Debunked: Rumsfeld says $2.3 Trillion missing from the Pentagon

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Debunked: Rumsfeld says $2.3 Trillion missing from the Pentagon

First, thanks for posting the link to the SecDef report. As someone with a decade of professional auditing experience, I disagree with how you characterize some of the information in the report, on page 3, Sen Grassly is quoted, “
“…these reports show that DoD has lost control of the money at the transaction level. With no control at the transaction level, it is physically impossible to roll up the numbers into a top-line financial statement that can stand up to scrutiny and, most importantly, audit.” the next paragraph states “For the FY 1999 financial statements, the auditors concluded that $2.3 trillion transactions of the $7.6 trillion entries to the financial statements were “unsupported”.” The paragraph then lists several non-cash items which were unsupported but estimated such as unfunded pension liabilities etc.
It’s an over statement to say no money was “missing”. Missing and “unable to track at the transaction level” are very similar concepts. For example, if you have $50,000 transaction and you don’t know how the money was spent because the transaction controls are inadequate, you don’t really know if it was spent at all. If the invoices are missing so a payment can’t be matched to a specific transaction that is a red flag. That is why basic auditing practices include contacting vendors and verifying invoices -if you don’t have a transaction record, there is no verification to be done. Accounting fraud can involve sending a check to a conspirator at an approved vendor, or removing cash from an account and covering it up by making a journal entry which indicates payment to a vendor that was never made. Vendor fraud includes overcharging, double charging etc. So not having control at the transaction level raises questions.
The report doesn’t actually discuss transactions in detail. It is focused on streamlining and fixing systems so proper auditing and accounting can be done in the future.
We don’t know from this report how many transactions failed the initial audit, or the specific missing information for each of those transactions. We don’t know the size of the transactions either. Without that information, it’s impossible to conclude exactly what the situation was. Although, the DOD later said all the money had been accounted for, as far as I know, no detailed accounting was ever presented to the public. Accounting is about numbers which track the actual movement of money. Press releases and reports that don’t provide those numbers don’t meet accounting standards.
The report doesn’t refute Grassly’s statement that the DOD had lost control of the money at the transaction level. The point is, if that control was not in place at the time of the transaction, it can’t be put in place after the fact. The best an auditor could do is try to find evidence after the fact of what happened to the money – it would be highly unusual to be able to do that perfectly, but that’s what the DOD claimed they did.

 


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Debunked: Rumsfeld says $2.3 Trillion missing from the Pentagon

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