H 4926 CONGRESSIONAL RECORD — HOUSE May 15, 1995

is advocating a freeze. ‘‘The foundation of

the defense budget is built on sand.’’

A Senate Armed Services subcommitte is

scheduled to hold a hearing on the problems

Tuesday. It will be chaired by Sen. John

Glenn (Ohio), a Democrat, who was authorized by Republicans to conduct it because of

his long-standing interest in the subject.

Among the problems detailed by the Defense Department, the Pentagon inspector

general and the GAO:

Of the 36 Pentagon departments audited by

the inspector general (IG) in the last year, 28

used ‘‘records in such terrible condition’’ as

to make their annual financial statements—

an accounting of money collected and money

spent—utterly worthless, said Vander

Schaaf.

Financial officials cannot account for $14.7

billion in ‘‘unmatched disbursements,’’

checks written for equipment and services

purchased by all military units within the

last decade. This means that accountants

know only that a certain amount of money

was spent on the overall F–16 jet account, for

example, but not how much was spent on F–

16 landing gear or pilot manuals because

they cannot find a purchase order from the

government to match the check.

‘‘You don’t know what you’re really paying

for,’’ Vander Schaaf said.

The $14.7 billion represents ‘‘hardcore problems’’ where department accountants have

tried but failed to find the records. ‘‘We

could be paying for something we don’t need

or want,’’ said Russell Rau, the IG’s director

of financial management.

In the last eight years, various military offices appear to have ordered $7 billion worth

of goods and services in excess of the amount

Congress has given to them to spend. These

‘‘negative unliquidated obligations’’ may indicate that a bill has been paid twice or mistakenly charged to the wrong account because bookkeepers at hundreds of maintenance depots, weapons program offices and

military bases did not keep track of payments they made, said Vander Schaaf.

Of the $7 billion ‘‘the government has no

idea how much of this balance is still owed,’’

Rau said.

Hamre has threatened to take part of the

$7 billion out of the military services’ current operating budget if they cannot find

documentation for the expenditures by June

1.

Every year the Defense Department pays

private contractors at least $500 million it

does not owe them, according to Vander

Schaaf. The GAO believes the figure is closer

to $750 million.

The payment system is in such bad shape

that the Pentagon relies on contractors to

catch erroneously calculated checks and return them. Many of the overpayments are

due to errors made on a paper-based system

in which haried clerks are judged by how

quickly they make payments. And because

there is no adequate way to track the

amount of periodic payments made on a contract, businesses often are paid twice for the

work they have done.

Defense Department finance officials believe they are recouping about 75 percent of

the overpayments, although they admit they

have no way of knowing exactly how much is

being overpaid.

Today, after an 18-month struggle by

Hamre to turn the situation around, the department still has 19 payroll systems and 200

different contracting systems.

Hamre, who wins praise from Republicans

and Democrats for his efforts, has undertaken a major consolidateion of payroll and

contracting offices. He has opened more than

100 investigations into whether individual

program managers or service agencies violated the law by using money appropriated

for one program for something else or for

paying contracts that exceeded their budget.

He has frozen 23 major accounts and has

stopped payment to 1,200 contractors whose

records are particularly troublesome. In

July, clerks will be prohibited from making

payments over $5 million to any contractor

‘‘unless a valid accounting record’’ of the

contract can be found. By October, the

amount drops to $1 million, which means it

will affect thousands more contracts.

According to Hamre and Rau, a number of

cases are under investigation for possible

violations of the Anti-Deficeincy Act, the

law that governs how congressionally appropriated money must be spent. Penalties

range from disciplinary job action to criminal prosecution. Investigators are trying to

determine:

Why there is an unauthorized expenditure

of around $1 billion on the Mark 50 torpedo,

and the Standard and Phoenix missiles.

Hamre and Rau suspect that Navy officials

used money appropriated for other items or

wrote checks on empty accounts to pay contracts from 1988 and 1992.

Whether Air Force officials used money

from various weapons programs to build a

golf course at Wright-Patterson Air Force

Base in Ohio beginning in 1987.

What happened when some programs ran

out of money. ‘‘There are some [cases] in the

Air Force now that really stink,’’ Hamre

said. When money for the Advanced Cruise

Missile ran out, Air Force officials simply

terminated the existing contract and rewrote another, more expensive one the following day, Pentagon investigators recently

concluded. In order to pay for cost overruns

associated with the new C–17 cargo plane,

contract officials simply reclassified $101

million in development costs as production

costs.

Hamre said the services allowed such

money mingling to go on partly because of

the complexity of the yearly congressional

appropriations process. ‘‘People want to find

an easier way to get the job done,’’ he said.

‘‘They are trying to get some flexibility in a

very cumbersome system.’’

But, he added, some services also have resisted correcting problems and punishing

wrongdoers. ‘‘I’m very frustrated by it,’’ he

said. ‘‘In the past, they just waited until people retired. It was the old boy network covering for people.’’

The Defense Department is unlike any government agency in scope and size. It sends

out $35 million an hour in checks for military and civilian employees from its main financing office in Columbus, Ohio. And it

buys everything from toothbrushes to nuclear submarines; about $380 billion flows

within the various military purchasing bureaucracies and out to the private sector

each year.

It takes at least 100 paper transactions

among dozens of organizations to buy a complex weapons system. Some supply contracts

have 2,000 line items and, because of the congressional appropriations process, must be

paid for by money from several different

pots.

Fixing the problems without throwing the

entire system into chaos, Hamre said, ‘‘is

like changing the tire on a car while you’re

driving 60 miles per hour.’’

But some argue it has never been more important to make the fixes quickly.

‘‘Here we are in a period of reduced spending, it’s critically important today that we

get a bigger bang for the buck,’’ said Sen.

William V. Roth Jr. (R–Del.), chairman of

the Government Affairs Committee, where

many of the current problems were first revealed. ‘‘We’ve got to put pressure on to expedite it. At best, it will take too long.’’

But in the world of Defense Department financing, time is not always a solution, as

one small example illustrates.

In 1991, because of a computer programming error, the department’s finance and accounting service centers erroneously paid

thousands of Desert Storm reservists $80 million they were not owed. When officials realized the mistake, they began to send letters

to service members to recoup the overpayments. Many veterans complained to Congress, which then prohibited the Pentagon

from collecting any overpayment of less

than $2,500 and made it give back money collected from people who received less than

that amount.

To comply, the Defense Finance and Accounting Service (DFAS) payment centers in

Cleveland, Denver, Indianapolis and Kansas

City created new computer programs to cancel the debts and issue refunds. But they did

not adequately test the new programs, IG

and GAO investigators found.

As a result, the appropriate debts were not

canceled, and improper amounts of refunds

were issued, often to the wrong service member. The DFAS center in Denver, for example, canceled $295,000 that service members

owed it for travel advances. In all, the

botched effort to follow Congress’s direction

cost taxpayers an additional $15 million,

Pentagon officials said.

‘‘It isn’t possible now’’ to recoup the

money, Hamre said. ‘‘We can’t reconstruct

the records. We admit were really, really

bad. We won’t do it again.’’ The IG’s office

has agreed that it would be too costly to reconstruct the records and recoup the loss.

As he often does when he testifies about

these matters on Capitol Hill, Hamre confessed to the Senate Armed Services Committee recently: ‘‘We’ve made a lot of

progress. Boy, we’ve got a long way to go.’’

fRECESS

The SPEAKER pro tempore. Pursuant to clause 12 of rule I, the Chair declares the House in recess subject to

the call of the Chair.

Accordingly (at 12 o’clock and 36

minutes p.m.), the House stood in recess subject to the call of the Chair.

fb 1243

AFTER RECESS

The recess having expired, the House

was called to order by the Speaker pro

tempore [Mr. WELLER] at 12 o’clock and

43 minutes p.m.

PROVIDING FOR CONSIDERATION

OF H.R. 614, THE NEW LONDON

fNATIONAL FISH HATCHERY CONVEYANCE ACT

Mrs. WALDHOLTZ. Mr. Speaker, by

direction of the Committee on Rules, I

call up House Resolution 146 and ask

for its immediate consideration.

The Clerk read the resolution, as follows:

H. RES. 146

Resolved, That at any time after the adoption of this resolution the Speaker may, pursuant to clause 1(b) of rule XXIII, declare the

House resolved into the Committee of the

Whole House on the state of the Union for

consideration of the bill (H.R. 614) to direct

the Secretary of the Interior to convey to

the State of Minnesota the New London National Fish Hatchery production facility.