WUOMFM

Did the federal government spend $21 trillion that wasn’t authorized by Congress?

Dec 20, 2017

"My hope is that if I have a few things – like this interview, the Forbes piece – that that gives me a little bit of a platform to approach lawmakers and try to ask questions in that venue," Skidmore said.
Credit Vladimir Solomyani / Unsplash

Now that the GOP has gotten its tax reform plan passed, leaders like House Speaker Paul Ryan are saying the next item on the agenda is reining in government spending.

Perhaps the work of Michigan State University economist Mark Skidmore, his team of graduate students, and a former government official, will give them a place to start.

Skidmore and his team dug into government websites and reports, and they may have found unauthorized spending in the Department of Defense (DOD), and the Department of Housing and Urban Development (HUD) to the tune of $21 trillion from 1998-2015.

Skidmore joined Stateside today to explain.

Listen to the full conversation above, or read highlights below.

Some examples of what Skidmore’s team has seen

“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.

“So if you think about budgeting, typically every year the agency or the department is authorized a certain amount, so in the Army’s case it would be $120 or $130 billion. In fiscal year 2015, they 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.

Another example would be there were 170 journal voucher adjustments – unsupported adjustments – that amount to $2.1 trillion. And I thought, well, I expected to see some explanation about these 170 adjustments. Why were they unsupported? What was that for? And it just sort of stops and I’m like, ‘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?'”

On what Skidmore hasn't heard from government officials

“I have reached out to the Congressional Budget Office, the GAO [U.S. Government Accountability Office], and the Office of the Inspector General. I have gotten calls back, but I have not been able to talk with anybody who has specific knowledge regarding these reports – and in particular, this one report with the $6.5 trillion. That’s the most recent one and it’s the largest, so it’s the one that I’ve been focusing my questions on.

“I just sent another note to the key person listed in the report as the primary contact today. I really would like to find out the answer and learn more and not just, ‘Well, we have to shift money around and it’s complicated and it’s hard.’ But really try to get answers to these kinds of specific questions.

"If I can do that, maybe, you know, we could get somewhere and I would feel better about it. But the numbers are so large and so much outside of my experience with public budgeting that I really want to understand. And so that’s why I’m doing this.

"When the website links were disabled, that prompted me to write an article with Laurence Kotlikoff which appeared in Forbes about 12 days ago highlighting some of these key questions. So, my hope is that if I have a few things – like this interview, the Forbes piece – that that gives me a little bit of a platform to approach lawmakers and try to ask questions in that venue.

"But, you know, it sounds so crazy ... $21 trillion of unsupported adjustments. I feel like you need good documentation, good trust level to have that kind of conversation.”

We reached out to the Department of Defense Office of Inspector General. They replied with the statement below.

A statement from Bruce Anderson, chief of communications for the Office of Legislative Affairs and Communications in the Department of Defense Office of Inspector General:

As discussed in the report, we concluded that the Army and Defense Finance and Accounting Service (DFAS) personnel were unable to provide the underlying detailed transaction level documentation to support the $6.5 trillion in 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 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.  

  1. The $803 billion in unsupported FBWT adjustments are not transfers from the U.S. Treasury.  As footnoted on p. 28 of the report, DFAS Indianapolis personnel stated that the majority of these adjustments were related to budget execution adjustments from prior years that must be applied to establish the correct beginning balances for the general ledger account.  This net number is a result of 33,389 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. 
  2. As stated on p. 6 of our report, the 170 adjustments were unsupported because they forced general ledger amounts to agree with other data sources without reconciling the differences or determining which data source was correct; corrected errors or reclassified amounts to other accounts without adequately documenting why the adjustments were needed; or changed general ledger data without adequate documentation to support the adjustments. 
  3. The $903 billion in unsupported A/P adjustments are not amounts due to specific vendors or individuals.  As footnoted on p. 28 of the report, DFAS Indianapolis personnel stated that the majority of these adjustments were related to budget execution adjustments from prior years that must be applied 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.

As to what prompted the audit, I invite you to review the project announcement posted September 8, 2015. 

http://www.dodig.mil/reports.html/Article/1149389/project-announcement-audit-of-army-general-fund-financial-statement-compilation/

These audits have been required by law for some time now. You can find similar audits on our website.

With regard to the assertion that we disabled the links to the applicable documents, I have to inform you that the reports remained available on the website. We did migrate our content to a new server October 5, and kept the same base URL. 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.

Again, the documents were available on the website. One would have had to look for them, which is certainly more work than using previously identified links, but it is inaccurate to imply that the reports were no longer available.

*Correction: The original statement sent to Michigan Radio from the Department of Defense Office of Inspector General referenced the number $803.3 million in list item one and $929.7 million in list item three. The office sent a corrected statement that changed the first number to $803 billion and the second to $903 billion. The statement has been corrected above.

*This post was last updated on Dec. 21 at 12:41 p.m.

(Subscribe to the Stateside podcast on iTunes, Google Play, or with this RSS link)