Financial Mess at the Pentagon

April 23, 1993

Is there a fiscal time bomb ticking away at the Pentagon? The Bush administration left office having set up a Defense Management Review that was supposed to save $70 billion over the next four years largely by consolidating all financial operations in a Defense Business Operations Fund. President xTC Clinton set aside $10 billion in his defense budget in case the savings were not achieved as advertised, but he may have been a piker.

The Congressional Budget Office has estimated the potential shortfall at $50 billion, which would mean the Bush initiative would save only $20 billion over the four-year period -- if that. Defense Secretary Les Aspin has ordered a probe of what looks like a colossal financial mess that could shrink the resources available to carry out the new administration's military budget plans.

Mr. Clinton and Mr. Aspin are thus in a bind. The greater the savings shortfall, the more they can blame their problems on their predecessors but also the harder it will be to equip and maintain the armed forces at desired levels. As it is, the defense secretary has already conceded he will have to scrap some weapons systems he wanted to keep cranking along until completion of a "bottoms-up" review. If the financial panel headed by Philip A. Odeen of BDM Corp. comes up with a report as devastating as some expect, Mr. Aspin may have to do a lot more cutting than he or congressional hawks would like. On the basis of investigative reporting by Richard H. P. Sia, who covers the Pentagon for The Sun, the secretary has told the Senate that the operations fund, which he questioned when he was a congressman, may have to be scrapped or revised thoroughly.

Mr. Sia in a dispatch last Sunday reported the Bush administration's financial system has turned into a "quagmire" characterized by sloppy to non-existent records and accounts, increasing evidence of mismanagement and so much multi-billion dollar wheeling and dealing that Sen. Charles E. Grassley, R-Iowa, is demanding a "top-to-bottom audit."

Mr. Sia has obtained a General Accounting Office internal memo charging that "the government has not achieved a rudimentary degree of accounting for its resources." This is appalling.

If the savings shortfall is indeed as large as some fear, the administration will either have to make it up with greater increases in defense spending or, more likely, order deeper cutbacks than some military experts deem advisable. When President Clinton issues his first real defense budget next January, the Pentagon's financial credibility will be crucial and on the line.

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