Debunked: "The Pentagon cannot track $2.3 trillion in transactions"

[Mick]

Step 1 - Original Source

Secretary of Defense, Donald Rumsfeld. Monday September 10th, 2001

http://www.defense.gov/speeches/spee...x?speechid=430

According to some estimates, we cannot track $2.3 trillion in transactions.

Step 0 - Already Debunked?

See:
http://www.911myths.com/index.php/Missing_Trillions

Step 2 - Context:

Rumsfeld is basicaly asking for more money, because the DOD is working with very outdated systems. As an example he says:

The technology revolution has transformed organizations across the private sector, but not ours, not fully, not yet. We are, as they say, tangled in our anchor chain. Our financial systems are decades old. According to some estimates, we cannot track $2.3 trillion in transactions. We cannot share information from floor to floor in this building because it's stored on dozens of technological systems that are inaccessible or incompatible.

The entire federal budget in 2000 was $1.8 trillion, so $2.3 trillion going missing sounds hardly like something that could be swept under the rug.

Step 3 - Meaning of phrases

"we cannot track" does not mean that the money went missing. It means that their systems are so out of date and not compatible with each other that they can't track (by computer) transactions across departments. In order to do that, they would have to do it manually. The money is not missing, money went into the pentagon, and products and services came out - it's just too complicated to follow the trail of exactly how that happened up to acceptable accounting practices.

Step 4 - Meaning of the quote.

So he's basically talking about accounting. The money is not missing, just not tracked up to expected accounting standards. In 2002 the amount of improperly tracked transactions was reduced to $900 billion, as they integrated their accounting systems). But that's still not missing, it's just improperly tracked. This is explained in another defense dept publication:

http://www.defense.gov/news/Jul2001/...710finmngt.pdf

In the current environment, DoD has a serious credibility problem in financial management. On January 11, 2001, in the confirmation hearing of the Secretary of Defense (SECDEF), Senator Byrd questioned the Defense Department’s inability “to receive a clean audit opinion in its financial statements”. He went on to say, “I seriously question an increase in the Pentagon’s budget in the face of the department’s recent (inspector general) report. How can we seriously consider a $50 billion increase in the Defense Department’s budget when the (Department of Defense’s) own auditors–when DoD’s own auditors–say the department cannot account for $2.3 trillion in transactions…”

In subsequent Senate testimony of February 13, 2001, Senator Grassley referenced these questions and continued, “…these reports show that DoD has lost control of the money at the transaction level. With no control at the transaction level, it is physically impossible to roll up the numbers into a top-line financial statement that can stand up to scrutiny and, most importantly, audit.”

While DoD may debate some of the criticisms of its financial statements and the size and components of the $2.3 trillion issue, we think that corrective action requires radical financial management transformation. For the FY 1999 financial statements, the auditors concluded that $2.3 trillion transactions of the $7.6 trillion entries to the financial statements were “unsupported”. DoD notes that many of these entries included end-of- period estimates for such items as military pension actuarial liabilities and contingent liabilities, and manual entries for such items as contract accounts payable and property and equipment values. DoD would further note that the “unsupported” entries are “not necessarily improper” and that documentation does exist in many cases, albeit, not adequate for the auditing standards imposed.

The last paragraph tells the story. The accounts are complicated, with $7.6 trillion transactions for one year (that's not saying they spent $7.6 trillion, they spent far less, but the transactions are between departments, so get entered multiple times). And about a third of them do not have documentations "adequate for the auditing standards imposed"

Step 5 - Single Sentence Debunking

The money was not missing, just not properly tracked, and they eventually sorted out how it was spent, and what they got for it.

Step 6 - Truth behind the quote?

As it stands the quote was true. The interpretation of the quote does of course have some grain of truth in it. Millions, maybe even billions of dollars "go missing" after a fashion due to accounting discrepencies - and perhaps even some illegal actions. But it certainly is not $2,300 Billion.