Professor Mark Skidmore and a team of researchers have examined various government websites and reports and believe they may have found trillions of dollars in unauthorized spending by the federal government. After examining spending by the Department of Defense (DoD) and the Department of Housing and Urban Development (HUD), Skidmore and his team found $21 trillion in ostensibly unauthorized federal spending from 1998 to 2015.

In an interview on WKAR public radio in Michigan, Skidmore said, “The most recent report that we refer to came out in 2016 for the Army. It’s the largest one of $6.5 trillion in unsupported adjustments and typically in government, adjustments would be on the expenditure side and not on the revenue flow side, because that revenue comes in, is authorized by Congress. But in this case, at least according to the document, there was an adjustment in the amount of $800 billion … that looks like a transfer from the Treasury to the Army.” Skidmore -- an economist at Michigan State University -- was assisted by graduate students and a former government official.

How do you get to $800 billion?

Skidmore said that every year, each agency or department is authorized a certain amount of funds. For example, he cited the Army, which would receive between $120 to $130 billion. For fiscal year 2015, Skidmore said, the Army would have received $122 billion, “and then there’s this adjustment that takes place, and it’s a transfer from Treasury to the Army of $800 billion. It indicates that this is to adjust for previous years, but in every previous year you would have gotten an allocation in a similar amount, so how could you get $800 billion? I just don’t understand and I, in fact, I sent another message to some people today, again asking this kind of question.”

The MSU economist cited another example of 170 unsupported journal voucher adjustments that amount to $2.1 trillion. Skidmore said he expected to find some sort of explanation for the 170 adjustments, but found none. He said, “‘Wow, that doesn’t seem like too many unsupported adjustments to describe and explain how it could be $2.1 trillion. Is it just an accounting function? But how could it be so large?'”

So far, Skidmore has received no specific reply from government officials to his queries. He has contacted the Congressional Budget Office, the Government Accountability Office, and the Office of the Inspector General. While he has received return calls, he has not yet received an answer to his questions about the report of the allegedly unauthorized $6.5 trillion in spending. That’s the most recent one and it’s the largest, so it’s the one that I’ve been focusing my questions on. 

It was after website links to key data were disabled at the website for the Office of the Inspector General that Skidmore joined Laurence Kotlikoff in penning an article at Forbes magazine about what they had found. They wrote:

“On July 26, 2016, the Office of the Inspector General (OIG) issued a report ‘Army General Fund Adjustments Not Adequately Documented or Supported’.  The report indicates that for fiscal year 2015 the Army failed to provide adequate support for $6.5 trillion in journal voucher adjustments.  According to the GAO's Comptroller General, ‘Journal vouchers are summary-level accounting adjustments made when balances between systems cannot be reconciled. Often these journal vouchers are unsupported, meaning they lack supporting documentation to justify the adjustment or are not tied to specific accounting transactions…. For an auditor, journal vouchers are a red flag for transactions not being captured, reported, or summarized correctly.”

They went on to write:

“Given that the entire Army budget in fiscal year 2015 was $120 billion, unsupported adjustments were 54 times the level of spending authorized by Congress.  The July 2016 report indicates that unsupported adjustments are the result of the Defense Department's "failure to correct system deficiencies."

Inadequate audit trail

The result, according to the report, is that data used to prepare the year-­end financial statements were unreliable and lacked an adequate audit trail. The report indicates that just 170 transactions accounted for $2.1 trillion in year—end unsupported adjustments.  No information is given about these 170 transactions.  In addition, many thousands of transactions with unsubstantiated adjustments were, according to the report, removed by the Army. There is no explanation concerning why they were removed nor their magnitude. The July 2016 report states, ‘In addition, DFAS (Defense Finance and Accounting Service) Indianapolis personnel did not document or support why DDRS (The Defense Department Reporting System) removed at least 16,513 of 1.3 million feeder file records during the Third Quarter.’”

When WKAR contacted DoD’s Office of Inspector General about the $21 trillion of unsupported adjustments, DoD spokesman Bruce Anderson stated that both the Army and Defense Finance and Accounting Service (DFAS) were not able to provide “the underlying detailed transaction level documentation to support the $6.5 trillion in [journal voucher] adjustments.  The $6.5 trillion represents the amount of unsupported adjustments DFAS created for the FY15 Yearend Army General Fund Financial Statements.  The number is not cumulative and is not an estimate.  We reported that the JV [journal voucher] adjustments were unsupported.  Without this supporting documentation, we simply could not determine whether the adjustments were necessary or correct.  We include in the report data showing the considerable number of unsupported and supported JV adjustments.”

The statement said that the agency found $803 billion in unsupported Fund Balance With Treasury (FBWT) adjustments that were not transfers from the U.S. Treasury.  FBWT refers to an asset account of available budget spending authority for a department. “Without sufficient supporting documentation for the adjustments, we could not determine whether the adjustments were warranted and accurate, or whether the values in the financial statements were accurate.”

According to the statement from DoD, “The $903 billion in unsupported A/P adjustments are not amounts due to specific vendors or individuals.” It contended that the relevant agencies were using accounting methods to establish the “correct beginning balances for the general ledger account.  This net number is a result of 22,536 adjustments made by DFAS personnel or generated by DFAS systems.  These adjustments were considered unsupported because they did not provide sufficient transaction level documentation to support the adjustments.  Without sufficient supporting documentation for the adjustments, we could not determine whether the adjustments were warranted and accurate, or whether the values in the financial statements were accurate.’

Moreover, DoD spokesman Anderson wrote that the dead links on the OIG website were the result of migrating the agency’s content to a new server on October 5. He wrote, “This required us to use new URLs for every document. I imagine Mr. Skidmore tried to get to the documents using old URLs, which regrettably but unavoidably no longer worked. A little searching would have resulted in finding the reports.”

Investigators Kotlikoff and Skidmore appear skeptical of the government’s explanations for the allegedly unauthorized expenditures. They wrote: “Given that the entire Army budget in fiscal year 2015 was $120 billion, unsupported adjustments were 54 times the level of spending authorized by Congress.  The July 2016 [OIG] report indicates that unsupported adjustments are the result of the Defense Department's "failure to correct system deficiencies.”

Kotlikoff and Skidmore added:

“An appendix to the July 2016 report shows $2 trillion in changes to the Army General Fund balance sheet due to unsupported adjustments. On the asset side, there is $794 billion increase in the Army's Fund Balance with the U.S. Treasury.  There is also an increase of $929 billion in the Army's Accounts Payable. This information raises additional major questions. First, what is the source of the additional $794 billion in the Army's Fund Balance? This adjustment represents more than six times appropriated spending.  Second, do these transfers represent a flow of funds to the Army beyond those authorized by Congress? Third, were these funds authorized and if so when and by whom? Fourth, what is the source of these funds? Finally, the $929 billion in Accounts Payable appears to represent an amount owed for items or services purchased on credit. What entities have received or will receive payment?”
 

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Spero News editor Martin Barillas is a former US diplomat, who also worked as a democracy advocate and election observer in Latin America. His first novel 'Shaken Earth', is available at Amazon.

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