The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.”

How Can $6.5 Trillion Disappear?

The US Army can’t find $6.5 TRILLION. No, that’s not a typo. It’s not million, it’s 6500 times one billion dollars, not pesos. That money is gone. And no one knows where it is.

It’s more than the entire annual defense budget. Have they checked all the drawers, or looked under the mattresses? The number is not made up: it comes from the Inspector General!

It’s difficult for us non-billionaires to comprehend how much that is. Well, the US GDP (economic activity) for one year is around $16.5 TRILLION. Thus, just the amount that disappeared from the Army is about one-third of that.

Here is what our colleague Mish Shedlock writes on August 22:

16,000 Files Vanish: Inspector General Says Army Has No Idea How It Spent $6.5 Trillion

The United States 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.”

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 new report focused on the Army’s General Fund, the bigger of its two main accounts, with assets of $282.6 billion in 2015. The Army lost or didn’t keep required data, and much of the data it had was inaccurate, the IG said.

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

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.”

“THE GRAND PLUG”

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.

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.

Just a Number

Banks balance customer’s accounts to a penny. The Army cannot balance its accounts to $6.5 trillion, in a single year.

This is precisely what happens when there is no accountability for anything, and when all the money has to be spent so a budget increase can be requested in the following year.

No one cares, so no one is held accountable. Besides, it’s just a number. $6.5 trillion or $25.0 trillion, what difference does it make? After you pass the first $100 billion or so, and no one cares, there’s no reason to believe anyone will ever care.

How the hell can 16,000 financial data files simply vanish? Are there no backups? No central system?

Has anyone been fired over this? Heck, has anyone even been investigated?

Amazingly we have known about this problem for at least six years. Obama has done nothing about it.

Mike “Mish” Shedlock

https://mishtalk.com/2016/08/22/army-has-no-idea-how-it-spent-6-5-trillion/

This makes me wonder how accurate the US debt numbers are, the deficits, or anything else. When you can just come up with $400 million in cash to give to Iran, you have to ask, where was that money? What budget did it come out of? Who had the authority to transfer that much cash?  The words, “banana republic” somehow come to mind.