Fraud, Waste, Abuse

By David Abel
Defense Week

Unrealistic goals, poor accounting systems, and sweeping management failures continue to plague the Pentagon, according to a wide-ranging report released last week by the General Accounting Office.

The GAO report, "Major Management Challenges and Program Risks," outlines a broad spectrum of problems in the military's management, ranging from overpaying contractors for commercial spare parts to susceptible computer networks constantly attacked by hackers.

The report is part of a series that includes reviews of other federal agencies. While many of the problems were publicized in 1998, the report is significant because it encapsulates in 65 pages some of the Pentagon's most intractable problems.

Among the GAO's most jarring findings: auditors could not match about $22 billion in signed checks with corresponding obligations; $9 billion in known military materials and supplies were unaccounted for; and contractors received $19 million in overpayments.

"Despite DOD's military successes, many of DOD' s programs and operations are still vulnerable to fraud, waste, abuse, and mismanagement, and need improvement," wrote David Walker, the GAO's comptroller general, in a preface to the report.

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

Decades of neglect
The Pentagon, charged with the trying task of controlling more than $1 trillion in assets and managing an annual budget of $267 billion, has struggled to overcome a raft of institutional flaws brought on by decades of neglect and a culture inimical to whistleblowers, the report says.

While officials at the Pentagon acknowledge their failings, they say they're addressing the problems and have already made improvements.

"The Department of Defense has been devoting significant attention to the areas for several years," said Susan Hansen, a Pentagon spokeswoman. "Certainly, we are paying attention to them, and we feel as though we have made progress on them."

The GAO breaks down the Pentagon's problems into two areas: systemic management shortcomings in the areas of finances, contracts, information, and weapon systems acquisition and failures in managing inventory, personnel, and property.

Sloppy booksThe report begins by acknowledging that the massive size of the military -- 1.4 million soldiers and civilians, 15 percent of the nation's budget, and vast stocks of advanced weapons -- makes it difficult to manage.

Nonetheless, the most recent audits of Pentagon financial statements show serious record-keeping flaws in fiscal 1997. For example, recorded information on the number and location of military equipment such as F-4 engines was unreliable. Also, available inventory differed from what officials recorded at several major locations by 23 percent, the report says.

The Pentagon's sketchy accounting methods are compounded by human error, the report found. A GAO survey of 1,400 Defense Department upper-level financial managers found more than half had no financial or budget-related training.

The inventory failures mean the Pentagon doesn't know what it can send to troops, can't avoid buying more of something the military already owns, and can't tell how much its programs actually cost, the report says.

'Most immediate challenge'
The report also questions whether the Pentagon will be able to reprogram its computers before the onset of Y2K, the inability of computers to correctly interpret recorded dates in 2000. With more than 1.5 million computers, 28,000 systems, and 10,000 networks, solving Y2K is the Defense Department's "most immediate challenge," the report says.

But the Pentagon is unlikely to solve its Y2K problems in time, the GAO says. In November, the Office of Management and Budget placed the Defense Department on its "Tier 1" list, those agencies with "insufficient evidence of adequate progress."

The department's glut of technology has brought a growing number of attacks against its computer systems. There are now more than 100,000 attacks every year, and 65 percent of the hackers are successful in either stealing, modifying, or destroying data and software, the report says.

"Numerous DOD functions have been adversely affected, including weapons and supercomputer research, logistics, finance, procurement, personnel management, military health and payroll," the report says.

'Overly optimistic' budgets
Pervasive problems also continue to plague the Pentagon's $85 billion annual effort to develop and buy weapons. Too often, the Pentagon's systems duplicate the missions of existing ones, the report says. Also, the Pentagon often sets unrealistic development schedules and performance estimates, doesn't consider alternative options or consult the services, and pays before a system is proven.

For example, the Pentagon bought too many C-17s, lost about $700 million by not buying Blackhawk helicopters in the same year and over-estimated the number of Longbow Hellfire missiles needed, according to the report.

The auditors added that defense officials have "overly optimistic" budget projections. The report cast doubt on whether the Air Force would be able to offset the $13 billion projected increase in the cost of the F-22 fighter program, if attack submarines would stick to their budgets, and whether the stated cost ofthe B-2 bomber was accurate.

In the end, the report cites five underlying causes of the Pentagon's persisting problems: a culture opposed to change; too few incentives for those seeking reforms; unclear goals; a lack of reliable data for measuring program costs and performance; and poor management.