Pentagon's accounting is in a mess GAO finds billions of mismanaged funds in Army, Navy and Air Force accounts

April 30, 1993|By Richard H. P. Sia | Richard H. P. Sia,Washington Bureau

WASHINGTON — In an April 30 article in The Sun on financial managemen disarray at the Pentagon, it was incorrectly stated that the Air Force paid contractors more than $630 million to store communications satellites that were not reflected in Air Force records. The Air Force actually spent most of the money to buy the satellites and used less than $1 million a year to store them.

The Sun regrets the error.

WASHINGTON -- In a strongly worded letter to Defense Secretary Les Aspin, the U.S. Comptroller General has warned that the Pentagon is increasingly unable "to safeguard, manage and control the hundreds of billions of dollars of resources

entrusted to it."

Charles A. Bowsher wrote this week that the financial mess at the Pentagon involves billions in discrepancies in the military's financial records -- problems that extend far beyond a mismanaged $81 billion Defense Business Operations Fund.

FOR THE RECORD - CORRECTION

Though Mr. Aspin has already ordered a major review of the business fund, Mr. Bowsher said several investigations by the General Accounting Office, a congressional watchdog agency that ferrets out government waste and abuse, have uncovered "extremely serious accounting control weaknesses in all three military services' operations." A copy of Mr. Bowsher's letter, sent to Mr. Aspin Tuesday, was obtained by The Sun.

The GAO's findings include:

* $18.4 billion in ammunition that didn't show up in Army records. The Army also could not account for another $800 million in ammunition still in production or being shipped to Army facilities.

* $12.3 billion paid by the Navy for undocumented expenses last year, which Mr. Bowsher called "analogous to writing checks but not knowing what bills were paid." By failing to keep track of its finances, the Navy risked "making improper and fraudulent payments" or using tax dollars in ways Congress never intended.

* Billions of dollars in discrepancies between Air Force inventory records and the actual amount of equipment it has on hand. The staff at Air Force logistics centers failed to investigate and "made billions of dollars" in false entries to balance their books.

* Poor care and security at Army maintenance and storage depots, which put "hundreds of millions of dollars" in weapons and equipment at risk of severe corrosion or theft. At one depot, diesel engines that were left unprotected in an outdoor storage area rusted so badly that 70 percent of them had to be scrapped.

* More than $630 million paid by the Air Force to contractors for storing communications satellites that don't exist in Air Force records.

Efforts to reach Pentagon officials for comment on the GAO findings were unsuccessful.

The Pentagon's financial and accounting weaknesses raise the possibility that "waste, fraud and abuse will occur and not be detected or will not be detected early enough to be dealt with effectively," Mr. Bowsher said.

He also warned that the Pentagon cannot rely on its records or financial reports to make crucial decisions about the defense budget and military restructuring in the post-Cold War era.

"These risks have the potential to severely embarrass the department," the comptroller general said. "They also could undermine public confidence when the nation's taxpayers are being asked to bear a markedly heavier burden."

Fixing all the Pentagon's long-standing financial problems is "a daunting task," said Mr. Bowsher.

He urged Mr. Aspin not to rely too heavily on audits and some corrective steps taken by the Bush administration last year. Those audits reportedly showed that, with few exceptions, Pentagon officials were exercising "adequate" internal control of taxpayer dollars.

"We are concerned that [this] report, which was issued shortly before you became secretary of defense, may lead you and other members of the new administration to overly optimistic conclusions about what should be done to correct the serious management, control and accounting deficiencies" in the department, Mr. Bowsher said.

Mr. Bowsher also referred to financial management problems that have plagued the defense business fund, which the Bush administration created in 1991 to save money by streamlining a huge network of revolving funds that provide spare parts, equipment repairs and other goods and services to the military services.

The business fund has annual sales of $81 billion, 360,000 civilian and military employees and $126 billion in assets, making it equal in size to the world's fifth-biggest corporation. It was designed to impose fiscal discipline on managers and force them to pay attention to the cost of doing business. Its performance is critical to the success of defense management reforms that budget planners assumed would save more than $70 billion through 1997.

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