For years, lawmakers and government watchdogs have complained about wasteful and improper government payments to Medicare and Medicaid health care providers and to scores of other programs that have cost taxpayers at least $1.2 trillion since fiscal 2003.
Just last year, the Government Accountability Office (GAO) documented improper or dubious payments to more than 100 government program operated by 22 agencies totaling $144 billion. During a hearing before the Senate Budget Committee on Wednesday focused on “running the government for less,” Sen. Angus King (I-Maine) noted that the government could literally wipe out the annual deficit by recouping many of those improper government payments and closing the $406 billion annual gap in IRS tax collections.
Related: Want to Slash the Deficit? Stop the Billions in Improper Government Payments
Yet the hundreds of billions of improper payments by the government to contractors, physicians, beneficiaries and others could well be just the tip of the iceberg of federal funds being squandered because of inadequate oversight. That’s because the Department of Defense – the largest government agency with an annual budget of nearly $600 billion – has never been successfully audited.
Worse still, an investigation by Reuters in 2013 showed that “phony numbers” were inserted into Defense Department’s books to square the accounts with those of the U.S. Treasury—a sanctioned accounting practice that in any business would be considered fraud and lead to jail time.
“The Department of Defense is the only major department and agency in the federal government that cannot yet pass a test with an independent audit,” Gene L. Dodaro, Comptroller of the United States, said in an interview yesterday following his testimony before the Budget Committee. “There are some small components of the Defense Department that do pass audits, like the Army Corp of Engineers. But none of the major services and certainly not a department-wide audit so far.”
But that could be changing.
The military’s accounting disarray became an issue during the 2016 presidential campaign, and both President Trump and Democratic nominee Hillary Clinton pledged to order a thorough audit of the Defense Department as part of major government reforms if they were elected.
Related: How the Pentagon Cooks the Books to Hide Massive Waste
That idea enjoyed widespread bipartisan support. David Norquist, Trump’s nominee to become comptroller of the Pentagon, indicated that the Pentagon would devote the next several months “gearing up for a mission so complicated that many officials doubt it can be pulled off,” as The Atlantic reported.
While the Pentagon over the years has been hit with investigations and controversy over massive contract cost overruns, including development of the F-35 Joint Strike Fighter, as well as bribery in the awarding of contracts and other misdeeds, the Government Accountability Office (GAO) has never documented the extent of improper payments and still hasn’t the slightest clue.
Experts say there is no way of knowing how the Pentagon had spent more than $8.5 trillion since 1996 when a new law took effect mandating the DoD’s financial reviews. Precisely how much the Defense Department spends and where the money goes has been something of a mystery in the post-World War II era. Indeed, the Pentagon’s antiquated bookkeeping system –- some believe by design -- is not compatible with modern accounting practices and computer programs.
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When Army financial experts mustered the courage to submit their books for review last year, the Inspector General discovered $2.8 trillion of accounting errors and numerous missing receipts and invoices that were needed to back up their figures.
The Defense Department’s financial management operation was first added to the GAO’s “High-Risk List” of troubled government organizations and program in 1995. The many long-standing problems have continued to adversely affect the Pentagon’s ability to manage the department and “make sound decisions on missions and operations.”
During his interview, Dodaro conceded that the Pentagon had made some modest progress recently, but questioned whether they could overcome numerous obstacles to getting a handle on their finances and calculating improper payments.
Related: The Problem with Low-Income Tax Credits: Billions in Improper Payments
“Now the [GAO] auditors who have been in there have been performing an important service,” Dodaro said. “They’ve made over 700 recommendations so far, so the department is moving. They’re committed to trying to get to an auditable status. They’re expanding the scope of the audits at the [military] services. So, I’m encouraged that they’re moving in the right direction. But it’s going to take a while for them to get there because of their long-standing and fundamental weaknesses.”
Pressed to speculate on the magnitude of improper payments that may eventually turn up in a Pentagon audit, Dodaro replied, “It’s hard to tell” what will eventually be uncovered. “You don’t know, and that’s a problem, but you should know,” he said.
“I’m not in the business of guessing,” he added. “I’m in the business of auditing.”
