In its May issue, Conde Nast’s Portfolio.com has an unbelievable story about continued financial bumbling by the U.S. Department of Defense (DoD). Despite spending tens of billions of dollars over the past four years to upgrade its accounting software, the military’s business systems are as unreliable as ever. DoD’s systems are "so obsolete and error prone" that it doesn’t know where large chunks of its $439.3 billion (2007) annual basic budget goes. And that figure doesn’t include the vast sums being spent in Iraq and Afghanistan.

According to the report, the agency’s accounting is so dysfunctional it’s impossible for DoD to comply with an 18-year-old requirement by Congress to audit its books. What results is a system that once payments are authorized and money is transferred, there is no reliable way to trace where it ends up. The Portfolio.com article echoes a February article by The (Raleigh, N.C.) News & Observer that profiled DoD’s "labyrinth of arcane and incompatible accounting systems." The News & Observer notes that the accounting problems are not new, and quotes Winslow Wheeler, a project director at the Center for Defense Information, as saying if DoD were a public company, "…it would have gone belly up before World War II."

Both articles lay much blame on the complexity of layers upon layers of bureaucracy partly caused by continued turf wars between the four branches of the armed services. This results in each branch continuing to maintain separate and increasingly outdated business systems that are unable to communicate with each other, trace money disbursements and detect over billing by private contractors.

And guess who picks up the tab for the waste, fraud, and abuse?

Hat tip: TPM.

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Yesterday, the Government Accountability Office (GAO) released a troubling report on the U.S. Defense Department (DoD) hiring of private contractors to assist in its operations in Iraq and Afghanistan. It really illustrates how little we know about government contracting and why the lack of transparency is a problem.

Imagine this. DoD doesn’t even know how many private contractors it has on the payroll. AP reports that a senior defense official, in congressional testimony last month, estimated that there are about the same number of private contractors in each of the two war zones as there are American troops, 163,000 in Iraq and 36,500 in Afghanistan. But no one apparently knows for sure. The GAO found that private contractors outnumber DoD employees in some offices, and handle sensitive jobs like writing contracts and awarding fees.

Private contractors are free of ethics regulations that government employees are required to adhere to, setting up situations where corruption can easily flourish and likely never be discovered. Contractors are prohibited from accepting bribes or kickbacks (I suppose that’s something) and the companies hired by DoD are required to have ethic codes. But there are no safeguards against conflicts of interests. And with so many individuals handling so much money with precious little oversight…Well, you get the picture.

GAO, Congress’ watchdog, recommends that DoD require that private contractors it hires be forced to identify conflicts of interest and work to prevent them. That’s a start.

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File this under "Two steps forward, one step back."

Secrecy News highlights a change in disclosure policy by several federal defense intelligence agencies in anticipation of last week’s launching of USAspending.gov. Claiming that online disclosure of their unclassified contracts would compromise security, the Defense Intelligence Agency (DIA), the National Geospatial-Intelligence Agency (NGA), and the Counterintelligence Field Activity (CIFA) asked the Department of Defense for and received permission to keep the documents secret. "I appreciate your concerns that reporting these actions to the publicly accessible website could provide unacceptable risk of insight to your individual missions and budgets," wrote Shay D. Assad of the Under Secretary of Defense in a December 7 memorandum (pdf). "But when it comes to intelligence spending, there will actually be a net loss of public information because categories of intelligence contracting data that were previously disclosed will now be withheld," writes Steven Aftergood, Secrecy News editor.

The waiver applies to unclassified contract data for FY 2007 and 2008, and must be renewed each following year. However, data from FY2005 - 2006 for two of the agencies, DIA and NGA, is not covered by the waiver and is available. Go figure. Data from CIFA is not available. As Secrecy News says, while there is a sharp increase in intelligence agencies contracting with private entities, "public accountability is going down."

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