Black Holes of the Pentagon: What a large-scale DoD Audit Revealed
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Black Holes of the Pentagon: What a large-scale DoD Audit Revealed


WASHINGTON – December 4, 2018

A recent large-scale audit of the US Department of Defense showed disappointing results, which can then be classified as secret.

According to the indicator of budget allocations and budget expenditures among all departments of the executive power of the United States, the Ministry of Defense is the absolute leader. In the past fiscal year 2018, the appropriations for the activities of the DoD amounted to about $700 billion, that is, 17.5% of all budget allocations.

If earlier during the Barack Obama administration no one carried out such checks, then with the arrival of Donald Trump in the White House, the emphasis in this struggle has shifted. The new President was interested not only in the figures of military expenditures according to the official Federal budget but also in the actual volume of these expenditures, as well as their effectiveness.

Although Washington has a printing press of the U.S. Federal Reserve Board, which produces dollars, the further increase in the turnover of this machine was faced with certain restrictions. The national debt is growing rapidly. Under Trump, its value crossed the bar of $20 trillion. In a few months, the $22 trillion threshold could be surpassed.

With the same former President, no one paid attention either to the rapidly growing debt pyramid of the American state; now the authorities are simply obliged to think about it. The reason is that the US Federal Reserve began to raise the key rate, which leads to an increase in debt service costs, the so-called interest expenses. If the Federal Reserve continues to tighten its monetary policy, the moment is not far off when interest costs will become the main item of the US budget, surpassing the military.

The military budget is also connected with internal problems. Under Trump, the theme of the deep state began to come out--the alliance of the owners of money, that is, the main shareholders of the Federal Reserve of the United States, and part of the deeply conspiratorial state apparatus of the United States. It's also about the American special services and law enforcement agencies.

The Pentagon is also used as a deep state for military operations in different parts of the globe. And secrecy in the Pentagon becomes a breeding ground for lack of control. The Pentagon is very free to dispose of budget money.

First, the budget money is stolen by the military.

Secondly, state money is used to finance such operations that may harm the national interests of the United States.

Thirdly, there are suspicions that the military budget has become the main “purse” of the deep state.

On March 15, 2007, Robert Higgs, an American economic historian and economist  from the Independent Institute published an article "The Defense Budget of a Trillion Dollars Already Exists." Higgs found that military spending is actually already nearly a trillion dollars ($934.9 billion) a year.

On March 1, 2011, Christopher Hellman published a study "The Real U.S. National Security Budget: The Figure No One Wants You to See." According to his estimates, at that time the government annually spent more than $1.2 trillion on “defense.”

If Americans were ever presented with the real bill for the total national security budget, it would actually add up to more than $1.2 trillion a year, the article says.

For 2012, the White House requested $558 billion for the Pentagon’s annual “base” budget, plus an additional $118 billion to fund military operations in Iraq and Afghanistan.  At $676 billion, that’s already nothing to sneeze at, but it’s just the barest of beginnings when it comes to what American taxpayers actually spent on national security. Think of it as the gigantic tip of a humongous iceberg.

To get closer to a real figure, it’s necessary to start peeking at other parts of the federal budget where so many other pots of security spending are squirreled away.

Or for example, missing from the Pentagon's budget request is an additional $19.3 billion for nuclear-weapons-related activities like making sure our current stockpile of warheads will work as expected and cleaning up the waste created by seven decades of developing and producing them. However, this money officially falls in the province of the Department of Energy.  And then, don't forget an additional $7.8 billion that the Pentagon places into a miscellaneous category -- a kind of department of chump change -- which is not included either in its base budget or in those military battle funds.

And here are some more examples from the article "America Spends About Half of World’s Military Expenditures", published in May this year. Its author, investigative historian Eric Zuesse, argues that in the middle of this decade, the annual military spending of the United States was equal to $1.5 trillion, that is, more than twice the official figures of the Pentagon budget. In relative terms, that’s out about 40% of all spending of the US Federal budget, or about 8% of the US GDP.

"This amount was far less than the totals that the Inspector General of the U.S. Department of Defense had been reporting, in some of its periodic investigations (such as the one just cited), to have been missed or undocumented or falsely 'documented' as having been spent, by that Department; but, for some mysterious reason, the American people tolerate and re-elect 'representatives' who 'debate' and rubber-stamp such corruption, which is of enormous benefit to corporations such as Lockheed Martin and Boeing, whose sales and profits depend upon the U.S. Government and its allied governments. Any such privatization of the 'Defense' industry, in America or any other country -- treating its military operations so as to produce profits for investors (investors in mass-murder) -- thus guarantees that the national-security function will be heavily loaded with lobbying and graft, because the military industry’s entire market is to one's own government and to its allied governments: it's not a consumer market, but a government one. Thus, privatized military suppliers grow virtually to own their government; democracy consequently becomes impossible in such nations. And, one outcome from that is the uninterruptable financial reports by America's government, regarding 'Defense,'" said one article.

Huge amounts of military spending go to civilian agencies--first of all, the Ministry of Energy, through which the development of nuclear weapons is financed, and the National Aeronautics and Space Administration (NASA). Other agencies responsible for large military expenditures are the Department of State, the Department of Homeland Security, the Department of Veterans Affairs, and the Department of the Treasury.

Attempts to establish a minimum order in the field of military spending and military orders have been made in America more than once. In 1999, the Senate Arms Commission sought written explanations from the Pentagon about where the military budget was being spent. The Pentagon gave formal replies, but even this revealed theft in the amount of $12 billion. Subsequent estimates, although also incomplete, increased the specified amount of theft by about an order of magnitude. Former Secretary of Defense Donald Rumsfeld (led the Pentagon in 1975-77 and 2001-2006) said at a press conference:

"A quarter of the Pentagon's revenues we can not control and can not find out for sure where these funds were sent."

Gradually, the total assessment began to take shape. In the Congressional documents in 2016, an  astronomical sum of losses appeared for the previous two decades--$2.4 trillion. This includes losses as a result of the overpricing of products, works, and services purchased by the Pentagon. The real black hole through which tens of billions of dollars disappear every year is military R&D. Nine out of ten of its projects end in nothing; the money spent is written off as "planned losses."

There is algo a huge black hole of costs that do not have documentary evidence. Theft and loss of property (sometimes even weapons) is a major loss. Thus, as of 2013, the base of the Fifth US fleet in Bahrain could not report the embezzlement of almost $9 billion. The Janes portal published devastating material, sending its notes to the leading American newspapers, but the "case of the Fifth fleet" was hushed up, and public discontent was muffled by information about the "development of world terrorism."

And the mentioned amount of losses of $2.4 trillion is not the end of it. In 2013, figures were released, which Reuters interviewed Linda Woodford, an employee of the financial and accounting service of the Pentagon (DFAS), about. Woodford admitted that the last 15 years of her career, she was engaged with the monthly "substituting" of false numbers in the balance. It turned out that at the time when this statement was made, there was no reporting on the $8.5 trillion that Congress had appropriated to the Ministry of Defense since 1996.

"Numbers were missing. Numbers were clearly wrong. Numbers came with no explanation of how the money had been spent or which congressional appropriation it came from. A lot of times there were issues of numbers being inaccurate," Woodford said. "We didn't have the detail … for a lot of it."

As the clock ticked down, Woodford said, staff were able to resolve a lot of the false entries through hurried calls and emails to Navy personnel, but many mystery numbers remained.

Scandalous news about the misuse of budget money by the military, the lack of documents on expenses, the inflated prices for goods, works and services purchased by the Pentagon appear in the media almost every month. Here is one such scandalous news piece that appeared in February 2018. An audit by the British company Ernst&Young of the Defense Logistics Agency recorded "material misstatements" in the financial statements for completed construction works--at least $465 million. Another $384 million worth of ongoing construction projects were also lacking documentation, for a total of about $850 million.

In 1990, the United States passed a law requiring systematic audits of all government agencies without exception. Until now, the Pentagon remained an exception--there were no audits, but the new president laid it out: There should be no exceptions for the Pentagon. A large-scale audit of the Military Department was launched in late 2017, involving 1,200 auditors.

By early November, the preliminary results of the test were summed up. Experts called the results a "failure.” Deputy Secretary of Defense Patrick Shanahan expressed more cautiously: "I'm not surprised by the result because I didn't expect that the audit will go smoothly." The amount of all identified losses is not yet known. Some experts say that we can talk about losses measured in tens of billions of dollars. Others say the numbers are much higher. It is possible that the results of the first large-scale audit of the Department of Defense will remain a firm secret.

Author: USA Really