Tag Archives: Federal Government

Shocking US Federal Government Report Finds $6.5 Trillion In Taxpayer Funds “Unaccounted For”


Last week, we first touched on a topic which, in any non-banana republic, would be a far greater scandal than what Ryan Lochte may or may not have been doing in a Rio bathroom: namely, government corruption, falsification and potential fraud and embezzlement, which has resulted in the Pentagon being unable to account for up to $8.5 trillion in taxpayer funding.

Today, Reuters follows up on this disturbing issue, and reveals that the Army’s finances are so jumbled it had to make trillions of dollars of improper accounting adjustments to create an illusion that its books are balanced. The Defense Department’s Inspector General, in a June report, said the Army made $2.8 trillion in wrongful adjustments to accounting entries in one quarter alone in 2015, and $6.5 trillion for the year. Yet the Army lacked receipts and invoices to support those numbers or simply made them up.

As a result, the Army’s financial statements for 2015 were “materially misstated,” the report concluded. The “forced” adjustments rendered the statements useless because “DoD and Army managers could not rely on the data in their accounting systems when making management and resource decisions.”

For those wondering, this is what $1 trillion in $100 bills looks like.


Now multiply by 6.

This is not the first time the Department Of Defense has fudged its books: disclosure of the Army’s manipulation of numbers is the latest example of the severe accounting problems plaguing the Defense Department for decades. The report affirms a 2013 Reuters series revealing how the Defense Department falsified accounting on a large scale as it scrambled to close its books. As a result, there has been no way to know how the Defense Department – far and away the biggest chunk of Congress’ annual budget – spends the public’s money…. The Army lost or didn’t keep required data, and much of the data it had was inaccurate, the IG said.

In other words, it is effectively impossible to account how the US government has spent trillions in taxpayer funds over the years. It also means that since the money can not be accounted for, a substantial part of it may have been embezzled.

“Where is the money going? Nobody knows,” said Franklin Spinney, a retired military analyst for the Pentagon and critic of Defense Department planning, cited by Reuters.

The significance of the accounting problem goes beyond mere concern for balancing books, Spinney said. Both presidential candidates have called for increasing defense spending amid current global tension; the only issue is that more spending may not be necessary – all that is needed is less government corruption and theft.

An accurate accounting could reveal deeper problems in how the Defense Department spends its money. Its 2016 budget is $573 billion, more than half of the annual budget appropriated by Congress. The Army account’s errors will likely carry consequences for the entire Defense Department. Congress set a September 30, 2017 deadline for the department to be prepared to undergo an audit.

What’s worse is that the “fudging” of the numbers is well known to everyone in the government apparatus. For years, the Inspector General – the Defense Department’s official auditor – has inserted a disclaimer on all military annual reports. The accounting is so unreliable that “the basic financial statements may have undetected misstatements that are both material and pervasive.

Not surprisingly, trying to figure out where the adjustments are has proven to be impossible.

Jack Armstrong, a former Defense Inspector General official in charge of auditing the Army General Fund, said the same type of unjustified changes to Army financial statements already were being made when he retired in 2010.

The Army issues two types of reports – a budget report and a financial one. The budget one was completed first. Armstrong said he believes fudged numbers were inserted into the financial report to make the numbers match.

“They don’t know what the heck the balances should be,” Armstrong said.

Meanwhile, for government employees, such as those at the Defense Finance and Accounting Services (DFAS), which handles a wide range of Defense Department accounting services, the whole issue is one big joke, and they refer to preparation of the Army’s year-end statements as “the grand plug,” Armstrong said. “Plug”, of course, being another name for made-up numbers.

Finally, how on earth can one possibly “not account” for trillions? As Reuters adds, at first glance adjustments totaling trillions may seem impossible. The amounts dwarf the Defense Department’s entire budget. However, when making changes to one account also require making changes to multiple levels of sub-accounts. That creates a domino effect where falsifications kept falling down the line. In many instances this daisy-chain was repeated multiple times for the same accounting item.

The IG report also blamed DFAS, saying it too made unjustified changes to numbers. For example, two DFAS computer systems showed different values of supplies for missiles and ammunition, the report noted – but rather than solving the disparity, DFAS personnel inserted a false “correction” to make the numbers match.

DFAS also could not make accurate year-end Army financial statements because more than 16,000 financial data files had vanished from its computer system. Faulty computer programming and employees’ inability to detect the flaw were at fault, the IG said.

DFAS is studying the report “and has no comment at this time,” a spokesman said. We doubt anyone else will inquire into where potentially trillions in taxpayer funds have disappeared to; meanwhile the two presidential candidates battle it out on the topic of tax rates when the real problem facing America is not how much money it draws in – after all the Fed can and will simply monetize the deficit – but how it spends it. Sadly, we may never know.

Source: ZeroHedge

US Federal Government Adds Record $339 Billion In Debt First Day After Budget Deal

The federal government has piled up debt since the latest budget deal was signed into law, tacking $462 billion onto the national credit card since Nov. 2 as the Treasury Department replenished its funds and began another round of borrowing to take it all the way into 2017.

A staggering $339 billion in total debt was added on just the first day after President Obama signed the budget agreement — the single largest hike in history.

The debt has continued to rise, albeit more slowly, in the days since, putting the president on track to come close to the $20 trillion mark by the time he leaves office in January 2017.

Meanwhile, the early deficit numbers for fiscal year 2016, which began Oct. 1, are already looking more grim.

The government ran a deficit of $136 billion last month, up 12 percent compared with the previous October, as spending ballooned and taxes remained nearly flat. It was the worst October since 2010, when the government was still spending on the stimulus and was on pace for a deficit of more than $1 trillion that year.

The Treasury Department did not respond to a request for comment on the debt spike, but analysts said it wasn’t unexpected.

“It’s not going to keep rising at that pace. It’s like putting a cap on a geyser. It was being held at an artificially low pace,” said Robert L. Bixby, executive director of the Concord Coalition, which pushes for policymakers to control debt and deficits. “It’ll increase at a more traditional level from this point on.”

Despite the massive spread of red ink, the government has been getting away with small debt service payments because of historically low interest rates over the past several years.

But as rates rise, so will those payments — from about $220 billion a year now to $755 billion a year in a decade.

The size of the debt has begun to take a starring role in the 2016 presidential campaigns. In the Republican debate Tuesday, Fox Business Network prodded candidates on their plans.

Sen. Rand Paul of Kentucky poked fellow candidate Sen. Marco Rubio for a tax and defense spending plan that Mr. Paul said would hike deficits by $1 trillion.

“As we go further and further into debt, we become less and less safe. This is the most important thing we’re going to talk about tonight,” Mr. Paul said. “Can you be for unlimited military spending, and say, ‘Oh, I’m going to make the country safe?’ No, we need a safe country, but, you know, we spend more on our military than the next 10 countries combined.”

Mr. Rubio said defense comes first.

“We can’t even have an economy if we’re not safe,” he said.

Ohio Gov. John Kasich, who as chairman of the House Budget Committee in the late 1990s helped write the deals that produced four years of surpluses, said he has plans to do it again — including a freeze on non-defense discretionary spending.

But it was just such a freeze that Congress rejected this year, forcing the budget deal that allowed for unlimited borrowing for another 16 months.

Mr. Bixby said Congress should use those months to work on long-term fixes rather than preparing for another knock-down fight over the debt limit.

“The way to keep the debt from going up is to change the policies producing the debt,” he said.

The government began bumping up against the debt limit in March and was borrowing from other funds — using “extraordinary measures” — to keep from breaching the $18.1 trillion level. Treasury Secretary Jacob Lew was able to stretch that borrowing through the end of October, when Congress passed a debt holiday lasting into March 2017, allowing him to borrow as much as needed to keep the federal government operating.

The first move was to replenish all of the funds depleted under the “extraordinary measures,” which is what sent debt skyrocketing on Nov. 2.

Such spikes are normal. In 2013, when a debt deal was reached, the government added $328 billion to its borrowing in one day. After the August 2011 debt deal, the amount rose $238 billion in one day.

But the Nov. 2 spike topped them all, at $339 billion in one day.

Of that, about $199 billion is public debt, which is money borrowed from outside sources, and $140 billion is borrowing from within government accounts.

As of Monday, the gross total debt stood at $18.6 trillion, with $13.4 trillion of that public debt borrowed from the outside.

When Mr. Obama took office in 2009, total debt stood at $10.6 trillion.