental $1.1 billion request for spare parts for aircraft, ships, tanks and other equipment. According to a June 11, 2001, General Accounting Office report, the spare parts money was transferred into general operational accounts and may have been siphoned off for other purposes. Senate Appropriations Committee Chairman Robert Byrd recounted 10 days later:

"The GAO found that 8 percent of that money, or $88 million, was used by the Navy to purchase spare parts. The remaining 92 percent of the appropriations was transferred to the Operations and Maintenance accounts of the military services and thus became indistinguishable from other Operations and Maintenance funds used for activities that include mobilization and training and administration."

The evidence that the Pentagon is mismanaging its budget is clear and overwhelming. And it comes from thoroughly reliable sources. For example, the Defense Department's own Inspector General's office found $1.1 trillion in bookkeeping entries that could not be tracked or justified:

"We identified $1.1 trillion in department-level accounting entries to financial data used to prepare DOD component financial statements that were not supported by adequate audit trails or by sufficient evidence to determine their validity."

Another GAO report found that about half of DoD's $64 billion dollar inventory in spare parts, clothing, medical supplies and other support items exceeds war reserve or current operating requirements.

The problems are both large and small. A March 13 Pentagon's Inspector General report uncovered numerous examples of gross overcharges in the Pentagon's accounting system, including:

==The Pentagon paid $2.10 for a body screw that cost the vendor 48 cents, a 335 percent mark-up.

==The Pentagon paid 25 cents for a dust protection plug that cost the vendor 3 cents, a 699 percent mark-up

==The Department paid $409.15 for a washroom sink that cost the vendor $39.17, a 945 percent mark-up.

The confused state of affairs has also aroused the concern of senior Republicans. In June 2001, Sen. Fred Thompson's (R-TN) Government Affairs Committee found that "no major component of the Defense Department can balance its books." The consequences for national security are devastating, the Committee found: "Wasteful spending and mismanagement sap the readiness of the armed forces and weaken national security." The report concluded:

"There is widespread agreement that the Department of Defense finances are a shambles. It wasted billions of dollars each year, and can not account for much of what it spends."

On June 21, Senator Robert Byrd, the new Appropriations Chairman rightly questioned whether the Pentagon's budget request is in touch with reality:

"If the Department of Defense does not know what it has in terms of assets and liabilities, how on Earth can it know what it needs?"

On February 13, Sen. Byrd's views were enthusiastically endorsed by Sen. Charles Grassley (R-IA):

"The Pentagon does not know how much it spends. It does not know if it gets what it orders in goods and services. And the Pentagon, additionally, does not have a handle on its inventory. If the Pentagon does not know what it owns and spends, then how does the Pentagon know if it needs more money? . . . Ramping up the Pentagon budget when the books are a mess is highly questionable at best. To some it might seem crazy."

Pennsylvania Rep. Curt Weldon (R) told a June 28 House Armed Services Committee Hearing: "You can't expect us to have confidence to give you the kinds of things that you want... until we have confidence that the financial process you have in place is in fact legitimate."

Even Defense Secretary Rumsfeld agreed about the seriousness of the problem, telling the same House Armed Services Committee hearing:

"Mr. Congressman, on the financial management systems, you're exactly right, the process is broken. The best estimates are that it will take years to refashion the financial management systems so that they function in a way that managers can in a reasonable period of time have any sense of how the money is flowing through that institution. We've got to get them fixed. It's a -- well, I won't add any adjectives."

Indeed, the Pentagon has requested $100 million in the fiscal 2002 budget to begin revamping the accounting process, a process Rumsfeld admits will take years.

President Bush told a February 20 Education Roundtable: "But I do believe it makes sense and is right to ask the question: if you receive federal money, what are the results for the money spent?" The Pentagon should be held to the same standard.

There are many problems within the Pentagon. New money is not the answer. A revamped and honest accounting system would be a good place to start.

Council for a Livable World urges the Senate to reject new Pentagon budget increases.