Saturday, February 27, 2010

Fraud - A Staple of MOMCOM's Budget

We hear a lot of bloviating about fraud and abuse in social help programs such as Medicare or Medicaid.

The fraudsters there are said to rip off the system to the tune of as much as 20% of that portion of the budget.

Those fraudsters are pikers compared to the status quo fraud of the MOMCOM budget.

It is almost a staple, having been built in now for decade upon decade, admitted to during the Rumsfeld saga:
"According to some estimates we cannot track $2.3 trillion in transactions," Rumsfeld admitted.

$2.3 trillion — that's $8,000 for every man, woman and child in America. To understand how the Pentagon can lose track of trillions, consider the case of one military accountant who tried to find out what happened to a mere $300 million.

"We know it's gone. But we don't know what they spent it on," said Jim Minnery, Defense Finance and Accounting Service.

Minnery, a former Marine turned whistle-blower, is risking his job by speaking out for the first time about the millions he noticed were missing from one defense agency's balance sheets. Minnery tried to follow the money trail, even crisscrossing the country looking for records.

"The director looked at me and said 'Why do you care about this stuff?' It took me aback, you know? My supervisor asking me why I care about doing a good job," said Minnery.

He was reassigned and says officials then covered up the problem by just writing it off.
(Getting Caught Is The Only No-No, quoting CBS Evening News). Rumsfeld made these declarations on September 10, 2001.

The next day auditors, who were searching for that "lost" money, lost the trail and lost their lives:
Most of those killed in the office, called Resource Services Washington, were civilian accountants, bookkeepers and budget analysts.
(South Coast Today). So much for the computers with the data, and the auditors who were destroyed the next day following Rumsfeld's revelation.

The MOMCOM portion of the federal budget increased this year, depending on who you listen to, up to about $708,000,000,000, with another $30,000,000,000 to be added to that for Afghanistan.

This year 25% fraud would be $738,000,000,000 * .25 = $184,500,000,000.

The 25% is the percentage Rumsfeld admitted to, so it is probably even more than that.

Health care and unemployment extensions being talked about would be totally covered easily each year with that amount.

But tradition, like Pentagon auditors, dies hard.

So I think all the talk about stopping fraud is just bloviating.

The staple of defrauding the Treasury will continue unabated unless the status quo really does change.


  1. Dredd,

    Hate to say it, but I was actually a budget person for the last several years I was in the military. At the unit level, budget is managed by an "out of hide" person like me, who is working outside of his specialty. The marching orders are to merely "keep an eye on things" and prevent gross instances of fraud - like someone buying a car with a government purchase card - that could get the commander in trouble. The goal at the end of every fiscal year is to have spent every penny allocated and then some. Underruns result in future budget cuts (as well as a competing commander getting to spend YOUR commander's money, not something taken lightly over beers at the O-Club), while overruns might get you a slap on the wrist, but more often than not, a future budget increase as well.

    After adapting the Government Purchase Card in the late 90s - a normal commercial VISA tied to a military account - some semblance of an audit trail was established, albeit at the greatly expanded risk for fraud. With anywhere from 10-30 cardholders to manage, this was quite a task, even for the paltry amount of money I had authority over (my largest annual budget was approx $1.25M). All of this was greatly expanded during the Bush era, as all military members were issued VISA cards to use for travel expenses as well, which also had to be monitored and tracked for both fraud as well as proper payment. All of this was done to get "bookable" costs savings by eliminating the agencies that had handled the functions previously, providing a measure of accountability and oversight in the process, in favor of off loading those same tasks on already over burdened line unit members, whose primary duties rarely left time for procurement and government checkbook accounting duties as well. And of course it goes without saying, manning levels were never adjusted accordingly either. My last ten years in the military were nothing but a constant litany of similar "more with less" stories.

    As far as Iraq, they were LITERALLY shipping pallets full of $100 bills in there during the initial transition. Small unit leaders were doling the shit out like candy with little or no accountability. Hey - FIAT CURRENCY! It's just paper anyway. The default's coming, but the elite know it and will be positioned accordingly beforehand. Get ready!

  2. disaffected,

    It is not the good guys in the military I worry about, it is the other ones who the good guys in the military should worry about too.

    Those good guys in there are one of our best hopes, but of course I say that hopefully, not with personal knowledge.

    They took an oath too.

    We all need to work together to try to avoid the default, but I have some pessimism the same as you do.

  3. Bush gets $400 million to destabalize Iran, yet this week our government claimes that none of it went to Abdul Malik Rigi, nor Jundullah, the preeminant group fighting for "human rights" in Iran, and who appeared on Persian VOA.

    It is no wonder why the US accuses China of hiding their true "military" budget, since that is SOP here at home.

    As for the $400 million, if it didn't go to Jundullah, where did it go?

  4. All I know is that while I was still in the military, my then home state Senator Charles Grassley (R-IA, yeah, THAT Charles Grassley) attempted to lead an audit of DoD finances. They gave up after finding that Pentagon finances were simply unauditable. Evidently the problem persists (imagine that!), as the Pentagon's latest "earliest possible date of compliance" is 30 Sep 2017 (end of FY 2017).

    Believe me as one who has been in the belly of the beast (and any DoD analyst who can speak anonymously so as not to fear for their job will affirm this), the DoD system is a seething cauldron of snakes, and the snakes know full well that the system is MUCH too big and interwoven for any single whistleblower to do anything about it.

    At the line unit level, you merely shrug your shoulders and keep your head down. The big money is much farther up the food chain anyway. Unfortunately, the overall culture of corruption and the attitude of, "Hey, we're warriors! Money should be no object!" permeates financial decision making at all levels.

    This is one battle that can truly only be won by starving the beast. Unfortunately, that's not got happen any time soon, nor probably even in our lifetimes.