2001 Pentagon unaccounted funds scandal

It is both a moral and logical challenge to and a expedient strength of the justice system that almost all legal trials rely primarily on circumstantial evidence, and then turn the decision of guilt over to a jury. If only hard evidence was required for conviction, very few would ever be convicted. So circumstantial evidence is a part of something as fundamental to governance as the practice of law. But when it comes to investigating the cold cases of "conspiracy theories", opponents are quick to uniformly dismiss circumstantial evidence as "coincidences". One such is the fact that a stupendous revelation by Donald Rumsfeld, worthy of being a scandal which would be ongoing until all its aspects had been either revealed or, preferably, resolved, said on September 10th:

"According to some estimates we cannot track $2.3 trillion in transactions"

Instead, because this was one day before the WTC demolition, the missing $2.3 trillion does not even have a page on Wikipedia, and no household name to call it by if it had. Rumsfeld did not rely solely upon the news being buried, but also on a Big Lie, designed to divert attention from those responsible; what should have been a confession was instead couched in terms of an accusation-an accusation against the very government department he was running at the time. But the timing was enough; the story did not make the news at the time, and months later, it received only scant coverage...

Anything that is done by WTC demolition conspirators before 9/11 must be seen not as occurring before 9/11 as we know it, but before 9/11 as they would have imagined it might occur-including the possibility that it would fail. So, more likely than its release being a way to cover it up, is that the story was a failsafe, in case 9/11 did not have the desired impact. The Department of Defense could 'discover' some of the missing money, blame the rest on the Clinton administration, and this massive news story could redirect investigation away from culpability in the WTC demolition.

One day before the 9/11 attacks, US Secretary of Defense Donald Rumsfeld made the above astonishing admission. Besides being reported months later in the CBS report given below, the quote is still posted at [expired] on the Department of Defense website. And on PBS Pentagon inspector general: "Its own auditors admit the military cannot account for 25 percent of what it spends,"

On September 10, 2001, Secretary of Defense Donald Rumsfeld held a press conference to disclose that over $2,000,000,000,000 in Pentagon funds could not be accounted for. Rumsfeld stated: "According to some estimates we cannot track $2.3 trillion in transactions." According to a report by the Inspector General, the Pentagon cannot account for 25 percent of what it spends."

Such a disclosure normally might have sparked a huge scandal. However, the commencement of the attack on New York City and Washington in the morning would assure that the story remained buried...

And in fact others go further, pointing to the fact that "accountants, bookkeepers and budget analysts" were killed in the Pentagon attack, and suggesting this, along with the destruction of information, was a possible motive for the attack.

[motive] 4. Destroy important information that the Pentagon doesn't want the public to find out about and kill certain personnel who would know or find out about it.

Rumsfeld: "According to some estimates, we cannot track $2.3 trillion in transactions." -DoD (09/10/01)

"The impact area included both the Navy operations center and the office complex of the National Guard and Army Reserve. It was also the end of the fiscal year and important budget information was in the damaged area." -Arlington County After-Action Report

"Most of those killed in the office, called Resource Services Washington, were civilian accountants, bookkeepers and budget analysts. They were at their desks when American Airlines Flight 77 struck." - South Coast Today/Pittsburgh Post-Gazette (12/20/01)

One Army office in the Pentagon lost 34 of its 65 employees in the attack. Most of those killed in the office, called Resource Services Washington, were civilian accountants, bookkeepers and budget analysts. They were at their desks when American Airlines Flight 77 struck.

"One Army office in the Pentagon lost 34 of its 65 employees in the attack. Most of those killed in the office, called Resource Services Washington, were civilian accountants, bookkeepers and budget analysts. They were at their desks when American Airlines Flight 77 struck."

It seems to be the only department which re-entered the building after renovation.

Like much of the other motives for 9/11, the revelation cleaned up loose ends of a doubtless very tangled and very heinous set of financial crimes. Unlike many of the others though, this one also had and would continue to serve the purposes of the War for Capitalism directly, by having funded and probably continuing to fund US Black Ops for many years.

Tthe 9/11 "inside job" crashed into the only small section of the Pentagon whose employees were beginning to uncover evidence relating to the theft, and their vital documentary evidence. And of course there would not only be no evidence of a crime, but, inasmuch as Rumsfeld had confessed, no coverup.

Apologists for the crime invoke an Appeal to Incompetence, obfuscating the admittedly invisible destination of the funds by sympathetically declaring the mechanism of their loss not a responsibility whose abnegation would itself be a crime, but a simple clerical error; losting 2.3 trillion is a mistake anyone could make.

The adversary's closer to home. It's the Pentagon bureaucracy. Not the people, but the processes. Not the civilians, but the systems...

In this building, despite this era of scarce resources taxed by mounting threats, money disappears into duplicative duties and bloated bureaucracy—not because of greed, but gridlock. Innovation is stifled—not by ill intent but by institutional inertia.

Just as we must transform America's military capability to meet changing threats, we must transform the way the Department works and what it works on...

Our challenge is to transform not just the way we deter and defend, but the way we conduct our daily business...

The men and women of this department, civilian and military, are our allies, not our enemies. They too are fed up with bureaucracy, they too live with frustrations. I hear it every day. And I'll bet a dollar to a dime that they too want to fix it. In fact, I bet they even know how to fix it, and if asked, will get about the task of fixing it. And I'm asking.

They know the taxpayers deserve better. Every dollar we spend was entrusted to us by a taxpayer who earned it by creating something of value with sweat and skill -- a cashier in Chicago, a waitress in San Francisco. An average American family works an entire year to generate $6,000 in income taxes. Here we spill many times that amount every hour by duplication and by inattention.

That's wrong. It's wrong because national defense depends on public trust, and trust, in turn, hinges on respect for the hardworking people of America and the tax dollars they earn. We need to protect them and their efforts.

Waste drains resources from training and tanks, from infrastructure and intelligence, from helicopters and housing. Outdated systems crush ideas that could save a life. Redundant processes prevent us from adapting to evolving threats with the speed and agility that today's world demands.

Above all, the shift from bureaucracy to the battlefield is a matter of national security. In this period of limited funds, we need every nickel, every good idea, every innovation, every effort to help modernize and transform the U.S. military....

The technology revolution has transformed organizations across the private sector, but not ours, not fully, not yet. We are, as they say, tangled in our anchor chain. Our financial systems are decades old. According to some estimates, we cannot track $2.3 trillion in transactions. We cannot share information from floor to floor in this building because it's stored on dozens of technological systems that are inaccessible or incompatible.

We maintain 20 to 25 percent more base infrastructure than we need to support our forces, at an annual waste to taxpayers of some $3 billion to $4 billion. Fully half of our resources go to infrastructure and overhead, and in addition to draining resources from warfighting, these costly and outdated systems, procedures and programs stifle innovation as well. A new idea must often survive the gauntlet of some 17 levels of bureaucracy to make it from a line officer's to my desk. I have too much respect for a line officer to believe that we need 17 layers between us....

Rumsfeld uses the Appeal to Incompetence that is preferable to admitting to crimes. And again, accounting is made out to be a feat beyond the capabilities of mere civil servants:

In fiscal 1999, a defense audit found that about $2.3 trillion of balances, transactions and adjustments were inadequately documented. These "unsupported" transactions do not mean the department ultimately cannot account for them, she advised, but that tracking down needed documents would take a long time. Auditors, she said, might have to go to different computer systems, to different locations or access different databases to get information.v></ref>

A 2003 Insight article also reports on the problem:

But, speaking of deficits and surpluses, Walker again has raised the issue of the apparent inability of federal agencies properly and accurately to account for funds entrusted to them by taxpayers. For example, the Department of Defense (DoD), which has in the last two years received tens of billions of additional funds to fight wars in Afghanistan and Iraq, has been on the high-risk list since the list's inception. According to Walker, "DoD's financial-management deficiencies represent the single largest obstacle to achieving an unqualified opinion on the U.S. government's consolidated financial statements. To date, none of the military services or major DoD components have passed the test of an independent financial audit." In other words, because of DoD's inability properly to account for its funds, the entire federal ledger cannot be balanced.

Among the DoD's financial-management "deficiencies" is the agency's inability to account for $1.1 trillion. Insight pointed out in April of last year that, according to Assistant Inspector General for DoD Auditing David Steensma, "we reported that DoD processed $1.1 trillion in unsupported accounting entries to DoD component financial data used to prepare departmental reports and DoD financial statements for [fiscal year] 2000" [see "Government Fails Fiscal-Fitness Test," May 20, 2002]. That is, when the Clinton administration turned over the Pentagon to the Bush team some $1.1 trillion was missing or unaccounted for.

Such massive accounting problems are a huge issue, hidden in plain sight. Rumsfeld had another reason to admit this. which is, that the extra 1.2 trillion could be conflated with the 1.1 trillion of 1999 and 2000, therefore the problem could be lain at the door of the Clinton administration, which could harm neither the US Empire of the present nor that of the past. The stately procession to world domination via world bankruptcy could continue as languidly as ever. This continued into 2001 (CooperativeResearch point out that "auditors won’t even quantify how much money is missing from fiscal year 2001, causing “some [to] fear it’s worse” than 2000").

However, there is an even more compelling reason that this is a story about Black Ops, past and future, more than 9/11 itself, apart from the sheer scale of the money. The report that uncovered the trillions appeared at the end of February 2000, before Bush had even been elected, and Rumsfeld and others had spoken about this before, on more than one occasion, and for months before the attacks:

Pentagon's finances in disarray

By JOHN M. DONNELLY The Associated Press 03/03/00 5:44 PM Eastern

WASHINGTON (AP) -- The military's money managers last year made almost $7 trillion in adjustments to their financial ledgers in an attempt to make them add up, the Pentagon's inspector general said in a report released Friday.

The Pentagon could not show receipts for $2.3 trillion of those changes, and half a trillion dollars of it was just corrections of mistakes made in earlier adjustments.

Each adjustment represents a Defense Department accountant's attempt to correct a discrepancy. The military has hundreds of computer systems to run accounts as diverse as health care, payroll and inventory. But they are not integrated, don't produce numbers up to accounting standards and fail to keep running totals of what's coming in and what's going out, Pentagon and congressional officials said.

August 18, 2000

The DFAS centers processed approximately $7.6 trillion in department-level accounting entries to DoD Component financial data used to prepare departmental reports and DoD financial statements for FY 1999. Of the $7.6 trillion in department level accounting entries, $3.5 trillion were supported with proper research, reconciliation, and audit trails. However, department-level accounting entries of $2.3 trillion were made to force financial data to agree with various sources of financial data without adequate research and reconciliation, were made to force buyer and seller data to agree in preparation for eliminating entries, did not contain adequate documentation and audit trails, or did not follow accounting principles. We identified but did not have adequate time or staff to review another $1.8 trillion in department level accounting entries. The DoD Agency-Wide financial statements for FY 1999 were subject to a high risk of material misstatement. The sheer magnitude of department-level accounting entries required to compile the DoD financial statements for FY 1999 highlights the difficulties and problems that DoD encountered in attempting to produce accurate and reliable financial information using existing systems and processes. The largest number of department-level accounting entries were made for the Navy General Fund because DFAS Cleveland Center processed both monthly and year-end department-level accounting entries for the Navy General Fund. For details of the audit results, see the Finding section of the report. See Appendix A for details of the management control program as it relates to the processing of department level accounting entries.</ref>Inspector General Department of Defense Audit Report, Department-Level Accounting Entries for FY1999 ]</ref>

January 7, 2001

The Defense Department's inspector general recently identified $6.9 trillion in accounting entries, but $2.3 trillion was not supported by adequate audit trails or sufficient evidence to determine its validity.

Another $2 trillion worth of entries were not examined because of time constraints, and therefore, the inspector general was able to audit only $2.6 trillion of accounting entries in a $6.9 trillion pot.

January 11, 2001

Senator Byrd: A recent article in the Los Angeles Times, written by a retired vice admiral and a civilian employee in the Office of the Secretary of Defense, accused the Department of Defense of being unable to account for the funds that Congress appropriates to it. The authors wrote, and I quote in part, quote, "The Pentagon's books are in such utter disarray that no one knows what America's military actually owns or spends." ...

That audit report found that out of $7.6 trillion in department-level accounting interest, 2.3 trillion in entries either did not contain adequate documentation or were improperly reconciled or were made to force buyer and seller data to agree. This DoD-IG report is very disturbing....

SECTION: CAPITOL HILL HEARING

HEADLINE: AFTERNOON SESSION OF A HEARING OF THE SENATE ARMED SERVICES COMMITTEE

SUBJECT: THE NOMINATION OF DONALD RUMSFELD TO BE SECRETARY OF DEFENSE

Source - 10MB PDF</ref> (Local Copy)< ]</ref>v>

February 12th 2001

"The inspector general of the Pentagon said there are 2.3 trillion dollars in items that they can't quite account for. That's not billion. That's trillion dollars. $2.3 trillion -- and the General Accounting Office said there are about $27 billion in inventory items that they can't find."-John Isaacs, PBS Online NewsHour

June 3rd 2001

Secretary Rumsfeld Media Availability en route to Turkey

But something must be wrong or broken, if you can have terrific people in the armed forces and the defense establishment who care deeply about our country, are dedicated and patriotic, and are invested in doing it right, and an equally dedicated and patriotic group of people in the Congress who dedicated to doing it right -- and for whatever reason, there is a high degree of distrust, which everyone told me when I arrived here in January. There is no other reason why there would be all those reports required, all the amendments, and the size of the bill and the concerns and the letters and the phone calls.

If there weren't some glitch, something going on where we aren't working right, why would there be 128 studies saying our acquisition system is broken? Why would the GAO and Senator Byrd announce that we can't locate $2.6 trillion worth of transactions and documents if things were good?

What we need are incentives at every level of that department to be respectful of the taxpayers dollars. We simply must care. People all across this country have worked their heads off, paid taxes and want to be defended and protected, but they want to be done as efficiently and as cost-effectively as possible and big government can't seem to do that. It's very difficult. The incentives aren't there for people and we need to find ways to do put them there.v></ref>

June 28, 2001 Thursday

DOBBS: "Well, let me, if I may, go to a management by objective. We know what you want to do. How many months are you giving yourself to get it done?

RUMSFELD: Oh, it's years. It's years. This department didn't get like this in five minutes, and it's not going to get out of this in five minutes. It is an enormous task. It's like turning a battleship. It doesn't turn on a dime. And we'll have to work with the Congress and find a way inside this institution to fix our acquisition system, which is broken."

"It takes 20 years to produce a weapon system, at a time where technology is turning over every 24 months. Our financial management systems can't account for $2.6. trillion worth of transactions, simply because the way they're arranged and organized..."

July 11th 2001

Testimony before the House Budget Committee on the FY 2002 Defense Budget :

REP. PETER HOEKSTRA (R-MI): "... I find it interesting, and we've done a lot of work on another committee that I sit on, taking a look at the Department of Education, which, for the last three years hasn't been able to get a clean audit. Then I understand that the Department of Defense shares many of the same problems that we have with the Department of Education. I think the IG just notes that in one of the audits that you went through of the 1999 financial statements included adjustments of $7.6 trillion -- that's trillion -- in account adjustments, of which 2.3 trillion were supported by un -- by reliable documents -- were unsupported by reliable documentation.

July 16th 2001:

Testimony before the House Appropriations Committee: Fiscal Year 2002 Defense Budget Request

Sec. Rumsfeld: ...As you know, the Department of Defense really is not in charge of its civilian workforce, in a certain sense. It's the OPM, or Office of Personnel management, I guess. There are all kinds of long- standing rules and regulations about what you can do and what you can't do. I know Dr. Zakheim's been trying to hire CPAs because the financial systems of the department are so snarled up that we can't account for some $2.6 trillion in transactions that exist, if that's believable. And yet we're told that we can't hire CPAs to help untangle it in many respects...

REP. LEWIS: Thank you, Mr. Moran.

"Mr. Secretary, the first time and the last time that Dov Zackheim and I broke bread together, he told me he would have a handle on that 2.6 trillion by now. (Laughter.) But we'll discuss that a little --

"As there were multiple reports of this issue prior to the attacks, then, it's hard to see any significance to Rumsfeld mentioning it again on 9/10. The news wasn’t concealed by what happened the next day, in any event: it was already firmly in the public domain.

"We still have the supposed motive of "destroying information" and "killing personnel" with the Pentagon attack, though. As we were told above, "the impact area included both the Navy operations center and the office complex of the National Guard and Army Reserve. It was also the end of the fiscal year and important budget information was in the damaged area." CooperativeResearch report on the consequences of this:

The Department of the Army will state that it won’t publish a stand-alone financial statement for 2001 because of “the loss of financial-management personnel sustained during the Sept. 11 terrorist attack.” [Insight, 4/29/2002]v>

A "a stand-alone financial statement for 2001"?

The “Chief Financial Officers Act of 1990,” Public Law 101-576, November 15, 1990, as amended by the “Federal Financial Management Act of 1994,” Public Law 103-356, October 13, 1994, requires the annual preparation and audit of financial statements. The Army did not publish stand-alone financial statements for FY 2001 due to the loss of financial management personnel sustained during the September 11 terrorist attack. Therefore, we did not audit Army financial information for FY 2001 financial statements. However, Army financial statement information was included in the DoD FY 2001 Agency-Wide Financial Statements.

This, then, is the "benefit" of the Pentagon attack: Army financial statements for 2001 were only provided in an overall Department of Defense document, not stand-alone, and therefore they could not be audited. No reported impact on the $2.3 trillion, nothing more at all.

The conclusion of the above report is interesting, too. It raises the issue of "large, unsupported adjustments to correct discrepancies between status of appropriations data and general ledger data" Calling this Minitrue adjustment to ledgers "correction", with its assumptions that they must be made to account for money whose absence is evidence of a crime, is itself yet another crime.

Since 1991, DFAS IN-SF has made large, unsupported adjustments to correct discrepancies between status of appropriations data and general ledger data. The Inspector General, DoD has addressed issues relating to these unsupported ending balance adjustments in every audit of the Army General Fund financial statements since 1996. We stated that the use of status of appropriations data and expenditure data was an unacceptable interim method for compiling the FYs 1997 through 2000 Army General Fund Financial Statements. We made

recommendations to DFAS IN-SF to identify and eliminate the causes for the ending balance adjustments and develop a plan of action with specific target dates to implement an integrated accounting system based on general ledger accounting. DFAS IN-SF actions have not been effective in correcting the deficiencies in the accounting system.

The ending balance adjustments almost doubled from FY 1999 to FY 2000. By correcting the accumulated error in GLAC 3310 and controlling all equity transactions, including recording appropriations used at the departmental level, we believe that up to 92 percent of the FY 2000 ending balance adjustment of $237 billion could have been eliminated. The need for ending balance adjustments will continue until general ledger accounting is correctly implemented throughout the Army’s accounting system. Unless DFAS IN-SF makes a concerted and sustained effort to identify and correct all the deficiencies in the implementation of general ledger accounting, the Army General Fund financial statements will continue to be unreliable. Ending balance adjustments should be eliminated after FY 2001.

General ledger accounting hasn't been implemented properly, then, but if it was than "up to 92%" of this example year balance adjustment would be unnecessary (that would leave an adjustment of $19 billion, still a big chunk of cash, but a significant improvement on $237 billion). We've no idea how this relates to the overall $2.3 trillion, but it does seem to fit with the overall talk of accounting issues.

The "corrections" have been successful. A February 2002 story reported that more than two thirds of that expenditure had now been "reconciled":

Zakheim Seeks To Corral, Reconcile 'Lost' Spending

By Gerry J. Gilmore American Forces Press Service

WASHINGTON, Feb. 20, 2002 -- As part of military transformation efforts, DoD Comptroller Dov S. Zakheim and his posse of accountants are riding the Pentagon's financial paper trail, seeking to corral billions of dollars in so-called "lost" expenditures.

For years, DoD and congressional officials have sought to reconcile defense financial documents to determine where billions in expenditures have gone. That money didn't fall down a hole, but is simply waiting to be accounted for, Zakheim said in a Feb. 14 interview with the American Forces Information Service. Complicating matters, he said, is that DoD has 674 different computerized accounting, logistics and personnel systems.

Most of the 674 systems "don't talk to one another unless somebody 'translates,'" he remarked. This situation, he added, makes it hard to reconcile financial data.

Billions of dollars of DoD taxpayer-provided money haven't disappeared, Zakheim said. "Missing" expenditures are often reconciled a bit later in the same way people balance their checkbooks every month. The bank closes out a month and sends its bank statement, he said. In the meanwhile, people write more checks, and so they have to reconcile their checkbook register and the statement.

DoD financial experts, Zakheim said, are making good progress reconciling the department's "lost" expenditures, trimming them from a prior estimated total of $2.3 trillion to $700 billion. And, he added, the amount continues to drop.

"We're getting it down and we are redesigning our systems so we'll go down from 600-odd systems to maybe 50," he explained.

"That way, we will give people not so much more money, but a comfort factor, to be sure that every last taxpayer penny is accounted for," he concluded.

Now plainly the US Government saying this does not make it true.