Every so often, I come to the Senate floor to bring my colleagues up to date on the lack of financial management systems in the Department of Defense.
I’m here again to address what I consider a festering bureaucratic sore.
The Pentagon can’t keep track of the taxpayer’s money.
I’ve just indicated that I’ve spoken about this many times.
In 30 years of watchdogging, little or nothing has happened.
Internal controls over the taxpayers’ money remain weak or non-existent at the Department of Defense.
I’m here today to speak specifically about a recent Inspector General audit to drive home that point.
Specifically, auditors discovered $1.1 billion dollars in undocumented payments by the Pentagon using funds Congress provided to assist Ukraine.
They examined 479 transactions from calendar year 2022, totaling $2.1 billion.
The auditors determined that 65 percent of the transactions could not be verified for a lack of documentation.
If the sample were doubled in size, the IG estimated a staggering 94 percent would be unsupported.
We all agree that’s unacceptable.
If we don’t agree that’s unacceptable, then there’s something wrong with our thinking.
The rules are crystal clear.
Supporting documentation is required when paying bills.
Proper documentary support should include a contract, travel authorization, invoice, receipt, payment voucher or things like that.
I don’t mean you need to have all those things available to pay a bill, but you ought to have at least one of them or more before you spend the taxpayers’ money.
Taken together, these records form an audit trail essential for payment verification and fraud detection.
If the documents match up, a bill is ready to pay.
Mr. President, $1.1 billion dollars went out the door, and there’s no documentation to back it up.
I want to make very clear – that’s an audit report, not Chuck Grassley saying that.
We don’t know how that money was used. Was it spent to assist Ukraine as required? Or was it misused or stolen? We simply don’t know.
Clearly, unsupported payments leave the door wide open to fraudsters.
Paying bills without documentation shows neglect and indifference.
It’s reckless and should not be tolerated.
These undocumented expenditures occurred on the watch of [the] Chief Financial Officer, or as we know him, CFO, Mike McCord.
Though Mike McCord has departed the Department, he and his deputies are accountable.
They failed to exercise due diligence over the public’s money.
Such gross mismanagement is made worse by the Pentagon’s pitiful accounting system, or, as I said in my opening, the lack of a financial management system.
Top managers turned a blind eye to this problem as well – just like a long line of their predecessors.
Instead of modernizing, they kept pouring out billions down a rat hole to upgrade ancient systems that belong on the junk heap.
Why did such smart, experienced managers go down that rabbit hole?
Why did they fail to acquire modern systems that could produce reliable information, effective controls [and] clean opinions?
Why has this problem not been fixed?
There once was a brave-hearted watchdog in the Air Force Comptroller’s who claimed to know the answer.
Ernie Fitzgerald was that person’s name.
I knew him in the 1980s. He worked in the Defense Department until he retired 20 years ago, and he probably died three or four years ago
He had this to say: “Leaders in the Pentagon don’t want to fix it. Sloppy accounting gives them flexibility to hide their shenanigans.”
When there is no audit trail to follow, it’s easy to make sneaky accounting adjustments to cover your backside.
Pentagon managers have some explaining to do, and I’m all ears.
I want to give you just one recent example, and I’m following up with the Inspector General in the Pentagon to get some answers on this.
Over a period of six years, until earlier last year, when [Janet Mello] plead guilty to… stealing $106 million out of the Defense Department, she was buying all kinds of homes, and all kinds of expensive cars.
I don’t have a long list of where $106 million went.
Can you believe, over a period of five years, there was nobody in the Defense Department – well, I suppose eventually after six years somebody discovered it – but she got away with it for six years.
Now she’s been prosecuted and [given] 15 years in prison....she plead guilty.
So, I write to the IG to get an explanation of how come they have a financial management system – or a lack there of – that doesn’t catch somebody stealing $106 million.
I sent along with those questions that I’m asking the IG, a report that I put out in 1998.
That was a report of people stealing money at the Air Force base in Dayton, where they had this check writing machine.
We found out that the person managing that check writing machine could make checks out to people in his family, and there was about $5 million stolen at that particular time.
We went to Dayton to study what was wrong, and what was wrong was exactly what this audit report shows today – they were writing checks without invoices.
You see, we pointed something out 26 years ago… that was wrong with financial management in the Defense Department.
I guess you could say that the Defense Department has learned nothing in the last 26 years.
I just hope they would take my report of 1998, and what’s wrong with Janet Mello stealing $106 million dollars, and try to change the system.
Now, we in the Congress, with our power of oversight – or, as you studied in high school government, the checks-and-balances of government – we appropriate money, we pass laws, but we don’t enforce those laws.
We have a constitutional responsibility to point out when the executive branch of government, or the people in the executive branch of government, aren’t faithfully executing the laws that we pass, or aren’t properly spending the money the way we appropriated.
We don’t enforce the laws – we make the laws and we have oversight.
Well, what do you do?
You come to the floor to the United States Senate and try to raise Cain about it and get some changes made.
But, the Defense Department is a little bit different than any other agency of the federal government.
They’re the only agency of the federal government that has never had a clean audit.
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