Research: Commentary

A Short Tour of Pentagon Financial Mismanagement, Waste, Fraud, and Abuse

November 20, 2011 | Article

By Ethan Rosenkranz, Carl Conetta

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With pressure mounting for stricter constraint on federal spending, the Pentagon is putting up a desperate fight to keep the deficit-reduction hounds at bay.   The Pentagon’s base budget has rebounded to peak Cold War levels, now exceeding a half trillion dollars a year.  Nothing undermines the Pentagon’s effort to defend this budget as much as its own track record, however.  

Over the past ten years, the Department of Defense has consumed more than $6 trillion in today’s money – about 54% of all discretionary spending.  Looking forward, it hopes to emerge from the deficit-reduction process with nearly as much available for 2012-2021.  But it has proved to be a poor steward of the resources at its disposal.  It continues to be one of the only federal departments whose books are in such poor order that it cannot even stand for an audit.  Although recent legislation requires the Department to be able to pass an audit by 2017, similar “deadlines” have been routinely postponed in the past. 

The fog that surrounds the Pentagon’s finances is not so thick as to completely shroud telling instances of gross mismanagement, however.  For example, the Pentagon’s weapons acquisition program has spent $32 billion over the last decade on weapons systems that were later cancelled.  And it lost another $70 billion outright due to poor management of procurement programs.  The Government Accountability Office has found that procurement programs have suffered hundreds of billions of dollars in cost growth over the past decade with a number of leading items suffering the now standard problems of being over budget, behind schedule, beset by technical problems, and less capable than promised.  The F-35 Joint Strike Fighter stands out as an example.  It is currently five years behind schedule and $150 billion over-budget.   The Information Technology systems that the Pentagon must field in order to pass an audit are themselves years behind schedule and billions of dollars over-budget.

Below are articles and reports that highlight financial mismanagement as well as waste, fraud, and abuse at the Department of Defense:

Washington Post:  Army report: Military has spent $32 billion since ’95 on abandoned weapons programs

A 2010 Army Acquisition Review found that $32 billion has been spent on 22 weapons systems that were later cancelled.  For a copy of the 2010 Acquisition Review,click here

Agence France-Presse: Billions in Afghanistan aid dollars unaccounted for: audit

An audit prepared by the Special Inspector General for Afghanistan Reconstruction (SIGAR) found that the State Department, Department of Defense, and U.S. Agency for International Development were unable to account for almost $18 billion in development funds that had been dispered by the U.S. government. 

ABC World News: Pentagon Waste: Could Billions Have Been Saved Through Smarter Ordering System?

A report by the Government Accountability Office (GAO) found that the Defense Logistics Agency has $7 billion in excess spare parts in its inventory.

New York Times: Audit of Pentagon Spending Finds $70 Billion in Waste

A 2011 GAO report found that the Pentagon lost $70 billion due to poor management of its weapons acquisition program.   For a copy of the GAO report, click here.

Mother Jones: The All-Time 10 Worst Military Contracting Boondoggles

In its final report, the Commission on Wartime Contracting (CWC) found that the federal government lost $31-60 billion, out of a total of $206 billion spent, due to contracting fraud in Iraq and Afghanistan.  For a copy of the CWC final report, click here.

Bloomberg: Lockheed’s F-35 Rose 64% Over Decade in ‘Rich Man’s World’

According to a 2011 GAO report, the F-35 Joint Strike Fighter’s development costs have grown by 64 percent since 2001.  The program is still being developed more than 10 years after its inception, is five years behind schedule, and is now estimated to cost a total of $382.5 billion, up almost $150 billion from its original cost estimate of $233 billion.  For a copy of the 2011 GAO report, click here

National Journal: The Pentagon’s Premium

A look at the Pentagon’s long history of overpaying contractors for basic services and its track record of poor financial management and oversight. 

USA Today: Some Army Surplus Is Unlikely to be Used

In a series of reports from 2007-2010, GAO found that the Defense Logistics Agency, Navy, Air Force, and Army all ordered excess parts that were unnecessary or unneeded.  In total, these agencies planned to spend $37 billion on unnecessary spare parts over the next five years.   For a copy of the GAO reports: click on the following links: Defense Logistics AgencyArmyNavyAir Force

Computerworld: Pentagon IT Mismanagement Wastes Billions

A 2004 GAO study found that the Pentagon was investing billions of dollars in upgrades to its IT systems with little or no oversight, and that the program was fundamentally flawed potentially costing taxpayers billions of dollars in wasted funding.  For a copy of the GAO report, click here.

The Free Liberal: A Government Agency Even Libertarians Can Love: The GAO and Pentagon Accountability

Nathan Larson provides a succinct overview of a number of GAO investigations into Pentagon waste during Operation Iraqi Freedom. 

Boston Globe: Department of Defense Report Outlines Contractor Fraud

A Department of Defense report found that, between 2007 and 2009, the Pentagon paid over $285 billion to contractors and contracting firms that had been convicted of or admitted to defrauding the government.  For a copy of the Department of Defense report, click here

Government Executive: GAO: Defense Finance Systems $6.9 Billion Over Budget, Years Behind Schedule

Six out of the nine IT systems that the Department of Defense is setting up in order to allow it to conduct a full audit by 2017 are between two and twelve years behind schedule.  In total, the nine IT systems have experienced cost overruns of at least $6.9 billion. 

Department of Defense: DOD Acquisition and Logistics Excellence Week Kickoff – Bureaucracy to Battlefield

In a speech given on September 10, 2001, then-Secretary of Defense Donald Rumsfeld admitted that the Pentagon “cannot track $2.3 trillion in transactions.”  He also said that the Pentagon maintains 20-25 percent more base infrastructure than is necessary wasting $3-4 billion a year. 

The Center for Public Integrity: Pentagon Spends Billions on Incentive Pay But Doesn’t Measure What Works

According to a 2011 GAO report, the Pentagon spent $11 billion on bonuses for military personnel, including enlistment and reenlistment incentives, but has no way of measuring the effectiveness of its pay incentives and establishing an optimal bonus amount.  For a copy of the GAO report, click here. 

Defense Tech: $46 Billion Wasted on Cancelled Programs

A 2011 report by the Center for Strategic and Budgetary Affairs (CSBA) found that over the past ten years, the United States has wasted $46 billion on cancelled weapons systems.  For a copy of the CSBA report, click here.

San Francisco Chronicle: Military Waste Under Fire: $1 Trillion Missing

A 2002 Department of Defense Inspector General Report found that the Pentagon had processed $1.1 trillion in unsupported accounting entries.  For a copy of the IG report, click here.

Bloomberg: $35B Missile Defense Misses Bullet With Bullet

In a comprehensive article, Bloomberg examines missile defense’s 27-year, $141.1 billion history, highlighting the fact that the program is exempt from standard acquisition regulations, including requirements for independent cost analysis.  A GAO auditor calls the program “an undefined destination as an unknown cost.” 

 

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