Plugging the Pentagon's Leaky Budget Practices

Getting full value for dollars spent on defense could begin with basic money management

THE surprising withdrawal of Adm. Bobby Ray Inman as nominee for secretary of defense was disappointing in at least one respect. His first public commitment as nominee was a promise to get ``a dollar value for a dollar spent in defense.'' Americans need such assurance. The sad fact is that the Department of Defense (DOD) cannot account for hundreds of billions of dollars it has spent in recent years.

Hopefully, William Perry, as the new nominee, shares the same objective. There is reason to believe that, as deputy defense secretary for the last year, he may already have become aware of this nearly intractable problem in the Pentagon. He certainly is aware of it if he has read the 1993 report to Congress by United States Comp-troller General Charles Bowsher, who heads the General Accounting Office (GAO). His report is entitled, ``Financial Management: DOD Has Not Responded Effectively to Long-Standing Problems.''

This innocuous title may account for the lack of interest the report generated in Congress and by the media last July. Or perhaps the first problem cited in the report was too small to attract attention: An Air Force accountant embezzled a mere $2 million without the loss ever having been detected. Only a tip from an acquaintance alerted the Air Force to the thefts, which had been going on for three years. Those who read further in the report, however, soon came to the parts that dealt with the disappearance of billions, not millions of dollars.

For example, as of February 1992, the Navy had written $12.3 billion worth of ``unmatched disbursements'' with no record of where the money went. As the comptroller general says, ``unmatched disbursements are analogous to writing checks but not knowing which bills were paid.''

The Army is no better. For example, its Material Command paid out $29 billion for various things, but for what purpose? They didn't bother to keep ``certain financial records'' that might have explained the payments, records that by law must be held for at least three years but now are missing.

The Army's personnel department is also sloppy. According to Mr. Bowsher, out of 829,000 active payroll records, some 203,000 - or 24 percent - did not match personnel records. A sergeant-major separated from the Army on Sept. 25, 1991, received $69,500 through May 15, 1993, because payroll controls were ineffective. In one month alone 2,200 people received improper payments totaling $6 million.

Another error detected by the GAO audit indicated that the Army failed to pay $40 million in withholding taxes to the IRS.

Air Force records listed $630 million paid out for ``communication satellites stored by contractors,'' but, no one seems to know where, if anyplace, the satellites exist. According to GAO, ``these satellites were not on the Air Force's financial or property inventory or property management records.''

Even when the Air Force succeeded in spotting discrepancies in their financial records, they took improper actions, according to GAO: ``Air Force logistics centers (1) made billions of dollars in unsupported adjustments to their inventory records to force them into agreement with financial records in the Air Force's general ledger and (2) did not investigate billions of dollars in differences between inventory and financial records.''

One measure of ineffective control of DOD spending is evident in a scandalous statistic. In 1992 the Defense Finance and Accounting Service detected duplicate and erroneous payments of $118 million to military contractors and solicited refunds from them. But the real magnitude of the problem became evident when, in just the first six months of 1993, contractors voluntarily returned unsolicited refunds of $478 million to DOD. How many excess payouts have gone undetected and will never be returned voluntarily?

This irresponsible, unprofessional performance wastes taxpayers' money and gravely degrades combat readiness. Failure to maintain accurate property accounts ``hampered equipment distribution decisions'' to units deploying for Desert Storm operations. Some Army units were issued excess equipment but distribution to other units was withheld because of supply uncertainties. GAO concluded, ``As a result, the readiness of units that did not deploy was seriously deteriorated.''

Based on a series of 24 earlier GAO reports that Bowsher described as ``devastating audit findings,'' he stated to Congress, ``[Defense] has still not demonstrated that it is serious about resolving its financial management problems.... DOD's financial management problems, deficiencies, and weaknesses are almost overwhelming.''

The Senate Armed Services Committee should ensure that Mr. Perry has plans to find out where defense funds are going. Without such plans, plus aggressive leadership, he will never know whether he is delivering full value for each defense dollar. The Opinion/Essay Page welcomes manuscripts. Authors of articles we accept will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHEL.CSPS.COM.