The Pentagon’s $35 Trillion Accounting Black Hole

Michael Rainey

While it shouldn’t come as a surprise for an organization that has famously failed to ever pass an audit, the Pentagon was nevertheless able to shock some observers this week with a new batch of financial numbers.

According to Bloomberg’s Anthony Carpaccio, the Department of Defense made $35 trillion in “accounting adjustments” in 2019, easily surpassing the $30.7 trillion in such adjustments recorded in 2018.

Carpaccio notes that the number “dwarfs the $738 billion of defense-related funding in the latest U.S. budget, a spending plan that includes the most expensive weapons systems in the world including the F-35 jet as well as new aircraft carriers, destroyers and submarines.” It’s also “larger than the entire U.S. economy and underscores the Defense Department’s continuing difficulty in balancing its books.”

So what are these accounting adjustments? Todd Harrison of the Center for Strategic and International Studies says they represent “a lot of double, triple, and quadruple counting of the same money as it got moved between accounts” within the Pentagon. “A lot” may be an understatement: According to government data, there were 562,568 adjustments made in the Pentagon’s books in 2018.

Why it matters: More broadly, the number highlights the persistent lack of internal financial controls at the Pentagon, which makes it extremely difficult to account properly for spending in the largest government budget. “Although it gets scant public attention compared with airstrikes, troop deployments, sexual assault statistics or major weapons programs, the reliability of the Pentagon’s financial statement is an indication of how effectively the military manages its resources considering that it receives over half of discretionary domestic spending,” Carpaccio says.

Rep. Jackie Speier (D-CA), who asked the Government Accountability Office to look into the issue, said the “combined errors, shorthand, and sloppy record-keeping by DoD accountants do add up to a number nearly 1.5 times the size of the U.S. economy,” and charged that the Pentagon “employs accounting adjustments like a contractor paints over mold. Their priority is making the situation look manageable, not solving the underlying problem.”

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