Department failed to report at least $817 million in unconstitutional spending

(U.S. SENATE) – U.S. Senator Jon Tester this week joined a bipartisan group of lawmakers expressing concern over the Department of Defense's failure to notify Congress of at least $817 million in unauthorized spending.

Under the Anti-Deficiency Act, the Defense Department cannot spend money without Congressional approval.  If it does so mistakenly, the Department must notify Congress immediately.

Recent investigations uncovered the reporting violations.

Tester and several colleagues this week wrote to Department of Defense Under Secretary Robert F. Hale, demanding to know why his Department failed to notify Congress of the violations.

"There is much more to do in order to overcome the pervasive financial management problems that affect the Department's ability to control costs, anticipate future expenditures, measure performance, and prevent and detect fraud, waste, and abuse," Tester wrote.

The lawmakers also noted some recent improvements in the Defense Department's budgeting, but say the U.S. Constitution gives Congress sole authority to authorize spending.

"Congress and the Defense Department both have important jobs to do," Tester said.  "And when the Defense Department fails to disclose spending it wasn't authorized to make in the first place, it's my job to hold them accountable.  The public has a right to know when their tax dollars are not being spent properly.  I want good answers as to how this could have happened in order to prevent it from happening again."

Tester is an outspoken advocate for cutting government spending and the national debt.  He recently urged the Defense Secretary to save billions of dollars by closing Cold War-era bases overseas.

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September 13, 2011

The Honorable Robert F. Hale
Under Secretary (Comptroller) and Chief Financial Officer

Office of the Secretary of Defense

United States Department of Defense

1100 Defense Pentagon, Room 3E770

Washington, DC 20301-1100

Dear Under Secretary Hale:

We are writing to express our concerns over the Department of Defense's (DOD) reporting of violations of the Anti Deficiency Act (ADA), the key statute that ensures all expenditures by federal agencies conform with the authorized budgets and requirements established in law. 

The ADA prohibits any DOD officer or employee from incurring obligations or making expenditures in excess of or in advance of appropriations or apportionments. The Act also requires DOD to establish a system of controls to restrict obligations and disbursements. Finally, when DOD determines that a violation of one of the ADA's requirements has occurred, DOD is required to "report immediately to the President and Congress all relevant facts and a statement of actions taken."  Compliance with the ADA gives Congress the confidence that the Department is not circumventing congressional direction and that the agency can properly track its funds.  In fact, the law can be considered as implementing of Article One of the United States Constitution, which provides that "No money shall be drawn from the Treasury, but in consequence of appropriations made by law."

In September 2008, the Government Accountability Office (GAO) reported on ongoing challenges faced by the DOD in following the ADA.  Specifically, the GAO noted: "As a result of continuing financial management weaknesses, including difficulties in ensuring the proper authorization, processing, and recording of payments, DOD's ability to timely and reliably determine the amount of funds that it has available to spend is impaired, and the department remains at risk of overobligating and overexpending its appropriations in violation of the ADA."[1]

GAO's findings are particularly noteworthy given that in recent testimony before Congress, you have testified that "…generally, our [DOD] violations of the Anti Deficiency Act… are quite low, very much lower I might add, than non-defense agencies taken as a whole." [2] Further, you have indicated that how positively DOD has performed in terms of ADA violations is evidence that the Department is generally doing well on financial management.

According to information provided to our offices by GAO, between fiscal years 2005 and 2010, four military services have reported seventy-three ADA violations, totaling just over $602 million.  In fiscal year 2011, two additional and large violations were reported by the Navy and Air Force for another $270 million.  However, based on GAO and DOD Office of Inspector General reports, at least $817 million in unreported ADA violations have been identified, but not yet reported to the Congress.[3] [4] One violation worth $617 million is a case that has not been reported or closed since 2006. These unreported violations represent an almost doubling of DOD's ADA violation dollar value, yet the Department has not concluded its assessments, and Congress has not yet been notified.  Further, it is our understanding that DOD is reviewing other potential ADA violations before reporting to Congress.

As such, we are writing to request the following information:

1)      When will the Department officially report to Congress on the two pending ADA violations totaling $817 million as identified by the GAO and OIG?  Further, please explain why DOD has delayed the reporting of these identified violations.

2)      To what extent are other potential violations under review by the Department? Please provide a current list of all ongoing ADA violation investigations, including the date the potential ADA violation was initially identified, the dollar amount of the potential ADA violation, the office or official assigned to review the potential violation, the account name and number in which the potential ADA violation occurred, the appropriation under which the potential ADA violation occurred, and an estimate of when the investigation of the potential ADA violation will be completed and reported to Congress.

3)      What is the process undertaken by DOD to investigate a potential ADA violation, including any planned improvements to expedite the legally required reporting?

During your time as Under Secretary (Comptroller) and Chief Financial Officer, the Department has taken encouraging steps towards establishing a reliable department-wide financial management system. However, there is much more to do in order to overcome pervasive financial management problems that affect the Department's ability to controls costs, anticipate future expenditures, measure performance, and prevent and detect fraud, waste, and abuse.  The ultimate goal of strong financial controls and management are to have reliable information about funding available and expenditures made.  Without a thorough process to track appropriations, obligations, and expenditures, the risk for ADA violations is high.

We request that you provide this information to us by October 30, 2011. We look forward to working with you during the months ahead.

Sincerely,

(s)

Jon Tester et al

[1]GAO, DOD Financial Management: Improvements Are Needed in Antideficiency Act Controls and Investigations, GAO-08-1063, September 2008.

[2] House Committee on Armed Services, Panel on Defense Financial Management and Auditability Reform, hearing on DOD's Plans for Financial Management Improvement and Achieving Audit Readiness, July 28, 2011. See also Senate Committee on Armed Services, Subcommittee on Readiness and Management Support, Testimony during hearing on Financial Management and Business Transformation at the Department Of Defense, July 27, 2011 and  Committee on Homeland Security and Governmental AffairsSubcommittee on Federal Financial Management, Government Information, Federal Services, and International Security, Hearing on Assessing Efforts to Eliminate Improper Payments, May 25, 2011.

[3] GAO, Department of the Army—The Fiscal Year 2008 Military Personnel, Army Appropriation and the Antideficiency Act, B-318724, June 22, 2010.

[4] DOD OIG, Selected Controls over the Military Personnel, Army Appropriation, D-2006-112, September 22, 2006.