In a damning report on the chaotic state of financial accounting by the United States Army, the country’s Inspector General has said that trillions of dollars in improper accounting adjustments were made to create the illusion of balanced book-keeping.
In its June report, the Inspector General’s office 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. And, because it lacked receipts and invoices to support those numbers, the army simply made them up.
The US Department of Defense (DoD) has been plagued by severe accounting problems and disclosures about the army’s latest account manipulations are only a sign of the prevailing malaise. Lax budgeting and years of condoning account fudging processes have left the taxpayer unable to assess how the Defense Department, which receives far and away the largest chunk of the government’s annual budget, spends the money.
A more in-depth inquiry into accounting procedures at the DoD would probably reveal even bigger problems in how the department spends its money. The department’s 2016 budget is $573 billion, more than half of the annual budget appropriated by Congress.
At first glance adjustments totaling trillions may seem impossible. The amounts dwarf the DoD’s entire budget. However, analysts point out that making changes to one account also require making changes to multiple levels of sub-accounts. That creates 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.
An army spokesman downplayed the significance of the improper changes, which he said net out to $62.4 billion. “Though there are a high number of adjustments, we believe the financial statement information is more accurate than implied in this report,” he said.
Some employees of the Defense Finance and Accounting Services (DFAS), which handles a wide range of Defense Department accounting services, referred sardonically to preparation of the Army’s year-end statements as “the grand plug,” an accounting jargon for inserting made-up numbers. But the DFAS also came in for criticism from the Inspector General’s office, which cited how the DFAS had made unjustified changes to numbers.
For example, two DFAS computer systems showed different values of supplies for missiles and ammunition, the report noted – but rather than solving the disparity, DFAS personnel inserted a false “correction” to make the numbers match. It pointed out that the DFAS also could not make accurate year-end Army financial statements because more than 16,000 financial data files had vanished from its computer system. Faulty computer programming and employees’ inability to detect the flaw were at fault, the report said.