- New Senate committee report reveals government
departments
routinely waste billions upon billions of dollars each year through
financial
mismanagement.
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- The horrific events of Sept. 11 temporarily sidelined
the bitterly partisan haggling about the federal budget. But a growing
number of insiders on Capitol Hill are becoming convinced that the debate
about how the nationís financial resources are used may be as
important
as any debate concerning the ìfirst war of the 21st century,î
and very well may determine the success of future actions in that
war.
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- With the dust still settling from the attacks on the
World Trade Center and the Pentagon, unity has been the order of the day,
with little time or inclination for finger-pointing about the breakdown
of intelligence, home defense and readiness. The time for this will come
soon enough. There are for the moment few willing to go on record about
how outrageously financial resources have been squandered during the last
eight years. But the fact is that trillions of dollars have been
appropriated
by Congress without accountability and with no systematic means of
determining
whether the level of appropriation is enough or even if the money was spent
for its appropriated purpose. It is almost as though the profligate
ìBoss
Tweedî of New Yorkís Tammany Hall had been resurrected on
the federal level (see Tweed on cover).
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- Already there is talk about renewed deficit spending
among both Democrats and Republicans to fund the war on terrorism and to
accommodate new economic-stimulus packages, including another round of
tax cuts. But critics quietly are asking how future spending needs even
can be approximated without reliable accountability.
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- Financial fudging in the Cabinet departments long has
been a sore point for the inspectors general (IGs) and the General
Accounting
Office (GAO), charged with keeping an eye on waste and abuse. Now President
George W. Bush has entered the fray. He is well aware that to win a war
ó whether it be a war on drugs, crime, hunger or terrorism ó
every resource is precious. He made that clear in his 2002 Management
Agenda,
where he said: ìWithout accountability, how can we ever expect
results?
Under my administration, we will bring this cycle of failure to an abrupt
end. As president, I will hold affected agencies accountable for passing
their audits not later than 2002. I will say to those in place, ëGet
your audits right.íî
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- What is the ìcycle of failureî to which
the president is referring? While there are numerous examples of god-awful
financial mismanagement among federal agencies and departments, nowhere
is it worse than in the area of national security. Last year (and every
year since audits have been required) the Department of Defense (DOD) not
only could not produce a clean audit but was unable to account for at least
$1.1 trillion (see ìRumsfeld Inherits Financial Mess,î Sept.
3).
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- Little wonder the president ordered a complete
reorganization
of the DOD. To understand the importance of fiduciary responsibility even
in a time of crisis, consider that if Defense Secretary Donald Rumsfeld
and the Bush team at the Pentagon had that $1.1 trillion today, it could
buy 244 Nimitz-class aircraft carriers at a cost of $4.5 billion each,
19,298 F/A18-E/F Super Hornet Fighters at a cost of $57 million each or
343,750 Bradley fighting vehicles at a total cost of $3.2 billion.
Furthermore,
using a reasonable estimate of $3 billion, the $1.1 trillion that is
unaccounted
for could pay for the construction of 367 brand-new Pentagon buildings,
or seven Pentagons per state.
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- Insight offers these hypotheticals to help focus on
accountability
and spending priorities at a time when the popular impulse may be to damn
the torpedoes and speed the spending. The consensus of national-security
specialists is that funding levels hardly can be blamed for the Clinton-era
intelligence and policy failures that made possible the Sept. 11
attacks.
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- In any case, Congress has oversight of all appropriated
funds and shortly will determine how much is needed per department and
agency to run the federal government for fiscal 2002. Congress for years
has been concerned about how wastefully tax money is spent and is taking
corrective actions to rein in the problem at all levels. In June, Sen.
Fred Thompson (R-Tenn.), ranking minority member on the Senate Governmental
Affairs Committee, issued the two-volume report Government on the Brink,
the first in years seriously to address waste, fraud and abuse within the
federal government.
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- According to the Thompson report, ìBecause of
its size and scope, and the terrible way it is managed, the federal
government
wastes billions and billions of your tax dollars every year. The waste,
fraud and abuse reported to the Governmental Affairs Committee each year
is staggering. Of course no one knows exactly how much fraud, waste and
mismanagement cost the taxpayers because the federal government makes no
effort to keep track of it.î
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- Using data provided by a variety of official sources,
including the IGs of each federal agency and the GAO, Thompsonís
Government on the Brink provides a comprehensive guide to each
agencyís
strengths and weaknesses. What is most revealing, however, is the number
of departments that simply cannot account for billions of dollars. Consider
the following from the Thompson report:
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- Department of Defense: ìDespite the massive audit
effort, the Department of Defense could not overcome the fundamental
inadequacy
of its financial-reporting systems and produce reliable data. The
department
continues to confront pervasive and complex financial-management problems
that can seriously diminish the efficiency of the military servicesí
support operation. There is no major component of the Defense Department
that can balance its books.î
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- Department of Agriculture: ìBecause its financial
management is so deficient, the department canít ensure that its
financial statements are reliable and presented in accordance with
generally
accepted accounting principles. For fiscal 2000 ó the seventh
straight
year ó the Agriculture Department failed its annual financial
audit.î
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- Department of Education: ìWith the exception of
fiscal year 1997, the Department of Education has not received an
unqualified
or ëcleaní opinion on its financial statements since its first
agencywide audit. That means it canít even balance its books once
a year. Needless to say, it canít manage its money on a day-to-day
basis.î
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- Department of Health and Human Services: ìThe
Department got an unqualified or ëcleaní opinion on its
financial
statements for fiscal year 2000. However, it still canít use its
financial systems for day-to-day management. The departmentís clean
opinion came only after billions of dollars of discrepancies were figured
out many months after the end of the fiscal year.î
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- Department of the Treasury: ìGAO has reported
that the federal government is not able to properly and consistently
compile
financial statements, identify and eliminate intragovernmental transactions
or reconcile the results of operations in the financial statements with
the budget results.î
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- And these summaries are just a sample of nearly a dozen
departments plagued with financial problems. Eleven of the 24 major federal
agencies and departments have financial-management problems, and of those
11 none received a grade higher than D-plus from Rep. Steve Horn (R-Calif),
chairman of the House Government Reform subcommittee on Government
Efficiency,
Financial Management and Intergovernmental Relations. For years he has
reported on the state of federal management in an annual report
card.
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- Despite the inability of the federal bureaucrats properly
to account for their funds, their budgets remain the same or have been
increased. For fiscal 2002 the president requested increases for both the
DOD and the Department of Education. The total amount requested for the
11 departments and agencies unable properly to account for their money
comes to nearly $1.4 trillion ó some 86 percent of the total fiscal
2002 budget request of $1.9 trillion. Already this figure has been
augmented
in light of recent events with the supplemental $40 billion for use in
the wake of the Sept. 11 attacks.
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- No one is sure just how much of that $40 billion will
be used by the DOD, but how it is used is important. John Schofield,
communications
director for the House Appropriations Committee, tells Insight:
ìWeíre
always monitoring agencies, regardless of the crisis. But thereís
a broad consensus that the president needed some authority and flexibility
to do some things immediately.î
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- Brenna Hapes, House Budget Committee communications
director,
agrees. ìWeíre not sure yet where to expect budget increases,
but weíre always looking for ways to ensure that the money given
to agencies is spent wisely and appropriately. As for the $40 billion
request,
oversight hasnít been our focus in the last week-and-a-half. We
need to balance and make sure that we have what we need for however long
it takes.î But, concludes Hapes, ìwe donít want it
to be carte blanche either. Congress is going to retain the authority to
monitor how the money is spent, and that was a lot of the discussion
surrounding
the supplemental.î
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- Thomas Stanton, an attorney and academic at the Johns
Hopkins Center for the Study of American Government, is upbeat about how
the federal government will pull it together. ìThis country is
pretty
good in a crisis and thereís good reason to get the
[financial-tracking]
systems working well, and Iím optimistic. Our problem has been that
we didnít have a demand for results and some agencies have done
their own thing. I think a possible next step is an oversight committee
that says, ëWeíre gonna give you tough love. Weíre gonna
work with you and move you until youíre a capable agency.í
It just canít be a case of firing a shot over the bow and everything
is going to be all right.î
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- ìTough loveî in the form of financial
accountability
may be one outcome of the crisis that began Sept. 11. Congress has acted
to ensure the president has at his grasp all the resources necessary to
do what is needed. Now, more than ever, it is necessary that the federal
government be held accountable for responding responsibly.
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- Kelly Patricia OíMeara is an investigative
reporter
at Insight.
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