Pentagon audit yields four 'potential' crimes

January 23, 1992|By Richard H. P. Sia | Richard H. P. Sia,Washington Bureau of The Sun

WASHINGTON -- An internal Pentagon audit of the military's multibillion-dollar surplus accounts has uncovered four "potential" criminal violations involving unauthorized overspending for Air Force, Navy and Marine Corps reserve programs and weapons testing.

An audit report by the Pentagon inspector general's office, a copy of which was obtained by The Sun, said that records of four separate defense appropriations indicate what "appears to be a potential violation of the Antideficiency Act," a federal law that bars officials from willfully obligating or spending money in excess of amounts appropriated by Congress.

The military services failed to suspect possible trouble or investigate the discrepancies, the report said.

The audit found so many bookkeeping errors and check-writing foul-ups in the surplus accounts that investigators were unable to determine if the plethora of other financial irregularities they found were honest mistakes or deliberate acts to circumvent normal budgeting and accounting procedures.

Among the findings in the 124-page report:

* Auditors said finance personnel were, in effect, prone to paying bills without making sure the billed amounts were correct or checking the balances in the surplus accounts. Records show that some bills were paid twice, sometimes three times, without anyone catching the error.

The surplus accounts examined by auditors "were inadequately managed and vulnerable to abuse," said the report, which was delivered earlier this month to the Defense Department comptroller.

* Auditors found that at least half the funds that accumulated unspent in surplus accounts over the years had no legitimate purpose and should be returned to the Treasury.

This could amount to as much as $9 billion.

They reported, for example, that money continued to be earmarked by the military for weapons programs, like the Army's Sergeant York anti-aircraft gun and Roland air defense missile, that had been canceled years earlier. In other cases, account books showed huge obligations for contracts that had in fact been completed -- and final bills paid -- long ago, but that were never closed out.

The report urged defense officials against blindly "writing off," or ignoring, accounts showing negative balances "since they may have been caused by overpayments and may contain refunds due to the U.S. Government." The auditors gave no estimate of what might be owed.

The Pentagon comptroller's office has accepted the report, saying "with some exceptions, this office generally agrees with many of the findings and recommendations of the report."

Existence of the surplus accounts drew congressional and media attention in June 1990 when House investigators disclosed that the Defense Department and more than a dozen federal agencies had access to more than $100 billion in unspent funds. They warned Congress that the money could be used to offset future budget cuts and cover questionable, unauthorized expenditures.

The Pentagon alone accounted for half of that unspent money, which Rep. Andy Ireland, R-Fla., Sen. William V. Roth Jr., R-Del., and other lawmakers attacked at that time as a monstrous "slush fund" that threatened to drive up the federal deficit. One type of surplus account common in the military, known as an "M account," had combined balances of $18.8 billion, while another had at one time accumulated as much as $27 billion, the General Accounting Office reported.

Defense officials have explained that the Pentagon's accounts were fattened by the Reagan administration's military buildup, which generated big budgets to support high-cost weaponry and longer buying cycles. The accounts, created by Congress in 1956, have been needed to pay old bills, cost overruns and unforeseen expenses arising from previous commitments -- without having to run to Congress every time for extra money, they say.

By law, money appropriated by Congress is available to federal agencies for a certain period of time and then "expires," but the unspent funds do not actually revert to the Treasury.

Instead, leftover funds pile up in obscure surplus accounts that, until strict reforms were enacted in late 1990, agencies could tap indefinitely. The balances in these accounts do not actually represent hard cash, but rather represent old "authority" to spend money that has not been used up by an agency.

Although Pentagon auditors gave few specifics in their report about the suspected criminal violations, they identified four "overdisbursed" appropriations, including one for Pentagon agencies that test and evaluate new defense hardware that closed the 1990 fiscal year $56.8 million in the red.

They also cited funding for Marine Corps reserve equipment that remained $2.37 million in the red as of last July; an unspecified Air Force reserve personnel program that had overspent by $1.17 million as of November 1990; and a Navy reserve personnel appropriation that ran a $1.3 million deficit in November 1990.

The audit report said military officials blamed much of the overspending on "erroneous disbursements," but it urged Pentagon officials to investigate all potential violations, nonetheless.

A. Ernest Fitzgerald, an Air Force financial analyst known for exposing military waste and fraud, said the audit "signals a complete collapse of basic management control systems."

"Our financial people essentially pay bills as ordered by the procurement people. No one's asking questions," he said yesterday after reviewing the audit. "It's degenerated into a service function. They're just plain writing checks."

The last formal action taken against suspected military violations of the Antideficiency Act occurred in 1973 over alleged Navy attempts to conceal overspending in its personnel accounts.

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