Lawmakers Launch Bill to Prevent More ‘Accounting Errors’ at Pentagon After $6.2 Billion Flub

Lawmakers Launch Bill to Prevent More ‘Accounting Errors’ at Pentagon After $6.2 Billion Flub
U.S. Secretary of Defense Lloyd Austin attends a press conference at State Department in Washington on April 11, 2023. Madalina Vasiliu/The Epoch Times
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Sens. J.D. Vance (R-Ohio) and Josh Hawley (R-Mo.) have introduced legislation to prevent further accounting errors at the Department of Defense (DOD) after a “valuation error” came to light recently at the Pentagon amounting to over $6 billion.

The draft bill (pdf) aims to amend the Foreign Assistance Act of 1961 to require the Pentagon to use accounting methods that capture the true cost to taxpayers of sending weapons to other countries from U.S. stockpiles.

“This legislation will save American taxpayers from footing the bill for shoddy accounting at the Pentagon,” Mr. Vance said in a statement. “There should be no excuse for accounting errors with a seven-figure price tag. With this bill, Congress can ensure that the cost of our military aid is properly and consistently calculated.”

Specifically, the legislation would clarify the term “aggregate value” for the purposes of Presidential Drawdown Authority (PDA), which is a mechanism the Biden administration is using to expedite the transfer of weapons and other equipment to Ukraine.

It would require that the total value of weapons and other equipment sent abroad under the PDA framework is calculated by using either the original acquisition cost to the U.S. government plus the cost of improvements, or the replacement cost, whichever is greater.

A separate provision in the draft bill would require that the Pentagon calculate the full cost to the U.S. government of providing defense services.

In response to an inquiry from The Epoch Times about the proposal, the DOD said it does not comment on draft legislation as a matter of policy.

The legislative action comes in context of a broader push for greater accountability for the DOD over a multibillion-dollar accounting error relating to military aid to Ukraine that came to light last month.

The Pentagon is seen from a flight taking off from Ronald Reagan Washington National Airport on Nov. 29, 2022. (Alex Wong/Getty Images)
The Pentagon is seen from a flight taking off from Ronald Reagan Washington National Airport on Nov. 29, 2022. Alex Wong/Getty Images

‘Valuation Errors’

On June 20, a DOD spokesperson announced that the Pentagon had overcounted the value of the weapons it sent to Ukraine over the past two years by $6.2 billion, calling the incident a series of “valuation errors.”

The spokesperson said that the mistake occurred because U.S. military officials didn’t count the actual value of depleted weapons stockpiles but instead used the value of replacing the weapons.

“In a significant number of cases, services used replacement costs rather than net book value, thereby overestimating the value of the equipment drawn down from U.S. stocks and provided to Ukraine,” said Pentagon deputy press secretary Sabrina Singh.

Specifically, there was an error of $2.6 billion in the 2022 fiscal year and $3.6 billion in the current fiscal year, which ends on Sept. 30.

“We have confirmed that for FY23, the final calculation is $3.6 billion, and for FY22 it is $2.6 billion, for a combined total of $6.2 billion,” Ms. Singh added.

“These valuation errors in no way limit or restricted the size of any of our PDAs or impacted the provision of support to Ukraine,” the spokesperson added, referring to the acronym for the Presidential Drawdown Authority mechanism.

A plaque of the Department of Defense seal is seen at the Pentagon in Washington, D.C., on Jan. 26, 2012. (Mandel Ngan/AFP via Getty Images)
A plaque of the Department of Defense seal is seen at the Pentagon in Washington, D.C., on Jan. 26, 2012. Mandel Ngan/AFP via Getty Images

The final calculation of the accounting error was almost twice as high as what the Pentagon estimated in May.

“The so-called ‘valuation errors’ around U.S. aid to Ukraine is a transparent attempt to bypass Congress for additional funds, while continuing to prioritize Ukraine over more vital U.S. interests, including deterring China in the Pacific,” Mr. Hawley said in a statement on July 12 that accompanied the announcement of the legislation.

“We must force the DoD to appropriately account for any future aid, not only for Ukraine, but also for all U.S. security assistance going forward,” the Republican senator added.

Earlier this week, Hawley and several of his Republican colleagues sent a letter (pdf) to Secretary of Defense Lloyd Austin, demanding an explanation of the accounting errors in U.S. security assistance to Ukraine.

“These so-called ‘valuation errors’ are particularly concerning given the nature and scope of U.S. aid to Ukraine—over $113 billion thus far,” the GOP senators wrote. “This is a transparent attempt to bypass Congress for additional funds, while continuing to prioritize Ukraine over more vital U.S. interests, including deterring China in the Pacific.”

Hawley earlier introduced the Special Inspector General for Ukraine Assistance Act in order to establish the watchdog position of Special Inspector General to oversee military and other forms of assistance to Ukraine amid questions about whether the aid serves vital American interests or is a needless burden to taxpayers.

Sen. Josh Hawley (R-Mo.) speaks during the Faith and Freedom Road to Majority conference at Hilton in Washington on June 23, 2023. (Madalina Vasiliu/The Epoch Times)
Sen. Josh Hawley (R-Mo.) speaks during the Faith and Freedom Road to Majority conference at Hilton in Washington on June 23, 2023. Madalina Vasiliu/The Epoch Times

Congressional Scrutiny

Lawmakers in Congress have demanded a briefing to grill Pentagon officials on how the accounting mistakes occurred and what improvements should be made to the DOD’s financial management systems to prevent similar problems in the future.
“DOD’s recently discovered ‘accounting error’ of $6.2 billion is yet another example of the failures within DOD’s financial management systems, and raises more concerns about DOD’s ability to protect taxpayer funds,” House Oversight Committee Chairman Rep. James Comer (R-Ky.) and Subcommittee on National Security Chairman Rep. Glenn Grothman (R-Wi.) wrote in a recent letter to Mr. Austin (pdf).

The two lawmakers demanded a briefing from the Pentagon on how it plans to use the $6.2 billion in taxpayer funds that are now available and what kind of accountability mechanisms are in place within the DOD to make sure that taxpayer funds “are spent properly and similar errors do not occur in the future.”

Mr. Comer and Mr. Grothman added that they would also demand to learn during the briefing how the Pentagon is making sure that weapons stockpiles that are vital for America’s national security are being replenished.

The letter follows the July 6 announcement of a joint hearing by the Oversight Committee and the Subcommittee on National Security, which aims to examine the financial practices of the Pentagon.

“For too long the Department of Defense has operated on its own terms and has clearly failed to ensure taxpayer dollars are not lost to waste, fraud, or abuse,” Mr. Grothman and Rep. Pete Sessions (R-Texas) said in a statement.

“It’s time to examine how a lack of accountability within DoD has resulted in failed audits and consider meaningful solutions to make sure DoD has the tools necessary to ensure fiscal responsibility,” they added.

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