Donald Rumsfeld annouced that more than $2 trillion in Pentagon funds had gone missing. He made this astonishing statement on September 10th, perfect timing to keep the story from making any news.
The sums here are certainly huge. OilEmpire headlines with a four trillion dollar figure, for instance, before repeating the more usual $2.3 trillion you'll see repeated elsewhere.
four trillion dollars have gone "missing"
Rumsfeld admitted to $2.3 trillion missing on September 10, 2001 (the day before 9/11)
Suggestions that the timing of Rumsfeld's statement was "convenient", as the news would be buried on the following day, aren't uncommon (our emphasis):
CBS Reports Pentagon
Cannot Account for $2.3 Trillion
"'According to some estimates we cannot track $2.3 trillion in transactions,' Rumsfeld admitted. $2.3 trillion — that's $8,000 for every man, woman and child in America."
-- CBS, 1/29/02
One day before the 9/11 attacks, US Secretary of Defense Donald Rumsfeld made the above astonishing admission. Besides being reported months later in the CBS report given below, the quote is still posted at http://www.defenselink.mil/speeches/2001/s20010910-secdef.html on the Department of Defense website. And on PBS at http://www.pbs.org/newshour/bb/military/jan-june01/dollars_2-12.html we learn that this figure came from a report of the Pentagon's inspector general. "Its own auditors admit the military cannot account for 25 percent of what it spends," reports CBS News Correspondent Vince Gonzales.
The timing of this admission just one day before 9/11 kept this story from even making the news at the time. Even when it was finally reported months later, this revelation received scant coverage...
On September 10, 2001, Secretary of Defense Donald Rumsfeld held a press conference to disclose that over $2,000,000,000,000 in Pentagon funds could not be accounted for. Rumsfeld stated: "According to some estimates we cannot track $2.3 trillion in transactions." According to a report by the Inspector General, the Pentagon cannot account for 25 percent of what it spends. 1 Â 2 Â
Such a disclosure normally might have sparked a huge scandal. However, the commencement of the attack on New York City and Washington in the morning would assure that the story remained buried...
And in fact others go further, pointing to the fact that "accountants, bookkeepers and budget analysts" were killed in the Pentagon attack, and suggesting this, along with the destruction of information, was a possible motive for the attack.
[motive] 4. Destroy important information that the Pentagon doesn't want the public to find out about and kill certain personnel who would know or find out about it.
Rumsfeld: "According to some estimates, we cannot track $2.3 trillion in transactions." -DoD (09/10/01)
"The impact area included both the Navy operations center and the office complex of the National Guard and Army Reserve. It was also the end of the fiscal year and important budget information was in the damaged area." -Arlington County After-Action Report
"Most of those killed in the office, called Resource Services Washington, were civilian accountants, bookkeepers and budget analysts. They were at their desks when American Airlines Flight 77 struck." - South Coast Today/Pittsburgh Post-Gazette (12/20/01)
One Army office in the Pentagon lost 34 of its 65 employees in the attack. Most of those killed in the office, called Resource Services Washington, were civilian accountants, bookkeepers and budget analysts. They were at their desks when American Airlines Flight 77 struck.
"One Army office in the Pentagon lost 34 of its 65 employees in the attack. Most of those killed in the office, called Resource Services Washington, were civilian accountants, bookkeepers and budget analysts. They were at their desks when American Airlines Flight 77 struck."
It seems to be the only department which re-entered the building after renovation.
Summarising, then, the argument appears to run something like this.
Huge sums of defence budget money have gone missing.
Simply admitting this was not an option.
However, those pulling off the 9/11 "inside job" decided that if they crashed into just the right spot of the Pentagon, then they could kill many of those who might uncover the problem or tell the public about it, and perhaps also destroy vital documentary evidence.
What's more, it gave the opportunity for Rumsfeld to inform the public on September 10th, and have his bombshell ignored courtesy of the attacks on the very next day.
Makes sense? To some, apparently, based on the sites and forum posts we've seen, but if you take a closer look at the information they've left out then a very different picture emerges.
The first problem with some reports on this issue comes in how they describe the money. In extreme cases it's treated almost as though it's been "stolen", while other sites ambiguously say it's "missing". 911Research above are more accurate in saying it could not be accounted for, or tracked. Here's where Rumsfeld spoke about this on 9/10, with a little more context (our emphasis):
The adversary's closer to home. It's the Pentagon bureaucracy. Not the people, but the processes. Not the civilians, but the systems...
In this building, despite this era of scarce resources taxed by mounting threats, money disappears into duplicative duties and bloated bureaucracy—not because of greed, but gridlock. Innovation is stifled—not by ill intent but by institutional inertia.
Just as we must transform America's military capability to meet changing threats, we must transform the way the Department works and what it works on...
Our challenge is to transform not just the way we deter and defend, but the way we conduct our daily business...
The men and women of this department, civilian and military, are our allies, not our enemies. They too are fed up with bureaucracy, they too live with frustrations. I hear it every day. And I'll bet a dollar to a dime that they too want to fix it. In fact, I bet they even know how to fix it, and if asked, will get about the task of fixing it. And I'm asking.
They know the taxpayers deserve better. Every dollar we spend was entrusted to us by a taxpayer who earned it by creating something of value with sweat and skill -- a cashier in Chicago, a waitress in San Francisco. An average American family works an entire year to generate $6,000 in income taxes. Here we spill many times that amount every hour by duplication and by inattention.
That's wrong. It's wrong because national defense depends on public trust, and trust, in turn, hinges on respect for the hardworking people of America and the tax dollars they earn. We need to protect them and their efforts.
Waste drains resources from training and tanks, from infrastructure and intelligence, from helicopters and housing. Outdated systems crush ideas that could save a life. Redundant processes prevent us from adapting to evolving threats with the speed and agility that today's world demands.
Above all, the shift from bureaucracy to the battlefield is a matter of national security. In this period of limited funds, we need every nickel, every good idea, every innovation, every effort to help modernize and transform the U.S. military....
The technology revolution has transformed organizations across the private sector, but not ours, not fully, not yet. We are, as they say, tangled in our anchor chain. Our financial systems are decades old. According to some estimates, we cannot track $2.3 trillion in transactions. We cannot share information from floor to floor in this building because it's stored on dozens of technological systems that are inaccessible or incompatible.
We maintain 20 to 25 percent more base infrastructure than we need to support our forces, at an annual waste to taxpayers of some $3 billion to $4 billion. Fully half of our resources go to infrastructure and overhead, and in addition to draining resources from warfighting, these costly and outdated systems, procedures and programs stifle innovation as well. A new idea must often survive the gauntlet of some 17 levels of bureaucracy to make it from a line officer's to my desk. I have too much respect for a line officer to believe that we need 17 layers between us....
[plenty more here, please go read the whole thing]
It's not that the money is "missing", then, at least according to Rumsfeld, more that incompatible and aging financial systems don't allow it to be tracked throughout the system. A DoD news document from April 2002 spelled this out even more clearly:
In fiscal 1999, a defense audit found that about $2.3 trillion of balances, transactions and adjustments were inadequately documented. These "unsupported" transactions do not mean the department ultimately cannot account for them, she advised, but that tracking down needed documents would take a long time. Auditors, she said, might have to go to different computer systems, to different locations or access different databases to get information.
That's obviously a huge issue, but then Rumsfeld isn't trying to hide that, or other Defence Department problems -- he was broadcasting them, saying that change was essential.
And of course why shouldn't Rumsfeld admit this? How is it going to damage him, or Bush? After all, the $2.3 trillion is almost eight times the 2001 Defence budget ( www.globalsecurity.org/military/library/budget/fy2001/sum/fy2001grbk.pdf ), therefore the problem was presumably ongoing throughout the Clinton administration (the above story references 1999, for instance). This continued into 2001 (CooperativeResearch point out that "auditors won’t even quantify how much money is missing from fiscal year 2001, causing “some [to] fear it’s worse” than 2000"), but this still looks to us like an issue for the department, more than the Government, and we really don't see why 9/11 would be required to hide it.
And there's another important point you're not being told. The language used in these claims, that Rumsfeld "announced" the missing $2.3 trllion on 9/10, along with the claim that he was "burying bad news", is designed to make you think that this information was only made public knowledge the day before the attacks. And that is utterly false. The report that uncovered the trillions appeared at the end of February 2000, and Rumsfeld and others had spoken about this before, on more than one occasion, and for months before the attacks:
Pentagon's finances in disarray
By JOHN M. DONNELLY The Associated Press 03/03/00 5:44 PM Eastern
WASHINGTON (AP) -- The military's money managers last year made almost $7 trillion in adjustments to their financial ledgers in an attempt to make them add up, the Pentagon's inspector general said in a report released Friday.
The Pentagon could not show receipts for $2.3 trillion of those changes, and half a trillion dollars of it was just corrections of mistakes made in earlier adjustments.
Each adjustment represents a Defense Department accountant's attempt to correct a discrepancy. The military has hundreds of computer systems to run accounts as diverse as health care, payroll and inventory. But they are not integrated, don't produce numbers up to accounting standards and fail to keep running totals of what's coming in and what's going out, Pentagon and congressional officials said.
January 7, 2001
The Defense Department's inspector general recently identified $6.9 trillion in accounting entries, but $2.3 trillion was not supported by adequate audit trails or sufficient evidence to determine its validity.
Another $2 trillion worth of entries were not examined because of time constraints, and therefore, the inspector general was able to audit only $2.6 trillion of accounting entries in a $6.9 trillion pot.
Contra Costa Times (California)
January 11, 2001
Senator Byrd: A recent article in the Los Angeles Times, written by a retired vice admiral and a civilian employee in the Office of the Secretary of Defense, accused the Department of Defense of being unable to account for the funds that Congress appropriates to it. The authors wrote, and I quote in part, quote, "The Pentagon's books are in such utter disarray that no one knows what America's military actually owns or spends." ...
That audit report found that out of $7.6 trillion in department-level accounting interest, 2.3 trillion in entries either did not contain adequate documentation or were improperly reconciled or were made to force buyer and seller data to agree. This DoD-IG report is very disturbing....
SECTION: CAPITOL HILL HEARING
HEADLINE: AFTERNOON SESSION OF A HEARING OF THE SENATE ARMED SERVICES COMMITTEE
SUBJECT: THE NOMINATION OF DONALD RUMSFELD TO BE SECRETARY OF DEFENSE
February 12th 2001
The inspector general of the Pentagon said there are 2.3 trillion dollars in items that they can't quite account for. That's not billion. That's trillion dollars. $2.3 trillion -- and the General Accounting Office said there are about $27 billion in inventory items that they can't find.
PBS Online NewsHour
June 3rd 2001
Secretary Rumsfeld Media Availability en route to Turkey
But something must be wrong or broken, if you can have terrific people in the armed forces and the defense establishment who care deeply about our country, are dedicated and patriotic, and are invested in doing it right, and an equally dedicated and patriotic group of people in the Congress who dedicated to doing it right -- and for whatever reason, there is a high degree of distrust, which everyone told me when I arrived here in January. There is no other reason why there would be all those reports required, all the amendments, and the size of the bill and the concerns and the letters and the phone calls.
If there weren't some glitch, something going on where we aren't working right, why would there be 128 studies saying our acquisition system is broken? Why would the GAO and Senator Byrd announce that we can't locate $2.6 trillion worth of transactions and documents if things were good?
What we need are incentives at every level of that department to be respectful of the taxpayers dollars. We simply must care. People all across this country have worked their heads off, paid taxes and want to be defended and protected, but they want to be done as efficiently and as cost-effectively as possible and big government can't seem to do that. It's very difficult. The incentives aren't there for people and we need to find ways to do put them there.
June 28, 2001 Thursday
DOBBS: Well, let me, if I may, go to a management by objective. We know what you want to do. How many months are you giving yourself to get it done?
RUMSFELD: Oh, it's years. It's years. This department didn't get like this in five minutes, and it's not going to get out of this in five minutes. It is an enormous task. It's like turning a battleship. It doesn't turn on a dime. And we'll have to work with the Congress and find a way inside this institution to fix our acquisition system, which is broken.
It takes 20 years to produce a weapon system, at a time where technology is turning over every 24 months. Our financial management systems can't account for $2.6. trillion worth of transactions, simply because the way they're arranged and organized...
SHOW: LOU DOBBS MONEYLINE 18:30
July 11th 2001
Testimony before the House Budget Committee on the FY 2002 Defense Budget
REP. PETER HOEKSTRA (R-MI): ... I find it interesting, and we've done a lot of work on another committee that I sit on, taking a look at the Department of Education, which, for the last three years hasn't been able to get a clean audit. Then I understand that the Department of Defense shares many of the same problems that we have with the Department of Education. I think the IG just notes that in one of the audits that you went through of the 1999 financial statements included adjustments of $7.6 trillion -- that's trillion -- in account adjustments, of which 2.3 trillion were supported by un -- by reliable documents -- were unsupported by reliable documentation.
July 16th 2001:
Testimony before the House Appropriations Committee: Fiscal Year 2002 Defense Budget Request
Sec. Rumsfeld: ...As you know, the Department of Defense really is not in charge of its civilian workforce, in a certain sense. It's the OPM, or Office of Personnel management, I guess. There are all kinds of long- standing rules and regulations about what you can do and what you can't do. I know Dr. Zakheim's been trying to hire CPAs because the financial systems of the department are so snarled up that we can't account for some $2.6 trillion in transactions that exist, if that's believable. And yet we're told that we can't hire CPAs to help untangle it in many respects...
REP. LEWIS: Thank you, Mr. Moran.
Mr. Secretary, the first time and the last time that Dov Zackheim and I broke bread together, he told me he would have a handle on that 2.6 trillion by now. (Laughter.) But we'll discuss that a little --
As there were multiple reports of this issue prior to the attacks, then, it's hard to see any significance to Rumsfeld mentioning it again on 9/10. The news wasn’t concealed by what happened the next day, in any event: it was already firmly in the public domain.
We still have the supposed motive of "destroying information" and "killing personnel" with the Pentagon attack, though. As we were told above, "the impact area included both the Navy operations center and the office complex of the National Guard and Army Reserve. It was also the end of the fiscal year and important budget information was in the damaged area." CooperativeResearch report on the consequences of this:
The Department of the Army will state that it won’t publish a stand-alone financial statement for 2001 because of “the loss of financial-management personnel sustained during the Sept. 11 terrorist attack.” [Insight, 4/29/2002]
What does the lack of "a stand-alone financial statement for 2001" mean?
The “Chief Financial Officers Act of 1990,” Public Law 101-576, November 15, 1990, as amended by the “Federal Financial Management Act of 1994,” Public Law 103-356, October 13, 1994, requires the annual preparation and audit of financial statements. The Army did not publish stand-alone financial statements for
FY 2001 due to the loss of financial management personnel sustained during the September 11 terrorist attack. Therefore, we did not audit Army financial information for FY 2001 financial statements. However, Army financial statement information was included in the DoD FY 2001 Agency-Wide Financial Statements.
This, then, is the "benefit" of the Pentagon attack: Army financial statements for 2001 were only provided in an overall Department of Defence document, not stand-alone, and therefore they could not be audited. No reported impact on the $2.3 trillion, nothing more at all. We don't even know for sure if this information was released later, because the document only talks about a loss of personnel, not data: if so, the most effect (on the budget issue) the attacks had was to partially delay the production of one particular document from one part of the Department of Defence.
The conclusion of the above report is interesting, too. It raises the issue of "large, unsupported adjustments to correct discrepancies between status of appropriations data and general ledger data": that is, corrections they must make because money cannot be accounted for. And then they explain where they believe most of the problems lie:
Since 1991, DFAS IN-SF has made large, unsupported adjustments to correct discrepancies between status of appropriations data and general ledger data. The Inspector General, DoD has addressed issues relating to these unsupported ending balance adjustments in every audit of the Army General Fund financial statements since 1996. We stated that the use of status of appropriations data and expenditure data was an unacceptable interim method for compiling the FYs 1997 through 2000 Army General Fund Financial Statements. We made
recommendations to DFAS IN-SF to identify and eliminate the causes for the ending balance adjustments and develop a plan of action with specific target dates to implement an integrated accounting system based on general ledger accounting. DFAS IN-SF actions have not been effective in correcting the deficiencies in the accounting system.
The ending balance adjustments almost doubled from FY 1999 to FY 2000. By correcting the accumulated error in GLAC 3310 and controlling all equity transactions, including recording appropriations used at the departmental level, we believe that up to 92 percent of the FY 2000 ending balance adjustment of $237 billion could have been eliminated. The need for ending balance adjustments will continue until general ledger accounting is correctly implemented throughout the Army’s accounting system. Unless DFAS IN-SF makes a concerted and sustained effort to identify and correct all the deficiencies in the implementation of general ledger accounting, the Army General Fund financial statements will continue to be unreliable. Ending balance adjustments should be eliminated after FY 2001.
General ledger accounting hasn't been implemented properly, then, but if it was than "up to 92%" of this example year balance adjustment would be unnecessary (that would leave an adjustment of $19 billion, still a big chunk of cash, but a significant improvement on $237 billion). We've no idea how this relates to the overall $2.3 trillion, but it does seem to fit with the overall talk of accounting issues.
And there's another point that you might consider relevant. While most people act like the talk of an unaccounted-for $2.3 trillion is still accurate, that's not actually true. A February 2002 story reported that more than two thirds of that expenditure had now been reconciled:
Zakheim Seeks To Corral, Reconcile 'Lost' Spending
By Gerry J. Gilmore
American Forces Press Service
WASHINGTON, Feb. 20, 2002 -- As part of military transformation efforts, DoD Comptroller Dov S. Zakheim and his posse of accountants are riding the Pentagon's financial paper trail, seeking to corral billions of dollars in so-called "lost" expenditures.
For years, DoD and congressional officials have sought to reconcile defense financial documents to determine where billions in expenditures have gone. That money didn't fall down a hole, but is simply waiting to be accounted for, Zakheim said in a Feb. 14 interview with the American Forces Information Service. Complicating matters, he said, is that DoD has 674 different computerized accounting, logistics and personnel systems.
Most of the 674 systems "don't talk to one another unless somebody 'translates,'" he remarked. This situation, he added, makes it hard to reconcile financial data.
Billions of dollars of DoD taxpayer-provided money haven't disappeared, Zakheim said. "Missing" expenditures are often reconciled a bit later in the same way people balance their checkbooks every month. The bank closes out a month and sends its bank statement, he said. In the meanwhile, people write more checks, and so they have to reconcile their checkbook register and the statement.
DoD financial experts, Zakheim said, are making good progress reconciling the department's "lost" expenditures, trimming them from a prior estimated total of $2.3 trillion to $700 billion. And, he added, the amount continues to drop.
"We're getting it down and we are redesigning our systems so we'll go down from 600-odd systems to maybe 50," he explained.
"That way, we will give people not so much more money, but a comfort factor, to be sure that every last taxpayer penny is accounted for," he concluded.
Now plainly the US Government saying this doesn't make it true, and we don't know what the real or current situation is. But equally, it's clear that the efforts to tie this in to 9/11 have major shortcomings. There's no clear reason given why the Bush adminstration would need to go to such efforts to conceal the problem, for instance. They didn't, either, and it was covered on several occasions before 9/11, so the fact that Rumsfeld mentioned the $2.3 trillion again on 9/10 seems to have no special importance. While the Pentagon attack did have an effect on the production of some DoD financial statements, it's not clear how significant this was, and another report suggests the DoD is reducing the “missing” amounts by taking steps to improve its accounting procedures. They still don't look too impressive to us -- $700 billion without proper documentation is a lot of money -- but it's hard to see how any of this constitutes a motive for the 9/11 attacks.
NOTE: Kudos to a Screw Loose Change piece, and particularly some well-researched comments by manny, which revealed most of the links referenced here and so persuaded us that this topic deserved a page.