Budget Stampede Raises Question: How Can Congress Know How
to Add Money If Pentagon Can Not Tell It Where It Spends Money?

February 1, 1999

Comment: #231

Discussion Thread:  #s 61, 72, 102, 114, 117, 130, 131, 146, 154, 159, 166, 169, 184, 193


[1] David Abel, "GAO Slams Pentagon 'Fraud, Waste, Abuse,'" Defense Week, February 1, 1999, Pg. 3.

[2] United States General Accounting Office, GAO Performance and Accountability Series, "Major Management Challenges and Program Risks:  Department of Defense," January 1999 (GAO/OCG-99-4) <http://www.gao.gov/new.items/cg99004.pdf> Attached.

As I have said repeatedly in past messages, the Defense Department suffers from three interconnected problems: (1) a modernization program containing weapons that are so expensive we can not buy enough of them to modernize the force on a timely basis, even if the program is perfectly executed; (2) a rapidly deteriorating readiness posture, which is driven by the rising cost of low readiness and is, in part, a consequence of aging caused by the first problem; and (3) a corrupt accounting system that renders it impossible to assemble the detailed information needed to fix the first two problems and makes a mockery of the Constitutional requirement for accountability. New readers should read Comment #169 to familiarize yourselves the constitutional issue.

Those who think a mad rush to throw money at the Pentagon will fix these problems would be well advised to make an effort to understand the magnitude of DoD's accountability crisis.

David Abel of Defense Week reports in Reference 1 about the most recent report analyzing the bookkeeping shambles issued by General Accounting Office (GAO). Reference #2 is a copy of the Overview of the GAO Report which can be found at the hot link at the end of this message.

Abel reports, for example, that GAO auditors could not match about $22 billion in signed checks with corresponding obligations or account for $9 billion in known military materials and supplies. Unauditable inventories mean the Pentagon doesn't know what it sent to the troops, it can't avoid buying more of something the military already owns, and can't tell how much its programs actually cost.

The report also says the Pentagon makes unrealistic budget projections, often sets unrealistic development schedules and performance estimates, and pays contractors before performance or capabilities are proven.

The report concludes by citing five underlying causes of the Pentagon's persisting problems: (1) a culture opposed to change; (2) too few incentives for those seeking reforms; (3) unclear goals; (4) a lack of reliable data for measuring program costs and performance; and (5) poor management.

Read the overview of the GAO report [Attachment #2 below]. The entire report can be found at the following hot link: <http://www.gao.gov/new.items/cg99004.pdf>

Chuck Spinney

[Disclaimer: In accordance with 17 U.S.C. 107, the following material is distributed without profit or payment to those who have expressed a prior interest in receiving this information for non-profit research and educational purposes only.]

Reference 2

United States General Accounting Office
GAO Performance and Accountability Series January 1999
Major Management Challenges and Program Risks Department of Defense GAO/OCG-99-4

The entire GAO report can be found at the following hot link <http://www.gao.gov/new.items/cg99004.pdf>


Managing and overseeing over $1 trillion in assets and a budget of over $250 billion annually, or about one-half of the government's discretionary funding, is an enormous task. As the United States begins the new millennium as the world's sole superpower, it continues to lead the world with superior military forces. The effectiveness of U.S. forces is well evidenced by experiences in the Persian Gulf and Bosnia. Also, the Department of Defense (DOD) has implemented a number of Department wide reform initiatives that are intended to improve its financial management, information management, and defense weapon systems acquisition processes and other key business practices.

However, DOD still faces challenges with many of its key performance and management processes.

The Challenges

Despite DOD's successes, many of DOD's programs and operations are still vulnerable to fraud, waste, abuse, and mismanagement. The Congress has held oversight hearings and enacted specific legislative initiatives to improve the economy and efficiency of DOD's operations and the Department has acted on congressional direction and suggestions for improvement. However, as noted in our report and reports of DOD's Inspector General (IG), many of DOD's key management processes need improvement. Successfully addressing these challenges can yield fiscal dividends that the Department could use to meet priorities such as readiness and modernization needs. Summaries of key systemic management process and program challenges that need to be addressed follow.

Systemic Management Challenges

  • DOD continues to struggle to overcome the many problems brought about by decades of neglect and to fully institute sound financial management practices. These problems range from being unable to properly account for billions of dollars in assets to being unable to produce reliable and timely information needed to make sound resource decisions.

  • Information management and technology issues are key DOD management challenges. A primary short-term concern centers on the implementation of the Year 2000 conversions of date-sensitive information on DOD's computer systems. Also, information security for computer systems poses concerns, since malicious attacks on these systems are an increasing threat to our nation's security.

  • Effectively managing the weapon systems acquisition process continues to be a concern for DOD. Although DOD has increased its procurement budget, it consistently pays more and takes longer than planned to develop systems that do not perform as anticipated.

  • DOD spends over $100 billion a year contracting for goods and services. Over the last few years, DOD has made several broad-based changes to its acquisition and contracting processes to improve DOD-contractor relationships and rules. DOD has given attention to acquisition reform initiatives, but we continue to identify risks in DOD's contracting activity, including areas such as erroneous, fraudulent, and improper payments to contractors; payment of higher prices for commercial spare parts than necessary; and the award and administration of DOD health care contracts.

Program Management Challenges

  • Although DOD has substantially downsized its force structure over the past 7 to 10 years, it has not reduced operations and support costs commensurately because the services are reluctant to consolidate activities that span service lines and reduce capacity as necessary.

  • DOD's inventory management practices continue to be ineffective and inefficient and are not well-suited to meet DOD's new missions and warfighting strategies. As a result, DOD spends more than necessary to procure inventory, yet items are not available when needed.

  • DOD's personnel programs to recruit, train, and retain a high-quality active-duty enlisted workforce have not received the management attention needed to ensure their successful operation. The military services recruit tens of thousands of new enlistees each year who fail to complete their contracts.

Progress and Next Steps

To address the management and performance problems we have cited, DOD has taken actions in the high risk and other areas and has made progress in improving some of them. DOD has had some success in addressing its inventory management problems, is working to reform its weapon systems acquisition process, and has recognized the need for infrastructure reductions. Although DOD's past and current efforts have resulted in progress in improving its operations, persistent and long-standing problems still exist.

Overcoming these challenges requires DOD to address the underlying causes of these problems, such as cultural barriers and service parochialism that limit opportunities for change and the lack of clear, results-oriented goals and performance measures, in some cases.

To address these problems, DOD must have an effective overall strategic plan for the agency and individual implementation plans for each level of the organization that, among other things, include goals, performance measures, and time frames for completing corrective actions. The Government Performance and Results Act of 1993 provides the framework for resolving high risk and other programs and for providing greater accountability in DOD's programs and operations. DOD, however, has not fully embraced the underlying principles in the Results Act.

Our review of DOD's strategic plan and its February 1998 performance plan identified weaknesses in (1) establishing results-oriented performance goals with explicit strategies and time frames for achieving them and (2) addressing what DOD has done or plans to do to resolve its persistent management problems. In our opinion, DOD needs to work closely with the Congress now to develop performance goals and measures. Addressing these areas would provide congressional decision makers and DOD the information necessary to ensure that DOD's plans are well thought out for resolving ongoing problems, achieving its goals and objectives, and becoming more results oriented, as expected by the Results Act.