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Pentagon guilty of billion-dollar accounting fraud, reveals Reuters investigation

Pentagon guilty of billion-dollar accounting fraud, reveals Reuters investigation

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A new report from Reuters has discovered widespread accounting fraud at the Pentagon, describing a budget of more than $8 trillion disappearing into a mess of corrupted data, erroneous reports, and unauditable ledgers. Sources from the Department of Finance and Accounting describe the arduous process of squaring the Navy's books with the US Treasury outlays, dealing with obviously inaccurate numbers or entries that were simply left blank. The data usually arrives just two days before deadline, and supervisors direct the office to enter false numbers — known as "plugs" — to square the accounts and conceal the agencies' patchy bookkeeping. The result is fraudulent figures that can reach as high as a trillion dollars in a single year, simply to make the Pentagon books match the Treasury's budget.

The army lost track of $5.8 billion in supplies between 2003 and 2011

The report doesn't allege any specific instances of fraud, but rather a widespread failure of accounting processes that have allowed for a staggering quantity of waste and misallocation of resources. "I don't think they're lying and cheating and stealing necessarily, but it's not the right thing to do," Pentagon Comptroller Robert Hale told Reuters.

In one example, the Army lost track of roughly $5.8 billion worth of supplies between 2003 and 2011. That figure is troubling partially because of the possibility for profiteering, but more so because of the equipment shortages reported by soldiers in Iraq and Afghanistan during those years. Those shortages were made significantly worse by what Reuters describes as "the Pentagon's chronic failure to keep track of its money."

The result has drawn widespread criticism from Congress and Pentagon leaders alike, but it's unclear how close the agency is to solving the problem. In 1996, the Clinton administration mandated yearly audits on all federal agencies, but while every other agency has complied with the order, the Pentagon has yet to undergo a single audit, presumably because of the fraudulent figures that would be unearthed. It's particularly ironic because, in the private sector, this kind of intentionally misleading book-keeping is a criminal offense. In 2011, Defense Secretary Leon Panetta announced that Pentagon ledgers would be audit-ready in 2014, a full 18 years after federal law first required annual audits for all government departments. As a result of the report, Reuters concludes the Pentagon probably won't meet the deadline, suggesting this waste may continue for years to come.