A neverending story: DoD’s attempts to stop cooking the books

“The Pentagon’s $1 Trillion Problem“, Scot Paltrow, Portfolio.com (May 2008) — An excellent article, well worth reading in full.  However, note the reporter’s implied assumption that DoD’s leaders want accurate accounting, but somehow new systems never seem to work.

Excerpt:

The size of nearly 28 football fields, with a facade of alternating red stucco and white cement tiles, the three-story operations center (in Indianapolis} is the federal government’s third-largest office building, after the Pentagon and the Ronald Reagan Building, and the place where a big chunk of the Iraq war’s soaring price is paid. The center doles out more than $104 billion annually, making it Defense’s largest disburser.

… To enter the Indianapolis center is to pass through a time warp, to a place where the most critical software programs date from the dawn of the computer age. They run on old-style I.B.M. mainframes and rely on Cobol, the ancient Sumerian of computer languages. “This was a bunch of systems patched together,” says Greg Bitz, a former director of the center. “I never went home at night without worrying about one of them crashing.” Bitz predicts a crisis as older programmers retire. “Try to find somebody today who knows Cobol,” he says.

… Preoccupied with protecting their turf, the Army, Navy, Air Force, and Marines continue to maintain separate, increasingly outdated systems that can’t talk to each other, trace disbursements, or detect overbilling by contractors. At the Indianapolis facility, as at the Defense Department’s four other main U.S. centers for financial operations, accounting programs under the same roof can’t share information without extensive jury-rigging, as though contracts, payments, and accounting had nothing to do with one another.

… Since the scandal in 1985, which revealed that the Navy paid Lockheed $640 each for airplane toilet seats, Congress, military leaders, and regulators have agreed that the Defense Department’s internal accounting system is in shambles. What’s startling is the scope of the problem and the government’s seeming inability to fix it. Over the past two decades, the Pentagon has repeatedly tried to design new computer systems to replace the antiquated ones. Even today, new incompatible financial systems continue to proliferate within the services, contrary to directives from the secretary of Defense’s office.

… The Pentagon has repeatedly assured Congress that it is working toward an audit. Yet the projected date continues to slip further away. In 1995, Pentagon officials testified that it could be audited by 2000. In 2006, an audit wasn’t envisioned until 2016.

… In 1990, Congress enacted legislation requiring all federal agencies to pass independent audits. Every year, the Defense inspector general dispatched dozens of auditors to the military’s financial and accounting centers. Every year, they reported back that the job couldn’t be done. Defense Department records were in such disarray and were so lacking in documentation that any attempt would be futile. In 2000, the inspector general told Congress that his auditors stopped counting after finding $2.3 trillion in unsupported entries made to force financial data to agree.

In 2002, Congress relented. Until the Pentagon can get its records in order, no comprehensive audit is required. Instead, the department writes each year to the inspector general certifying that “material amounts” in its financial reports can’t be substantiated.

…Since 2004, the Pentagon has spent roughly $16 billion annually to maintain and modernize the military’s business systems, but most are as unreliable as ever-even as the surge in defense spending is creating more room for error.

… Since 2005, the Pentagon has been carrying out what it says is the most comprehensive reform ever. Undersecretary of Defense Tina Jonas, who is now the comptroller and chief financial officer, is heading up an elaborate effort – once again – to develop compatible systems to share information seamlessly.

… Early initiatives have done little to inspire confidence. For example, the Army is introducing an overall accounting system for its general fund that is expected to be fully operational in 2011. “By all the measures one can usually rely on to predict success, this one is doing fine,” the Army’s acting undersecretary, Nelson Ford, said in a November interview. Just weeks later, though, the Defense inspector general found that the new system was “at high risk for incurring schedule delays, exceeding planned costs, and not meeting program objectives.”

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