Wednesday, July 28, 2010

How to Lose 95% of $9.1 Billion (i.e. that's $8.7 Billion with a B)

Leave it to the Department of Defense (DoD)! That's right. A new audit was released today shows that "the Pentagon cannot account for over 95 percent of $9.1 billion in Iraq reconstruction money, spotlighting Iraqi complaints that there is little to show for the massive funds pumped into their cash-strapped, war-ravaged nation" according to this article. The report states that the "breakdown in controls left the funds vulnerable to inappropriate uses and undetected loss."

Unfortunately, this is not the first time that the DoD has been shown to be fertile ground for fraud and abuse. In fact, the DoD has never received a clean audit opinion. Never!!! Basically, the DoD has so many holes in their internal controls that you could fly a fleet of B-1 bombers through their financial safety nets.
In 2001, there were 116 internal control weaknesses identified. This link to the Comptroller over the DoD states that in 2009 they made great progress as they are now working on fixing the remaining 19 internal control weaknesses that were identified eight years hence.

The link also states that the DoD is "Ready to achieve a clean audit opinion in 2009 on more than two-thirds of its assets and liabilities, totaling $2.4 trillion." Wow--congratulations on finding two-thirds of your assets and liabilities! Now, what about the other $1 Trillion plus that you can't locate?! Whose pockets are those assets lining?

To put this in perspective, a missing $1 trillion is over $3,000 for every American citizen. It's more like a missing $10,000 for every taxpayer. And, if the statistic I heard recently that only 50% of those filing tax returns pay anything, it's $20,000 for those of us who are paying taxes.

I personally can't imagine losing $20,000, can you?

Now, when you see that the breakdown in controls at the DoD is large enough that, in spite of years of effort they can't account for over $1 trillion, then it makes you realize that losing $8.7 billion is pocket change. I feel better already...

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