The amount of waste in any organization, public or private, is usually in direct proportion to the efficiency of its accounting procedures. If the book-keepers run a tight ship, carelessness is discouraged and the honest man is encouraged to stay that way. Poor management and sloppy accounting are open invitations to waste and corruption.
A textbook example of the way loose accounting methods lead to waste is in the Department of Defense. A three-week investigation of the military-procurement system by our associate Peter Grant turned up the following abuses:
Widespread pilferage at the base and supply-center levels were traced to poor bookkeeping and blatant disregard of regulations. Stolen items ranged from sunglasses and batteries to gasoline and office supplies.
At the Norfolk Public Works Center, for example, more than 700,000 gallons of gas could not be accounted for. Navy investigators discovered that drivers were selling government gasoline by the truckload to unscrupulous businessmen. The investigators laid responsibility for the scandal on "fragmented, incomplete . . . and [sometimes] nonexistent" accounting procedures.
A favorite collector's item among Navy personnel is a $51 leather flight jacket, supposedly issued only to pilots. Only 15,000 men are authorized to get the jackets; but records indicate that more than 31,000 of them were being distributed each year. The Navy admitted that it was easy for unauthorized personnel to obtain the much admired jackets. At some bases, they were handed out as souvenirs to visiting big shots.
In this case, however, the wasters killed a good thing with their greed: Appalled by the waste, Defense Department brass stopped production of the jackets.
Millions of dollars a year are lost because the military rarely if ever holds manufacturers liable for defective merchandise, even when the items are covered by warranties. Automobiles, for example, are routinely repaired at military shops, instead of being returned to the dealer under warranty. In the few instances when warranty claims are made, congressional investigators discovered, they are almost always resolved in the seller's favor.
If a taxpayer were to leaf through the military's spare-parts catalogues, he would gasp in horror at some of the prices the government pays. Screws that could be bought at a hardware store for 35 cents cost the government $2.19 a piece. A simple "O" ring worth less than $1 is bought by the military's shoppers for a whopping $59.28. A tiny plastic pin costs $4.65; a nut costs $3.35.
Ignorance is frequently to blame. Procurement officers "don't know their product," one congressional aide explained. "That's how they get rooked on these things." Interestingly, he added that every time the congressional watchdogs challenge one of the overpriced items, "The next time it goes out on purchase the price drops dramatically."
The military often provides the material used by private contractors for repair and maintenance work. Here again, lax accounting practices have led to widespread fraud. Contractors order more material than they need for the government repair job and use the excess for private work. In some cases, they are supplied with items that are not needed for the defense contract at all. One contractor had the gall to bill the government $151,000 for material the military had provided.
A big part of the problem of military extravagance is the Defense Department's refusal to admit that a problem exists. In recent congressional testimony, Paul Riley, deputy assistant secretary of defense for supply, maintenance and services, repeatedly insisted that specific abuses such as those cited were merely "isolated incidents" in a supply system that is functioning efficiently.
With that head-in-the-sand attitude, it is small wonder that the military continually ignores recommendations by the General Acounting Office that management and accounting methods be improved.
Footnote: When confronted with charges of waste and mismanagement, the military can often wrap itself in the cloak of "national security." Thus, the secrecy stamp allows mistakes to be covered up, fraud to be whitewashed and the guilty parties to go unpunished.