The Pentagon Fails Audit - $21 Trillions In Transactions Could Not Be Traced, Documented, Or Explained

WAR is a racket. It always has been.

It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives.

A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small “inside” group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes. – From Major General Smedley Butler’s War is a Racket

By Michael Krieger: The following story’s been on my radar for a while, but it wasn’t until I read the fictional-sounding article published in The Nation yesterday that I finally turned my focus on the issue.
To give you a sense of what’s going on when it comes to the unimaginable levels of waste, secrecy and probable fraud occurring at the U.S. Department of Defense, check out the first couple of paragraphs from this must read article:

On November 15, Ernst & Young and other private firms that were hired to audit the Pentagon announced that they could not complete the job.
Congress had ordered an independent audit of the Department of Defense, the government’s largest single cost center—the Pentagon receives two of every three federal tax dollars collected—after the Pentagon failed for decades to audit itself. The firms concluded, however, that the DoD’s financial records were riddled with so many bookkeeping deficiencies, irregularities, and errors that a reliable audit was simply impossible.
Deputy Secretary of Defense Patrick Shanahan tried to put the best face on things, telling reporters, “We failed the audit, but we never expected to pass it.” Shanahan suggested that the DoD should get credit for attempting an audit, saying, “It was an audit on a $2.7 trillion organization, so the fact that we did the audit is substantial.” The truth, though, is that the DoD was dragged kicking and screaming to this audit by bipartisan frustration in Congress, and the result, had this been a major corporation, likely would have been a crashed stock.

If that’s not surreal enough, here’s what The Nation magazine concluded following its own investigation:

“For decades, the DoD’s leaders and accountants have been perpetrating a gigantic, unconstitutional accounting fraud, deliberately cooking the books to mislead the Congress and drive the DoD’s budgets ever higher, regardless of military necessity.”

It appears the Pentagon routinely takes money appropriated by Congress for specific purposes, keeps what it doesn’t spend, and then funnels the excess towards all kinds of unaccountable purposes, apparently including secret programs or black budget operations. The amounts left over and spent in opaque ways appear to amount to billions, if not trillions, of dollars over time. This practice is also completely and flagrantly unconstitutional:

The fraud works like this. When the DoD submits its annual budget requests to Congress, it sends along the prior year’s financial reports, which contain fabricated numbers. The fabricated numbers disguise the fact that the DoD does not always spend all of the money Congress allocates in a given year. However, instead of returning such unspent funds to the US Treasury, as the law requires, the Pentagon sometimes launders and shifts such moneys to other parts of the DoD’s budget.
Veteran Pentagon staffers say that this practice violates Article I Section 9 of the US Constitution.

Not only does this practice take money that could be put to productive use and place it into the pockets of war profiteers, it may also be funding secret wars all over the world.

This Pentagon accounting fraud is déjà vu all over again for Spinney. Back in the 1980s, he and a handful of other reform-minded colleagues exposed how the DoD used a similar accounting trick to inflate Pentagon spending—and to accumulate money for “off-the-books” programs. “DoD routinely over-estimated inflation rates for weapons systems,” Spinney recalled. “When actual inflation turned out to be lower than the estimates, they did not return the excess funds to the Treasury, as required by law, but slipped them into something called a ‘Merged Surplus Account,’” he said.
“In that way, the Pentagon was able to build up a slush fund of almost $50 billion” (about $120 billion in today’s money), Spinney added. He believes that similar tricks are being used today to fund secret programs, possibly including US Special Forces activity in Niger. That program appears to have been undertaken without Congress’s knowledge of its true nature, which only came to light when a Special Forces unit was ambushed there last year, resulting in the deaths of four US soldiers.

This immediately made me think of a tweet I sent out last night.

"Yahoo News reported this month that the Defense Department is conducting a classified operation to assist the Saudis against the Houthis in Yemen, which may involve US ground troops."

They just classify wars and don't tell anyone. Nice.https://t.co/s0YEycWCMb

— Michael Krieger (@LibertyBlitz) 28 November 2018

What’s most difficult to wrap your head around is the enormity of the unaccountable numbers at play here. Mark Skidmore, a professor of economics at Michigan State University, and two graduate students looked into decades of Pentagon financial statements and found the following:

In all, at least a mind-boggling $21 trillion of Pentagon financial transactions between 1998 and 2015 could not be traced, documented, or explained, concluded Skidmore. To convey the vastness of that sum, $21 trillion is roughly five times more than the entire federal government spends in a year. It is greater than the US Gross National Product, the world’s largest at an estimated $18.8 trillion. And that $21 trillion includes only plugs that were disclosed in reports by the Office of Inspector General, which does not review all of the Pentagon’s spending.

There’s a lot more in this excellent Nation article, which I strongly encourage you to read and share at: Exclusive: The Pentagon’s Massive Accounting Fraud Exposed.
Finally, here’s a clip of David Degraw discussing the issue on Lee Camp’s show earlier this year.

  

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