If I were a betting man, I’d give odds that this ventures into tin foil hat territory.
I have many well-meaning, nice liberal friends. Recently one of the nicest, and best-meaningest of them told me something that makes WorldCom seem like petty larceny. It seems that 3.3 trillion dollars went unaccounted from federal coffers.
Considering that the entire federal budget is roughly 4 trillion, I find it unlikely that 3 trillion is missing from those two agencies. Considering that DOD’s budget is somewhere in the neighborhood of 400-500 billion per year, far more than HUD, AFAIK (at least in explicit defense spending), its unlikely that they misplaced 3 trillion. Sounds more like they consider “missing” any sort of spending that the government refuses to audit? Just a WAG.
It is not missing money. It is unsubstantiated accounting adjustments. IANAaccountant, but as I understand it, the problem goes something like this.
Let’s say I deposit a $1,143.92 check into my savings account, and then I wish to record it in Quicken. But when I go to record it, I realize that I don’t have my receipt for when I deposited it, or how much exactly the check was. So I just enter that I deposited $1,100 in cash. A day later I realize that the figure is too small, so I delete that entry and record that I deposited $1,150. Then, a few days later, I look at the bank account, and see the exact amount, so I delete the $1,150 entry, and input the exact amount of the check into my Quicken account. Thus, I have made $3,350 in unsubstantiated accounting adjustments in my records (additions to my Quicken plus the deletions), but the amount in my savings account never changed.
What the figures in question show is that the Department of Defense cannot track its money well, not that it has lost so much money. And, FYI, the total amount of unsubstantiated accounting entries at DOD has dropped from about $3.3 trillion in 2000 to about $600 billion last year. So, the numbers are still staggering, but there is progress being made.
So should we be running around shoutiing, “The sky is falling?” Put into perspective, how big a problem is this? Is a portion of the budget likely being embezzeled?
Well, there’s certainly a percentage of the defense budget that is pilfered through fraud, waste, or abuse, but I don’t believe that this $3 trillion has anything to do with that.
Again, this accounting foul up isn’t evidence of massive amounts of funds being misdirected. It’s evidence that the evidence about how the funds were directed is not satisfactory. The biggest problem here isn’t that “trillions of dollars went missing,” because there never was any “trillions of dollars.” There was only trillions of dollars in accounting entries.
However, it is a big deal in this respect: if financial systems are so weak that an institution cannot pass an audit (DOD never has, despite a 15 year old legal requirement that it should), there’s no reason to think that the Pentagon is a good steward of the taxpayer’s money.
Thanks for the insights, Ravenman. Can you point me to any articles that gently explain this “controversy.” My friend is vocal politically and I fear that by making this issue a cornerstone of her opposition to BushCo, she risks losing personal credibility.
I’m afraid I don’t know of any that put the issue in context. It’s far too wonky of a problem for it to be examined in detail by the media, which is where you’d normally find a decent, non-technical analysis.
All I can do it point you to the report that highlights this problem, which was written by the DOD Inspector General. Link. If your friend is a single-minded Bush-basher, you may note that this problem and those related to it have been going on for decades – the report cited here covers a year that Clinton was in office. (And, in all fairness, Rumsfeld has made more headway in fixing these types of accounting problems than any of his predecessors since McNamera.) If it’s a fixation with the military-industrial complex being ogres of capitalism, I’m afraid there’s nothing in there that would dissuade her from that view.
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