[Congressional Record Volume 141, Number 89 (Friday, May 26, 1995)]
[Senate]
[Pages S7630-S7632]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                         ADDITIONAL STATEMENTS

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                         DEFENSE BUDGET ISSUES

 Mr. GRASSLEY. Mr. President, the unmatched disbursement 
problem at the Pentagon has been simmering on a back burner for years.
  All of a sudden, it is on the front burner, and it is boiling.
  The issue is so bothersome right now because it undermines the 
credibility of the defense budget numbers and the case for pumping up 
the defense budget.
  There is another article on it in the Washington Post on Tuesday.
  This one zeros right in on the main problem: the lack of 
accountability at the Pentagon.
  I ask that the article be printed in the Record.
  The article follows:

                [From the Washington Post, May 23, 1995]

                 The Pentagon's Accountability Problem

                         (By Coleman McCarthy)

       Speaking of welfare abuse--and who isn't--have you heard 
     about the $13 billion the government handed out over the past 
     decade but doesn't know where it went or to whom? Then 
     there's the $6 billion spent in excess of what Congress 
     authorized.
       The welfare recipients who have taken this money and run--
     or lazed about or bought Cadillacs, as it is derisively said 
     of poor people--are in a category of their own. They are 
     military contractors. Their welfare agency is the largest of 
     them all, the Department of Defense, which has a defense 
     against enemies great and small except the one within: fiscal 
     stupidity and indifference.
       Some of the details of this welfare abuse were revealed May 
     16 before the Senate Armed Services subcommittee on 
     readiness. It wasn't much of a hearing: just a half-day of 
     testimony from a Pentagon undersecretary and the head of the 
     General Accounting Office, a few senators and not much in the 
     national media that evening or the next day.
       If $19 billion in lost or untracked tax money had been 
     dispensed by the Department of Education on mismanaged 
     reading programs or if this were $19 billion that vaporized 
     in the Medicare or food stamp bureaucracy, no hearing room 
     would have been large enough to hold the media and outraged 
     public, no time limit on hearings would have been imposed and 
     no senator's publicist would have passed up the chance to 
     paper Washington with the boss's deploring of bureaucrats, 
     welfare cheats and, for sure, liberals.
       But this was the Pentagon--the Department of Giveaways--and 
     its dollar-mates, military contractors and their rent-a-
     general execs. Both givers and takers are on permanent 
     dispensations from standards of competence, accountability 
     and honesty that apply elsewhere.
       At the hearings, Charles A. Bowsher of the GAO ran through 
     what he called the Pentagon's ``serious problem of not being 
     able to properly match disbursements with obligations.'' 
     Pentagon overpayments, flawed contracts, duplicative business 
     practices, shoddy or no record-keeping and multiple payroll 
     systems have meant that the money might as well have been 
     thrown out of airplanes for all anyone knew where it went.
       On such a routine matter as travel, Bowsher reported that 
     the Pentagon has ``over 700 processing centers, 1,300 pages 
     of regulations and some 40
      steps to get travel approval and reimbursement. The result: 
     DOD spent over 30 percent of each travel dollar on 
     administrative cost. By contrast, companies with the best 
     travel processes have one disbursing center . . . and 10 
     or fewer process steps. These companies spend as little as 
     1 percent of their travel dollar on administrative 
     costs.''
       According to John Hamre, the Pentagon undersecretary and 
     comptroller, each month the Pentagon deals with 2.5 million 
     invoices and 10 million paychecks. He spun: ``It isn't that 
     we have wicked people trying to screw up, it's that we have a 
     system that's so error-prone that good people working hard 
     are going to make mistakes.''
       In the past 18 months, the hard-working good folk at the 
     Pentagon have miscalculated Hamre's paycheck six times.
       Because no wicked people are involved in the missing 
     billions, no mention was made of firings, much less possible 
     indictments. On the issue of ``problem disbursements,'' Hamre 
     was the model of managerial thoughtfulness. It is too late or 
     too burdensome to go back and see what or who went awry: ``I 
     decided to suspend, on a one-time basis, the requirement to 
     research old transactions.'' To DOD's contractor buddies, the 
     message, unlike the money, was not lost: Relax, we're good 
     people, you're good people. It was ``the system.''
       Hamre reassured Congress that the era of reform is here: 
     ``The department has refined and advanced its blueprint to 
     eliminate its long-standing financial management 
     problems.'' [[Page S7631]] 
       Sure. In his 1989 book ``The Pentagonists: An Insider's 
     View of Waste, Mismanagement, and Fraud in Defense 
     Spending,'' A. Ernest Fitzgerald wrote that the military's 
     rote reaction to scandal is to promise reform, pledge self-
     policing and spout Caspar Weinberger's favorite cliche about 
     the ``few bad apples in any barrel.'' And then go back to 
     writing checks.
       Down the hall on the same day from the hearing on the 
     missing billions was another Senate Armed Services panel 
     reaching for its appropriations pen--debating a $60 billion 
     contract to build 30 attack submarines for the Navy. To 
     attack who? Russia.
       It was a day of symmetry: one Senate committee looking for 
     phantom money and another pondering a phantom enemy.

  Mr. GRASSLEY. Billions of dollars in DOD checks can't be hooked up to 
authorizing documents, but ``no mention is made of firings or possible 
indictments,'' the article says.
  The Pentagon will promise reform, pledge self-policing, and get right 
back to writing bad checks.
  This is what worries me, Mr. President.
  Some of my colleagues would like to give the Pentagon some extra 
money, so the Pentagon bureaucrats can write more bad checks.
  This is the very problem I spoke about on the floor last Friday.
  Last Friday I came to the floor to express concern about a new policy 
being pushed by the Comptroller at the Department of Defense [DOD], Mr. 
John Hamre.
  Mr. Hamre is proposing to write off billions of dollars of 
unmatchable disbursements.
  Unmatchable disbursements are payments which he claims cannot be 
linked to supporting documentation.
  In my mind, Mr. President, the plan would set a dangerous precedent 
and underscores the continuing lack of effective internal financial 
controls at the Pentagon.
  My speech last Friday merely expressed concerns and raised questions 
about the new policy.
  Well, at the conclusion of my statement, my friend from Arizona, 
Senator McCain, and my friend from Maine, Senator Cohen, launched an 
unwarranted attack on what I had said.
  I feel as though their criticism was misdirected. It misinterpreted 
and mischaracterized what I had said.
  Unfortunately, I was participating in the Canada-United States 
Interparliamentary Group meeting in Canada and had to run to catch an 
airplane.
  I was unable to respond to their critical remarks on Friday.
  I would like to do that now.
  Mr. President, I would now like to clarify for Senator Cohen's 
understanding of what I actually said about the IRS. Had his 
recollection of what I said been clear, he would have known that he and 
I are in total agreement on the management flaws at IRS.
  Senator Cohen seemed to think that I was holding up the IRS as some 
kind of model accounting bureau for Pentagon bureaucrats to copy.
  That was not my point at all. Nothing could be further from the 
truth.
  In fact, I am as frequent a critic of the way the IRS manages the 
peoples' money as he is.
  What I was suggesting in my comments was that the plan to write off 
billions of dollars of unmatchable disbursements would be an insult to 
the taxpayers.
  This is what I said:

       This money was taken out of the pockets of hard working 
     American taxpayers, and the Pentagon bureaucrats say it is 
     just too much trouble to find out how their money was spent.
       Could you imagine how the IRS would treat a citizen who 
     claimed to have no documentation for $100,000 of income? The 
     IRS would say: We know you got the money. You pay the tax. 
     Period. End of discussion.
       We should hold the Pentagon bureaucrats to the same 
     standard that the IRS holds the taxpayers to. The DOD should 
     have to play by the same rules imposed on the taxpayers.
       We should tell the Pentagon bureaucrats: We know you 
     received $10 billion in appropriations. Now, how did you 
     spend it? No extra money until we get the answer.

  Mr. President, this is the point I was trying to make.
  The IRS is relentless and thorough in collecting tax money from the 
people.
  I want the Pentagon bureaucrats to be just as relentless and just as 
thorough in controlling and accounting for the expenditure of the 
peoples' money as the IRS is in collecting it.
  I would now like to turn to Senator McCain's remarks.
  I take strong exception to what was said by the Senator from Arizona.
  Mr. McCain suggested that I ``enjoy savaging'' the Pentagon for 
shortcomings and deficiencies but never offer ``viable solutions.'' 
First of all, I do not remember ever making a critique of DOD's 
management without offering a solution, contrary to my friend's 
flippant remark.
  On Friday, I made two very specific recommendations for handling the 
new policy.
  I would like to restate those two recommendations. I said:

       We in the Congress should not approve this plan until two 
     stringent conditions are met:
       Number 1: Those responsible must be held accountable for 
     what has happened; Heads must roll.
       Number 2: A new DOD policy should be put in place that 
     specifies: Effective January 1, 1996, all DOD disbursements 
     must be matched with obligations and supporting accounting 
     records before a payment is made.

  Mr. President, as I said on Friday, these two recommendations will 
help to strengthen and reinforce section 8137 of the fiscal year 1995 
DOD Appropriations Act--Public Law 103-335. Senator Stevens 
acknowledged my proposed solution in a hearing on this issue May 23 
before his Defense Subcommittee.
  Section 8137 was a carefully crafted piece of legislation designed to 
correct the unmatched disbursement problem at the Pentagon.
  It was a phased approach I developed in close cooperation with the 
DOD Comptroller, Mr. Hamre.
  Section 8137 specifies that by July 1, 1995, a disbursement in excess 
of $5 million must be matched with appropriate accounting documents 
before the payment is made.
  Then, under the law, the mandatory matching threshold is lowered to 
$1 million on October 1, 1995.
  My amendment was adopted by the Senate on August 11, 1994.
  The next day I received a warm, handwritten thank you note from Mr. 
Hamre. I would like to read it. I quote:

       I would like to thank you for sponsoring the amendment 
     requiring DOD to match disbursements with accounting records 
     prior to actual disbursement of funds. I especially 
     appreciate your willingness to work with me to adopt your 
     amendment to ensure we could implement it in the least 
     disruptive manner. You will be very proud of the long-term 
     benefit it will produce in our business practices.

  Mr. President, to my friend from Arizona, I say: I have been working 
hard to fix this problem. I do not claim to have the answer but I am 
searching for it.
  And the recommendations I made on Friday are the logical next step to 
the phased approach contained in section 8137 of the law.
  They would lower the threshold to zero, effective January 1, 1996.
  Let me also say to my friend from Arizona that my recommendations are 
fully consistent with current DOD policy.
  To back up that point, I would like to quote from Mr. Hamre's letter 
of May 5, 1995, to Senator Glenn where the plan to write off 
unmatchable disbursements was first revealed to the public.
  I quote from the Hamre letter: ``We have adopted a policy that we 
will not disburse funds until we pre-match them to the accounting 
records.''
  That is recommendation No. 2 in Friday's speech.
  Mr. President, I say to my friend from Arizona that I have been 
working diligently to fix the problem.
  I have already helped to develop one viable solution and am working 
on another.
  Right now, I am working with the Comptroller General, Chuck Bowsher, 
to find a more comprehensive solution to the Pentagon's accounting 
problems.
  Mr. President, sometimes in the heat of debate, our arguments and 
proposed solutions fall on deaf ears.
  I would caution my friend from Arizona to listen to the arguments 
before blindly dismissing them.
  Unless that is done, the credibility of one's opposition is lost.
  Mr. President, I would like to add one new idea to the discussion.
  I do not believe the use of the word ``writeoff'' accurately 
describes what DOD is proposing to do.
  Normally, the word ``writeoff'' is used to describe a procedure for 
canceling from accounts a legitimate business loss.
  What Mr. Hamre is proposing to do is write off billions of dollars of 
unauthorized payments. [[Page S7632]] 
  A payment that cannot be linked to supporting documentation is an 
unauthorized payment. It may not be legitimate.
  Without documentation, we do not know how the money was used.
  That is my concern, Mr. President.
  Mr. President, Pentagon bureaucrats have an unblemished record of 
mismanaging the peoples' money.
  Now, is it smart to give a bureaucratic institution like the Pentagon 
that cannot control and account for the use of public money more public 
money--as some of my colleagues propose?
  DOD should not get any extra money until it cleans up the books.
  More money is not the answer. Better management is.
  

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