Comptroller wields sharp pencil amid financial chaos at Pentagon

March 23, 1994|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau of The Sun

WASHINGTON -- John J. Hamre is your man in the Pentagon, charged with making sure taxpayers' defense dollars -- $263.7 billion of them in fiscal 1995, $1.3 trillion over the next five years -- are spent properly.

If you think the system can be improved, so does Mr. Hamre.

Five months after becoming comptroller of the Defense Department, he says of the problems he found waiting in his third-floor office: "It was astounding to me. It was truly astounding."

He found 450 accounting and management systems; 105 pieces of paper behind every military transaction; 40 percent of the department's checks still being signed by hand; an agency "up to its belt buckle" in computers but lacking integrated software; military services each doing its own thing financially, with pay and personnel rolls so out of kilter that the Army recently kept paying more than 2,000 people for months after they had left the ranks.

"It is pretty gummed up," Mr. Hamre acknowledged in an interview. "I'll be long dead and gone before we ever reach nirvana when it comes to our accounting system."

In its 1994 report to Congress and the president, the Pentagon conceded: "Genuine reform of financial management in DoD will be nearly as monumental a task as restructuring America's defense posture to reflect the end of the Cold War."

Such frankness is part of a chorus of self-analysis heard on the banks of the Potomac these days as the Pentagon comes under the stewardship of a Clinton administration team committed to a new way of doing business. It is reviewing everything from roles and missions to the need for new weapons systems. If readiness is the priority in the field, efficiency is the byword in the office.

Defense Secretary William J. Perry, saying he was "appalled" at how the Pentagon -- "the biggest business in the world" -- is run, told the Senate Appropriations Committee's defense subcommittee this month: "Our financial management system is inefficient, obsolete and archaic."

Deputy Defense Secretary John Deutch told the Senate Armed Services committee, "We are woefully inadequate with respect to our financial control systems."

That inadequacy has led to Pentagon scandals over the years, with stories of $500 hammers, taxpayer-funded vacations for defense contractors, rip-offs by the defense industry and billions of dollars of public money squandered.

Charged with bringing order to the financial chaos is Mr. Hamre, 43, a recruit with 10 years with the Senate Armed Services Committee and six years with the Congressional Budget Office.

Neither a trained accountant nor an auditor, he has, however, been steeped in the arcane minutiae of defense budgets for the past 16 years. Equally important, he carries the respect of powerful members of Congress, whose cooperation is essential to real Pentagon reforms.

Sen. Sam Nunn, the Georgia Democrat who, as chairman of the Senate Armed Services Committee, is perhaps the most powerful legislator on defense issues, credited President Clinton with making "a superb choice" for "one of the most important positions in the Defense Department."

Sen. John W. Warner, the Virginia Republican who is a former Navy secretary, praised Mr. Hamre at his confirmation hearing as "one of the nicest men that ever walked the halls of the United States Senate," and then urged him to become "as rough as an old crosscut saw" in his new job.

The primary duty for Mr. Hamre is to prepare the defense budget. But his biggest challenge is modernizing the management and financial systems behind the bookkeeping.

"In many ways, it's a little like going to AA," he said. "Until you kind of admit you are a drunk, you don't stop drinking.

"In this case, until you admit you have some pretty profound problems, you don't [do anything] about them. What we had, frankly, was a department that was in a kind of stage of denial."

The reasons were both historical and modern.

As long ago as 1775, Mr. Hamre noted, James Warren, paymaster of the Continental Army, wrote to Congress that he was unable to do his job because there were 13 payroll systems, one for each of the colonies.

"Our burdens here are much greater," Mr. Hamre said. "They are overcoming this 200 years' legacy."

"We are more like an omelet than a souffle," he added.

"When you get right down to it, it's not a homogeneous organization. There are very discrete elements inside the Department of Defense. The services are very discrete and autonomous. Their finance and accounting systems go back 200 years."

Key to his reorganization effort is the Defense Business Operations Fund, a much-maligned Bush administration initiative to centralize Pentagon purchases.

A Pentagon study last year found that it routinely lost track of billions of tax dollars. But Mr. Hamre thinks the system can work if organized properly.

"I am a big defender of it," he said, noting that the fund controls $82 billion worth of transactions, nearly one-third of the Pentagon's budget.

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