Less than two weeks after the Department of Defense announced it would finally subject itself to a first-ever audit, a new report puts into perspective precisely why the Pentagon so sorely needs a thorough analysis of where its trillions upon trillions in taxpayer funds have gone — because a stupefying $21 trillion cannot be accounted for by just two government agencies, including the gargantuan DoD.
That sum is indeed $21 trillion — tens of trillions of dollars — spent by the DoD and Housing and Urban Development (HUD) on … well, no one really knows what.
Not just that, but this rather bewildering amount slipped through cracks in only seventeen years — from 1998, the year legislation passed mandating annual audits of every government agency, through 2015.
Michigan State University Professor of Economics Mark Skidmore, who specializes in public finance, authored the study, which became his brainchild after hearing Catherine Austin Fitts, former Assistant Secretary of Housing and Urban Development during the presidency of George H.W. Bush, remark on a report from the Office of the Inspector General (OIG) revealing no less than $6.5 trillion unaccounted for, but spent, by the DoD.
Skidmore, flabbergasted, had presumed from experience with previous public financing matters the astronomical figure too high not to be a mistake.
“Sometimes you have an adjustment just because you don’t have adequate transactions,” he explained of what typically happens when funds aren’t accounted for, in an interview in early December, “so an auditor would just recede. Usually it’s just a small portion of authorized spending, maybe one percent at most. So for the Army one percent would be $1.2 billion of transactions that you just can’t account for.”
Except, the erstwhile ‘missing’ monies didn’t total in the billions, and Skidmore soon confirmed the preposterous sum published in the OIG report, “Army General Fund Adjustments Not Adequately Documented or Supported,” on July 26, 2016. On December 8 — the day following the Pentagon’s audit announcement — he and Boston University Economics Professor Laurence Kotlikoff co-authored a column for Forbes explicating the research and expanding on the problematic OIG report, stating,
“The report indicates that for fiscal year 2015, the Army failed to provide adequate support for $6.5 trillion in journal voucher adjustments. According to the GAO’s Comptroller General, ‘Journal vouchers are summary-level accounting adjustments made when balances between systems cannot be reconciled. Often these journal vouchers are unsupported, meaning they lack supporting documentation to justify the adjustment or are not tied to specific accounting transactions … For an auditor, journal vouchers are a red flag for transactions not being captured, reported, or summarized correctly.’”
He continues, “Given that the entire Army budget in fiscal year 2015 was $120 billion, unsupported adjustments were 54 times the level of spending authorized by Congress. The July 2016 report indicates that unsupported adjustments are the result of the Defense Department’s ‘failure to correct system deficiencies.’ The result, according to the report, is that data used to prepare the year-end financial statements were unreliable and lacked an adequate audit trail. The report indicates that just 170 transactions accounted for $2.1 trillion in year-end unsupported adjustments. No information is given about these 170 transactions. In addition many thousands of transactions with unsubstantiated adjustments were, according to the report, removed by the Army. There is no explanation concerning why they were removed nor their magnitude. The July 2016 report states, ‘In addition, DFAS (Defense Finance and Accounting Service) Indianapolis personnel did not document or support why DDRS (The Defense Department Reporting System) removed at least 16,513 of 1.3 million feeder file records during the Third Quarter.’”
Affirming the jaw-dropping anomalous figure led Skidmore promptly to enjoin Fitts for a collaboration with graduate students examining thousands of additional Inspector General reports, dating from 1998 through 2015, the last year for which data was available at the time of the project — concentrating solely on the Defense Department and the Department of Housing and Urban Development.
“This is incomplete,” Skidmore advised, “but we have found $21 trillion in adjustments over that period. The biggest chunk is for the Army. We were able to find 13 of the 17 years and we found about $11.5 trillion just for the Army.”
Although even the preliminary numbers would sound nearly anyone’s alarm bells, Skidmore refused to propound on the nature of the unaccounted funds — whether it could have been allotted toward covert but legitimate projects, misallocated, brazenly wasted, or otherwise — but did characterize the raw findings as profoundly telling of a dearth in transparency in funding and parallel evisceration of due process in budgeting at the federal level of government.
Whether the Pentagon’s vanishing funds will ever be matched to tangible ends in its first or future financial post-mortem seems optimistically unrealistic; however, that the ball is finally rolling presents to the disgruntled public a momentous opportunity to pressure officials to be held accountable for squandering such embarrassing sums of taxpayer income.
After all, they’re listening — Skidmore’s interview with USAWatchdog came out on December 3 — with the Pentagon’s announcement following just four days later, on the 7th. Further, Skidmore noted peremptorily that, as he and Fitts scoured figures online, they observed something suspicious on the website for the Office of Inspector General, asserting in a side note,
“[A]fter Mark Skidmore began inquiring about OIG-reported unsubstantiated adjustments, the OIG’s webpage, which documented, albeit in a highly incomplete manner, these unsupported ‘accounting adjustments,’ was mysteriously taken down. Fortunately, Mark copied the July 2016 report and all other relevant OIG reports in advance [available at this link]. Mark has repeatedly tried to contact Lorin Venable, Assistant Inspector General at the Office of the Inspector General. He has emailed, phoned, and used LinkedIn to ask Ms. Venable about OIG’s disclosure of unsubstantiated adjustments, but she has not responded.”
In fact, as noted previously by The Mind Unleashed, the Department of Defense also recently edited its original audit announcement in a superficially innocuous yet potentially insidious detail — halving the total number of auditors to descend on the military, as seen in an internet archive of the page, to just 1,200 — without explanation, notation of adjusted figure, nor any other remark explicating the adjustment a simple mistake or otherwise.
Despite a remarkable $21 trillion essentially having evaporated from just two albeit notoriously thriftless governmental agencies, Skidmore fears public apathy will reign — with predictably wearisome results.
“If the American people don’t stand up and say this is unacceptable,” the economist admonished, “nothing is going to happen. This is just wrong.”
Image: DOD, fnr.