The Pentagon’s Bottomless Money Pit, by Matt Taibbi

What should be done with a department that can’t pass a basic audit? Raise its budget, of course. From Matt Taibbi at rollingstone.com:

Illustration by Victor Juhasz for Rolling Stone

A retired Air Force auditor — we’ll call him Andy — tells a story about a thing that happened at Ogden Air Force Base, Utah. Sometime in early 2001, something went wrong with a base inventory order. Andy thinks it was a simple data-entry error. “Someone ordered five of something,” he says, “and it came out as an order for 999,000.” He laughs. “It was probably just something the machine defaulted to. Type in an order for a part the wrong way, and it comes out all frickin’ nines in every field.” Nobody actually delivered a monster load of parts. But the faulty transaction — the paper trail for a phantom inventory adjustment never made — started moving through the Air Force’s maze of internal accounting systems anyway. A junior-level logistics officer caught it before it went out of house. Andy remembers the incident because, as a souvenir, he kept the June 28th, 2001, email that circulated about it in the Air Force accounting world, in which the dollar value of the error was discussed.

Wanted to keep you all informed of the massive inventory adjustment processed at [Ogden] on Wednesday of this week. It isn’t as bad as we first thought ($8.5 trillion). The hit . . . $3.9 trillion instead of the $8.5 trillion as we first thought.

The Air Force, which had an $85 billion budget that year, nearly created in one stroke an accounting error more than a third the size of the U.S. GDP, which was just over $10 trillion in 2001. Nobody lost money. It was just a paper error, one that was caught.

“Even the Air Force notices a trillion-dollar error,” Andy says with a laugh. “Now, if it had been a billion, it might have gone through.”

Years later, Andy watched as another massive accounting issue made its way into the military bureaucracy. The Air Force changed one of its financial reporting systems, and after the change, the service showed a negative number for inventory — everything from engine cores to landing gear — in transit.

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