This is extraordinary.
According to a Reuters article on Friday, 19 August, a DOD Inspector General investigation has concluded that the U.S. Army made trillions of dollars’ worth of “improper adjustments” to its accounts last year — and that its books are so jumbled, there’s no making head or tail of them. (H/t: Washington Free Beacon)
Reuters makes the following startling claims, based on the IG report:
The Defense Department’s Inspector General, in a June report, said the Army made $2.8 trillion in wrongful adjustments to accounting entries in one quarter alone in 2015, and $6.5 trillion for the year. Yet the Army lacked receipts and invoices to support those numbers or simply made them up.
As a result, the Army’s financial statements for 2015 were “materially misstated,” the report concluded. The “forced” adjustments rendered the statements useless because “DoD and Army managers could not rely on the data in their accounting systems when making management and resource decisions.”
Reuters blows right on past this to embark on a discussion of how the Pentagon’s books have been screwed up for years. But the initial statement is so fantastic, it needs to have its depths plumbed like the Kola Superdeep Borehole before we move on.
How in the world could the Army “wrongfully adjust” $6.5 trillion in accounting entries in 2015, a year when its annual budget was about $152 billion? Reuters cites an “assets” balance for the Army of $282.6 billion in 2015, in the service’s two main accounts. The $152 billion figure, culled from online federal spending data, comports with the Army’s 2016 budget request of $147 billion (base budget plus overseas contingency operations, or OCO), and tracks with the steady decline in the service’s budget since 2010. But either way you slice it, the numbers don’t make any kind of sense.
For the record, the amount “wrongfully adjusted” is almost 43 times the Army’s budget in 2015. $6.5 trillion is 23 times the amount reported as being in the Army’s two main accounts. In fact, it’s more than 11 times the entire defense budget for 2016, which is $573 billion.
The Reuters report addresses this, but not in a satisfactory way:
At first glance adjustments totaling trillions may seem impossible. The amounts dwarf the Defense Department’s entire budget. Making changes to one account also require making changes to multiple levels of sub-accounts, however. That created a domino effect where, essentially, falsifications kept falling down the line. In many instances this daisy-chain was repeated multiple times for the same accounting item.
Huh? Is someone — the IG? — saying that there is seriously no way to null out this effect and count only the meaningful, non-duplicative adjustments? Come on. If the IG’s forensic accountants can’t do that, why should we put any stock in this IG report? It’s just some alarming numbers that don’t seem to mean anything.
Heck, I could go through someone’s budget and add up all the items I can’t identify or document in each account and sub-account. For all the good it would do. But I’d know better than to come up for air afterward blaring out “6.5 trillion DOLLARS!!” at people.
Meanwhile, if I saw “accounting adjustments” that totaled either 23 or 43 times the amount of the only solid, verifiable accounting numbers we had, I’d have to suspect a huge money-laundering scheme was going on.
What I would not accept is that the Army was behind it.
The Reuters article goes on to babble about the defense budget representing more than half of the “annual budget appropriated by Congress,” a perennial staple of defense-budget alarmism that we’re supposed to be impressed with. Big whoop. Here are the meaningful numbers for 2015:
So let’s cut the crap, as we’re doing so often in 2016. It isn’t clear what’s going on here, but it looks like someone is trying to make a point, apparently by baffling us with BS.
There’s plenty wrong with defense budgeting, but insanely absurd “bad accounting” numbers don’t tell us anything useful. In fact, they’re misleading to a very irresponsible degree. The whiff of an impressionistic general indictment of all defense spending doesn’t strengthen the credibility of whatever we’re being sold here.
I note that Zero Hedge found this report astonishing too, although they’re not registering the skepticism I think it merits. If Congress latches onto this, I have to hope the first thing they’ll do is tell the DOD IG to go back and come up with some numbers that mean something first.