Army National Cemeteries Program director Kathryn Condon told a Senate panel that Arlington National Cemetery’s accounting procedures have been updated since she took over in 2010 so every dollar is accounted for. (Susan Walsh/AP)

Arlington National Cemetery is trying to account for $12 million — about a quarter of its current annual budget — that was allocated to the cemetery between 2004 and 2010 but apparently was never spent.

Congressional leaders and federal investigators who have been probing the cemetery’s operations said at a Senate hearing Wednesday that there was no documentation detailing where the funds are or how such a large amount of taxpayer money could have gone missing.

“It’s not clear if it was returned, if it was spent or where it is,” Sen. Claire McCaskill (D-Mo.) said after the hearing, which she chaired. “I don’t think there is any indication of people walking out with it. I think this is incompetence . . . gross incompetence.”

McCaskill called the hearing as a part of continued oversight of the cemetery, the nation’s premier military burial ground, which has spent the past 18 months attempting to fix serious problems with its burial procedures, contracting and management. In 2010, Army investigators found that people had been buried in the wrong places, unmarked or mismarked grave sites and that millions of dollars had been spent on contracts that produced nothing.

The Army’s Criminal Investigation Command and the FBI have for months been conducting a criminal investigation into possible contracting fraud and falsification of records.

In the wake of the scandal, the Army, which runs the cemetery, pushed out Arlington’s top two leaders, Superintendent John C. Metzler and his deputy, Thurman Higginbotham. At a hearing before McCaskill’s subcommittee in 2010, Higginbotham invoked his Fifth Amendment right against self-incrimination and did not answer any questions about the cemetery’s sloppy contracting procedures.

During Wednesday’s hearing, McCaskill praised the cemetery’s new leadership, saying that in almost every facet — from how it handles veterans’ remains to its new contracting procedures — the changes have amounted to a “sea change.”

“I am impressed that the amount of progress has been substantial and significant,” she said.

But she said she was concerned that the missing $12 million, which was discovered by Army auditors last year, has not been found. The Army’s inspector general, Lt. Gen. Peter Vangjel, testified that his office would continue to monitor the cemetery’s finances on an annual basis. He said the missing money was particularly troubling because cemetery’s previous management had asserted “they were short of funds when in fact they had funds they couldn’t account for.”

Kathryn Condon, who was appointed director of the Army National Cemeteries Program after Metzler and Higginbotham were ousted, told the committee that the cemetery’s accounting procedures have been updated since she took over in 2010 so that every dollar allocated to the cemetery is accounted for. The cemetery’s annual budget is $45 million, a spokeswoman said.

“We are now fiscally transparent,” Condon said.

The missing $12 million was part of $27 million in unspent funds found by the auditors. So far, $15 million of that has been recovered, cemetery officials said, although it is not clear how the money was found. The cemetery has begun to use that money to pay for updates to its computer systems, burial equipment and a new columbarium.

The cemetery is also making progress in accounting for every grave, which was required by legislation sponsored last year by McCaskill. The effort, still not complete, has revealed possible errors with thousands of graves, many as small as typographical errors in paperwork.

But the effort will mean that the cemetery will have to update its visitor brochures, which say that its “624 acres shelter the remains of over 320,000 servicemen and women.” That estimate, as Condon testified at the hearing, has been badly out of date for years.

In fact, she said, the grave-by-grave review shows that the number is more than 400,000.