Pentagon’s Accounting Error Grows to $6.2 Billion
July 10, 2023
A previously-reported Pentagon accounting error has more than doubled, as new reports show what was thought to be a $3 billion error in aid to Ukraine now totals $6.2 billion, according to Reuters.
The error resulted from overvaluing some of the equipment the Department of Defense sent to Ukraine, valuing older equipment as if it were brand new. This column previously quoted a Pentagon spokesperson, who explained, “In some cases, ‘replacement cost’ rather than ‘net book value’ was used, therefore overestimating the value of the equipment drawn down from U.S. stocks.”
This time, a Pentagon spokesperson said the additional funding was uncovered as Pentagon officials researched the situation more thoroughly and clarified protocols for valuing equipment based on Financial Management Regulation and Department of Defense policy.
The error amounts to a $2.6 billion overvaluation in 2022 and a $3.6 billion overvaluation in 2023, meaning the DoD has another $6.2 billion in military aid that it can send to Ukraine. This helps the Biden administration continue to send more money to Ukraine despite Congressional resistance to further funding.
The Pentagon is notorious for its poor financial controls. It has yet to receive a clean audit opinion, and the Government Accountability Office often cites Pentagon processes and controls as “high risk areas” for waste, fraud, and abuse. Just a few months ago, this column reported it lost track of $220 billion in equipment.
With a budget of $842 billion, and a total of $75 billion sent to support Ukraine, taxpayers can only brace themselves for additional errors that are coming.
Troubled Submersible Company Received $450,000 in Covid Aid
July 11, 2023
OceanGate Expeditions, the company behind the Titan submersible disaster, was forgiven of its $450,000 Paycheck Protection Program loan, according to the ProPublica PPP Loan Database.
OceanGate builds submersibles for tourism and research, but its inherently risky business model raises questions, and led to the tragic deaths of five people in the ocean in June.
Its liability waiver for sub tourism mentioned the possibility of death three times on the first page alone. Now, some are accusing the company of cutting corners. James Cameron, the renowned Titanic explorer and director of the 1997 movie, said, "I was very suspect of the technology that they were using. I wouldn't have gotten in that sub.”
Despite the questionable safety protocols and business model, OceanGate still received $450,000 from the first round of PPP loans in 2020. The loans were to help keep staff on the payroll as business stalled with lockdowns, with the company reporting it employed 22 staff members at the time. They were subsequently forgiven, giving OceanGate a nearly half-million dollar windfall.
PPP funding was handed out like candy to large and small businesses alike, regardless of business model, need, or the pandemic’s impact on a particular business. Its scope is one reason it has seen such massive fraud, with some estimating up to $64 billion in fraudulent loans, with total Covid aid stolen or wasted adding up to $403 billion.
This story also underscores an important note on Covid relief programs. While the massive PPP program was pitched as loans, 92 percent were fully or partially forgiven, making it a grant program. That was made clear to applicants upfront, though it was marketed to the American people as a loan.
While the government understandably acted quickly at the outset of the pandemic to get funds out the door, it is important to consider whether companies like OceanGate really deserved half a million dollars from taxpayers.
Pentagon’s Accounting Error Grows to $6.2 Billion
July 12, 2023
A previously-reported Pentagon accounting error has more than doubled, as new reports show what was thought to be a $3 billion error in aid to Ukraine now totals $6.2 billion, according to Reuters.
The error resulted from overvaluing some of the equipment the Department of Defense sent to Ukraine, valuing older equipment as if it were brand new. This column previously quoted a Pentagon spokesperson, who explained, “In some cases, ‘replacement cost’ rather than ‘net book value’ was used, therefore overestimating the value of the equipment drawn down from U.S. stocks.”
This time, a Pentagon spokesperson said the additional funding was uncovered as Pentagon officials researched the situation more thoroughly and clarified protocols for valuing equipment based on Financial Management Regulation and Department of Defense policy.
The error amounts to a $2.6 billion overvaluation in 2022 and a $3.6 billion overvaluation in 2023, meaning the DoD has another $6.2 billion in military aid that it can send to Ukraine. This helps the Biden administration continue to send more money to Ukraine despite Congressional resistance to further funding.
The Pentagon is notorious for its poor financial controls. It has yet to receive a clean audit opinion, and the Government Accountability Office often cites Pentagon processes and controls as “high risk areas” for waste, fraud, and abuse. Just a few months ago, this column reported it lost track of $220 billion in equipment.
With a budget of $842 billion, and a total of $75 billion sent to support Ukraine, taxpayers can only brace themselves for additional errors that are coming.
Throwback Thursday: Commerce Spent $9,800 on PR Firm
July 13, 2023
Throwback Thursday!
In 1980, the Department of Commerce spent $9,800 – over $36,000 in 2023 dollars – on a private public relations firm that, unsurprisingly, recommended additional spending on public relations.
Sen. William Proxmire, a Democrat from Wisconsin, awarded the Department of Commerce his Golden Fleece Award for this totally unnecessary spending.
According to Proxmire, Commerce hired the PR firm to review and evaluate the department’s PR efforts. The firm was chosen without the normal competitive bidding process because Commerce felt the firm was “uniquely qualified” to handle this project. The firm produced a 324-page report, recommending that Commerce undertake a slew of new PR efforts that would have cost tens of millions of dollars.
While $9,800 may not seem like much, the department already employed a small army of PR professionals to do exactly what the outside firm was hired to do. Commerce had 112 employees responsible for PR efforts internally and spent $4.8 million on their salaries. Twenty-one of those employees, with combined salaries of $781,000, worked exclusively for the Office of the Secretary, the office that requisitioned the private outside consultants.
Sadly, this waste on PR continues to this day across the federal bureaucracy. Open the Books published an investigation in 2015, and found that the federal government had spent $4.4 billion over seven years on PR.
Questions about why the government feels the need to promote itself aside, it’s indefensible for the government to contract work with pricey private firms when the ability to do the work exists internally.
GAO Identifies $47 Billion in Duplicated Services
July 14, 2023
The Government Accountability Office found $47 billion in potential savings in its recently released report that showed overlapped and duplicated services.
This annual report has resulted in about $600 billion in financial benefits since 2011, but there is plenty of waste in it that Congress continues to ignore. The most wasteful programs it identified, reforming Medicare payments by place of service, is estimated to save $141 billion over 10 years.
All Congress would have to do to save this money is to direct the Health and Human Services Secretary to equalize payment rates between settings for evaluation and management office visits and other services that the Secretary deems appropriate.
Another easy reform is in the realm of Nuclear Waste Disposal, with GAO estimating adopting alternative approaches to treating a portion of its low-activity radioactive waste could save tens of billions of dollars.
Improving naval acquisition practices, tweaking the Medicare Advantage program, and enhancing IRS enforcement efforts are each expected to save billions of dollars. Numerous other programs have potential savings of multiple millions, making efforts to address these issues well worthwhile given their high dollar amounts.
Unfortunately, Congress has not been eager to solve these problems. Since 2011, GAO has flagged 132 matters for Congress to fix, but only 52 have been addressed. Ten have been closed without being addressed, while 70 remain open.
GAO has done the difficult work of identifying where waste is occurring and how to fix it. Now, it’s up to Congress to step up and do the work of legislating these solutions into law to save taxpayers tens of billions.
The #WasteOfTheDay is presented by the forensic auditors at OpenTheBooks.com.