Army Audit Finds Trillions in Improper Adjustments

Chris Gaetano
Published Date:
Aug 24, 2016
Cook the Books

The Department of Defense's Inspector General has found that the U.S. army has made trillions of dollars worth of improper accounting adjustments in order to appear that its books were balanced, according to Reuters. The Inspector General report said that the army made $2.8 trillion worth of wrongful adjustments to accounting entries over just one quarter of 2015, a sum that swelled to $6.5 trillion over the course of the entire year. The Inspector General said that, because of this, the army's financial statements were useless, saying that it lacked receipts or invoices to support the numbers, and sometimes just made up figures out of whole cloth. 

The report said that the army did not prioritize correcting system deficiencies that caused the errors that resulted in the adjustments, and did not provide sufficient guidance for supporting them. Further, the Inspector General reported that the military removed at least 16,513 out of 1.3 million records from one of its budgetary reporting systems during the third quarter of 2015, and did not give any documentation or support for why it did so. This was because the military did not actually have any detailed documentation describing the import process, or complete system reports. 

Not only does this mean that the army's numbers lacked an adequate audit trail, managers could not rely on the data in their accounting systems when making decisions about resource allocation. If things do not improve, said the Inspector General, the army will not have the audit readiness required by the congressionally mandated deadline of Sept. 30, 2017. 

In its response, the army said that the $2.8 trillion and $6.5 trillion figures is "an overinflation and misrepresentation of the unsupported adjustments." It argued that auditors counted entries separately and repeatedly, rather than as an aggregate. 

"For example, when viewing Table 2 in the DoDIG Draft Report, it depicts the calculation method and displays adjustment in third quarter 2015 are also counted and reflected in fourth quarter 2015, duplicating the dollar value of JVs [journal vouchers] already reflected. Specifically, $1.4 trillion... were double-counted both from 3Q2015 and 4Q2015." 

While the scale might be impressive, Reuters said that the military has frequent problems with its accounting. It noted that Inspector General puts disclaimers on all annual reports warning that the financial statements may contain errors both material and pervasive. It also said that the same type of errors the Inspector General faulted the military for in its recent report were being made in 2010 as well.

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