WASHINGTON -- Defense Secretary Les Aspin ordered a top-level review yesterday into mismanagement of the $81 billion Defense Business Operations Fund, which senior defense officials said could lead to the replacement of the troubled financial management system.
Mr. Aspin announced the review after The Sun reported Sunday that the fund, which was created two years ago to help the Pentagon fix planes, feed troops and buy toilet paper more efficiently, has become such a financial mess that it has no credible records of the way tax dollars are being spent.
In a two-page memorandum to the Joint Chiefs of Staff, Mr. Aspin assured the military services that the business fund's cash shortages and other financial woes would not hurt military training and other activities that contribute to combat readiness.
"Transfers to cover essential military activities during the remaining months of this fiscal year will be made," Mr. Aspin said.
The Sun reported that the General Accounting Office, an investigative arm of Congress, recently examined the fund and concluded that it cannot produce a single accurate balance sheet.
According to the GAO and other sources, the fund racked up huge cash surpluses in 1992, creating a tempting slush fund for the Pentagon and its friends in Congress, but the fund's erratic management has led to a sudden shortage of cash.
When the fund was flush with money, congressional appropriators tried to offset cuts in military operations and maintenance accounts by ordering the transfer of $5.5 billion from the fund to the armed forces this year.
But the current cash shortage has stalled most of that transfer, raising concerns that the military might have to cut training and maintenance.
Mr. Aspin, who as a congressman tried to delay the creation of the fund, told the military chiefs that Deputy Defense Secretary William Perry and the comptroller's office would take the lead "in revising this financial tool." But he added: "If acceptable oversight of this system cannot be established, it is highly unlikely that either the Department of Defense or the Congress will continue with this system."
The Bush administration created the business fund in October 1991 by consolidating nine existing revolving funds and several worldwide activities such as commissary and accounting operations.