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Nation and World ------------------------------------------------------------------------
Copyright © 1998 The Seattle Times Company
Posted at 08:44 a.m. PDT; Monday, September 28, 1998
Three reports of embezzlements expose Pentagon's lack of control
by Ralph Vartabedian
Los Angeles Times
WASHINGTON - A string of embezzlements at military installations across the United States is pointing out serious weaknesses in the Pentagon's control over its multibillion-dollar contractor payment system, according to three investigative reports out today.
The embezzlements, ranging from $11,000 to $3 million each, were executed mainly by low-level employees at federal payment centers exploiting loopholes in the government's troubled accounting system, the reports found.
In one recent case, an Air Force staff sergeant in Dayton, Ohio, arranged for his mother and girlfriend to receive more than $900,000 in government checks, a scheme he executed even after managers had been warned that he should not be trusted, an internal Defense Department memo states.
Weaknesses in the payment system, which is operated by the Defense Finance and Accounting Service, have played a key role in more than a dozen cases of embezzlement in recent years, according to a General Accounting Office report obtained by the Los Angeles Times.
Even clerks are able to manipulate the Pentagon's computerized finance system to create fictitious contracts and then direct the Treasury Department to send checks to personal postal boxes, according to a second GAO report.
The known embezzlements represent only the tip of waste and fraud throughout the Pentagon's financial system, said Sen. Charles Grassley, R-Iowa, who requested the investigations out of growing concern about "lax internal controls."
"If we can send missiles to a bulls-eye at a factory in Khartoum and a Bedouin training camp in Afghanistan, we ought to be able to set up an accounting system at the Defense Department that operates with precision," Grassley said. "Let's say it takes a rocket scientist to do that; well, the Pentagon has rocket scientists right there."
The problem has been exacerbated by the administration's touted effort to "reinvent government," which has curtailed safeguards in an effort to cut red tape for defense contractors, according to a probe by a Senate subcommittee staff.
In addition, the Pentagon is cutting back on audits. In July, the Defense Contract Audit Agency stopped all routine reviews of contracts under $10 million.
Susan Hansen, a Pentagon spokeswoman, denied that such streamlining has compromised the integrity of the Pentagon's finances. But investigators for the Senate Judiciary's subcommittee on administrative oversight and the courts, which will issue its own report today, note that the Justice Department investigated 807 financial crimes against the Pentagon in 1997 alone and obtained 88 guilty pleas.
The finance service has long been troubled by serious accounting problems. The agency has never been able to balance its books and has set a goal of producing its first clean financial statement in 1999, a spokeswoman said.
Senate investigators conducted 15 on-site inspections to check whether ordered goods actually existed. The list of missing items included furniture, televisions and computer equipment. No proof existed that services were performed even after payments were made. In some cases, cheaper goods were substituted for higher-cost products.
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