The Federal Government Can’t Account for $21 Trillion. Does Anybody Care?

by Dr. Terrence Leveck, Solari:

On September 10, 2001, then Secretary of the Department of Defense Donald Rumsfeld said that for the 1999 DOD budget, “According to some estimates, we cannot track $2.3 trillion in transactions.” https://www.cbsnews.com/news/the-war-on-waste/ The following day the US sustained the terrorist attacks that forever changed our world, and this startling revelation was largely forgotten, until recently.

When a discrepancy occurs in an account that cannot be traced, it is usual to make what is called an undocumentable adjustment, or journal voucher. This is similar to when your balance is off by ten dollars when you reconcile your checkbook, so you add or subtract that amount to make everything balance with the bank. In 1999 the amount the Pentagon adjusted was eight times the DOD budget for that year, and one third greater than the total federal budget. https://en.wikipedia.org/wiki/1999_United_States_federal_budget

By 2015 the amount reported by the Office of the Inspector General (OIG) had increased to $6.5 trillion for the Army only. http://www.thefiscaltimes.com/2016/07/31/Pentagon-s-Sloppy-Bookkeeping-Means-65-Trillion-Can-t-Pass-Audit Dr. Mark Skidmore, Professor of Economics at Michigan State University, thought this made no sense and suspected an error in media reporting. Looking into this issue by using data published on the government’s own websites, he found that $21 trillion in unsupported adjustments have been reported by DOD and the Department of Housing and Urban Development (HUD) for the years 1998-2015. That’s $65,000 for every person in America. https://www.forbes.com/sites/kotlikoff/2017/12/08/has-our-government-spent-21-trillion-of-our-money-without-telling-us/2/#a79380966f04

Jim Minnery of the Defense Finance and Accounting Service traveled the country in 2002 looking for records on $300 million. “We know it’s gone. But we don’t know what they spent it on,” he said. He says higher-ups covered up the problem by writing it off, and he was reassigned.

According to a 2013 Reuters report, “The Pentagon is the only federal agency that has not complied with a 1996 law that requires annual audits of all government departments. The Pentagon has spent tens of billions of dollars to upgrade to new, more efficient technology in order to become audit-ready. But many of these new systems have failed, either unable to perform all the jobs they were meant to do or scrapped altogether.

“Linda Woodford spent the last 15 years of her career inserting phony numbers in the U.S. Department of Defense’s accounts. Every month until she retired in 2011, she says, the day came when the Navy would start dumping numbers on the Cleveland, Ohio, office of the Defense Finance and Accounting Service, the Pentagon’s main accounting agency. Using the data they received, Woodford and her fellow DFAS accountants there set about preparing monthly reports to square the Navy’s books with the U.S. Treasury’s – a balancing-the-checkbook maneuver required of all the military services and other Pentagon agencies. And every month, they encountered the same problem. 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. For those, Woodford and her colleagues were told by superiors to take “unsubstantiated change actions” – in other words, enter false numbers, commonly called “plugs,” to make the Navy’s totals match the Treasury’s.” This is also standard operating procedure for the other defense branches. Difficulties included a massive backlog of audits meant to ensure that vendor contracts had been fulfilled. https://www.reuters.com/investigates/pentagon – article/part2

In a December interview on USAWatchdog, https://www.youtube.com/watch?v=7CwpjIwwI9o an online news outlet run by former CNN and ABC News correspondent Greg Hunter, Dr. Skidmore said he frequently consults for local governments, and undocumentable adjustments, while common, are never more than one percent of the budget. In the case of the Army in 2015, the adjustment was over 50 times their budget for that year.

Of the missing $21 trillion he discovered, 11.5 trillion was for the Army, usually on the expenditure side. But in the 2016 OIG report for 2015, he found a single transfer from the Treasury to the Army of $800 billion when their budget was only $122 billion. The additional $688 billion had not been appropriated by Congress, and the Army doesn’t know what it was spent on.

Skidmore talked with OIG but could never make contact with anyone who had worked on the report. He also talked with the Congressional Budget Office and the General Accountability Office. They said if there was a problem there would be Congressional hearings. Donald Rumsfeld did testify before Congress in 2005, but no substantive answers were forthcoming.https://www.youtube.com/watch?v=aljgYENg–YAshort time later Dr. Skidmore discovered that the online links to all the relevant documents he had researched had been disabled. Fortunately he had made copies and they are available at Solari.com. https://missingmoney.solari.com/dod-and-hud-missing-money-supporting-documentation/ In his Watchdog interview he made a public appeal. “If you have a background in accounting or bookkeeping, please take a look at it. We need your help. Does this make any sense to you? The Federal Reserve is the fiscal agent for the Federal Government. I think if we wanted we could see the flow of resources through the Fed.”

After Dr. Skidmore made the document removals known, they were put back up online in a different location.

He further explains that, “These reports are not at all transparent. It’ll say for example there are thousands of missing records. Not just missing but records appear to be erased. But there’s no indication of how much money would be associated with those records that we can’t see. Similarly the one report for the Army at 6.5 trillion dollars, it’ll say something like, there were 170 unsupported journal voucher adjustments that account for two billion dollars and then it stops. In my mind I’m thinking the next step would be to go into those 170. 170 doesn’t seem like that many to look into. Why don’t we go and look?”

“These government documents say we have inadequate computing systems that don’t talk to one another. That we have incompetence at some level. We have explanations of erased records and computing error and inadequate audit trails.”

Greg Hunter: “You’re not saying they’re incompetent.”

Mark Skidmore: “Yeah, I’m not saying that. That’s what they’re suggesting. In my experience with people within the Federal Government, that is not the case. They are not that stupid. They are very sharp. And many of them care about what’s going on and want to do a good job. That’s my personal experience. I’m sure that there is some level of people who aren’t as competent as they could be, but there are many competent people and typically those people are the ones who are appointed to positions of responsibility. But that’s what these reports say.”

Greg Hunter: “We lost 21 trillion and we’re just stupid. I mean that’s just what they’re saying.”

Mark Skidmore: “For me it’s like how can we have these kinds of adjustments and this massive amount of money? It doesn’t make sense to me. And that’s why I’m willing to step up and say, let’s just ask some questions.

“In my mind I try to see if any of these are real possibilities. Like is it possible that it’s just computer systems that don’t talk to each other so you end up with double counting? Just as a quick example, if you take eleven trillion of unsupported adjustments from the Army divided by 120 billion roughly per year every year, you’d have to have each transaction counted like ten times going back and forth and back and forth, and that doesn’t seem to make sense to me.”

He makes the case in a September 28 Solari.com interview that even if that were the case, the transactions should still be documented. “I think we need to make a distinction between competence within the system and something happening at a higher level that is leading to this. Why don’t our legislators inquire and open up the books?”

Greg Hunter: “Do you think the possibility of fraud is big?”

Mark Skidmore: “I cannot discount it. Absolutely. It’s very probable. In fact, I referenced a journal article that says whenever you have a significant amount of unsupported journal vouchers that’s a red flag for fraud, whether it’s private or public. That’s not just me. It’s in the literature.
“How can this be and what does it mean? If billions of dollars are flowing in and flowing out, it appears to be out of our Constitution and outside of the rule of law. I know that for example some activities just for the sake of the protection of the people involved and of course national security has to be in a sense black budget. There’s always stuff like that, but usually it’s authorized spending and some percentage is this black budget that they’re doing things but only very few people in the security arena and within the Congress know about it. But this is way outside of that. I’m worried about it.”

Greg Hunter: “You would say this threatens the democracy of the United States of America?”

Mark Skidmore: “Yeah, I think if it’s outside of the rule of law, and the law says we need to have to have a proper financial accounting and all spending needs to be authorized by Congress, it looks to me like there’s something else happening, and that’s troubling.”
Four days after this interview, the Department of Defense announced it will conduct the first department-wide independent financial audit in its history. http://msutoday.msu.edu/news/2017/msu-scholars-find-21-trillion-in-unauthorized-government-spending-defense-department-to-conduct/

$21 trillion is equal to 40% of all federal expenditures from 1998 to 2015, and three time the total DOD budgets from 1998 to 2015. And the amounts have been increasing. The $9.3 trillion missing from the DOD in 2015 is the largest amount for one year since data became available in 1998.

The military doesn’t know how its budget is being spent. Total military expenditures are what Treasury says they are, and the individual line items, at least for the Army, are for the most part unknown. If money is being secretly diverted from the armed forces, our defense capability is being degraded in ways that are difficult to observe. Repeated fixes to the system have not solved the problem despite the availability of talented and conscientious people.

If the Treasury gives the Army a money transfer equal to six times its budget outside the congressional appropriations process, then the military is effectively being used to launder the funds. And where did that money come from? Did the Federal Reserve create it with a computer entry? Is the Fed printing trillions of dollars in secret?

Or could the money come from the Exchange Stabilization Fund, created in 1934 from profits realized from the confiscation of privately held gold by the Roosevelt administration? According to a Solari Report interview of March 9, 2017 with Rob Kirby, the ESF operates at the sole discretion of the President of the United States in conjunction with the Secretary of the Treasury without Congressional oversight or audit. As such, all use is deemed to be in the national interest and therefore secret. “Its entire operation is divorced from the civil service employees at Treasury. ..all books, records, and operations are at the New York Fed and the New York Fed member banks, which are agents for the New York Fed. It doesn’t actually exist within the US government. As an operational matter, it exists within private banks.” CAF further states, “The NY Fed is the depository of the US government and is a private bank owned by its members. It does not report to the Fed Chairman of the Board of Governors. It is also the agent that runs the ESF.” https://www.frbsf.org/education/teacher-resources/what-is-the-fed/structure/

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