Defense Department having money-managing problems

Walter Pincus
Reporter August 8, 2012

“I know Congress is locked in partisan gridlock,” Defense Secretary Leon E. Panetta said on Monday, adding, “They can’t figure out what the hell they’re going to do to try to deal with this issue.”

He was talking in Monterey, Calif., in his old congressional district, about the sequestration threat and the possibility that the defense budget — in which planned Pentagon spending over the next 10 years already has been reduced by $487 billion — will be hit with an additional $500 billion across-the-board cut if Congress does not produce a debt-reduction plan this year.

Walter Pincus reports on intelligence, defense and foreign policy for The Washingon Post. He first came to the paper in 1966 and has covered numerous subjects, including nuclear weapons and arms control, politics and congressional investigations. He was among Post reporters awarded the 2002 Pulitzer Prize for national reporting. View Archive

What Panetta didn’t mention is the Defense Department’s problems managing the huge sums of money it has received during a decade of warfare, when hundreds of billions of dollars overwhelmed its ability to oversee outlays.

He recalled that after World War II and the wars in Korea and Vietnam, “cuts were made across the board, weakening the entire military, hollowing out the force.”

“I don’t want to do that. I’m not going to repeat that mistake,” he said. “In order to not repeat that mistake, I’ve got to put every area of the defense budget on the table.”

In proposing the fiscal 2013 defense budget, he said, top military and civilian officials looked at every area “to determine where we can achieve legitimate savings.” These included efficiencies, reducing force structure, modernization, weaponry and compensation.

What he left out is this: The Pentagon has excess money, appropriated in past years for programs that were canceled or delayed but remain in five-year budget plans.

Don’t take my word for it.

The Senate Appropriations Committee commented on this in its report on the fiscal 2013 defense appropriations bill released Friday. The panel said it found money to pay for the increasing costs of the volunteer force by “scrutinizing the budget request and removing funds from troubled programs, duplicative requests, and overstatement of certain funding requirements.”

One source: $3.8 billion in recisions of money from about 75 programs that were in appropriations dating to 2007 but had not been spent. About $100 million from 2007 was for building Navy DDG-51 destroyers that were delayed. The money was still there because shipbuilding funding remains available for five years.

An additional $65.3 million came from Air Force 2011 procurement funding based on changing numbers for buying light-mobility aircraft and $31.6 million from planned funding of payloads for the Army’s Grey Eagle unmanned aircraft, a version of the Predator that was delayed because of an accident during 2011 testing.

The Senate does not have final word on recisions. The House appropriators approved recissions of $1.6 billion in their bill. When the two chambers meet in a conference on the final fiscal 2013 funding package, they will have to compromise on the source of recision funding.

Another Defense Department category that is seldom mentioned is “Expired Accounts.” According to the Defense comptroller’s Web site, these are “appropriation or fund accounts in which the balances no longer are available for incurring new obligations because the time available for incurring such obligations has expired.”

Under the rules, Pentagon agencies can pay outstanding costs from such accounts, but after five years, the money is returned to the Treasury.

Funding has different expiration dates. For example, that for military personnel and for operations and maintenance (O&M) lasts one year. Money for research and development expires after two years; five years for shipbuilding.

Personnel and O&M funding approved for fiscal 2012 must be spent by Sept. 30, which is the end of the fiscal year.

“Use them or lose them” was the description for handling the increased Pentagon appropriations of the past decade. In the past, funding would be pushed out in the last fiscal quarter because no one wanted to show that not all the money had been used — or next-year increases may not be approved.

Excess funding would be “deobligated.” According to the Defense comptroller site, deobligation is “the action taken when the obligation amount is determined to be in excess of the actual obligation amount. An entity can deobligate the excess obligations and put them to better use,” meaning some other Pentagon program.

The Senate Appropriations panel reported, “The Government Accountability Office analysis of past year obligation rates shows that the [military] services continue to underexecute their military personnel accounts,” averaging about $74.5 million a year. The panel then reduced fiscal 2013 military personnel accounts by that amount.

Pentagon officials said Wednesday that as of Sept. 30, 2011, $4.3 billion was in expiring accounts and $6.2 billion was being canceled.

In a recent message to Defense Department personnel, Panetta noted that his department “is the only major federal agency that cannot pass an audit today.”

It has been a major project for years and not expected to be ready for a full audit before 2017.

Remedying the lack of strong internal financial oversight is long overdue.

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