Sen. Carper Leads Bipartisan, Bicameral Letter to Address Defense Department Antideficiency Act Violations

WASHINGTON – Today, Sen. Tom Carper (D-Del.), Chairman of the Subcommittee on Federal Financial Management, led a bipartisan, bicameral group of 13 Members of Congress in a letter to Department of Defense (DOD) Under Secretary Robert F. Hale expressing concern over the DOD’s violations of the Antideficiency Act (ADA) – a constitutional obligation that prohibits federal agencies from incurring obligations or making expenditures in excess of or in advance of appropriations or apportionments. Joining Sen. Carper on the letter are Sens. Claire McCaskill (D-Mo.), Charles E. Grassley (R-Iowa), Bob Corker (R-Tenn.), Jon Tester (D-Mont.), Tom Coburn (R-Okla.), Scott Brown (R-Mass.), Susan M. Collins (R-Maine), John McCain (R-Ariz.), and Reps. Todd Young (R-Ind.), Adam Smith (D-Wash.), Mike Conaway (R-Texas), and Rob Andrews (D-N.J.).

According to a 2010 Government Accountability Office report and a 2006 DOD Office of the Inspector General report, the DOD has at least $817 million in unreported ADA violations related to 2005 and 2008 appropriations that have been identified, but not yet reported to the Congress.

In the letter, the Members cite Under Secretary Hale’s recent Congressional testimony that claims that the DOD’s violations of the ADA are generally low and that the DOD is performing well on financial management. While the Members note that the DOD has taken steps to establish a department-wide financial management system, they state that the DOD has more to do.

“The ultimate goal of strong financial controls and management is to have reliable information about funding available and expenditures made,” wrote the Members. “Without a thorough process to track appropriations, obligations, and expenditures, the risk for ADA violations is high.”

The ADA is a key statute that ensures all expenditures by federal agencies conform to the authorized budgets and requirements established in law. Under the ADA, federal agencies, including the DOD, are required to establish a system of controls to restrict obligations and disbursements. If and when the agency determines that a violation of one of the ADA’s requirements has occurred, that agency is required to “report immediately to the President and Congress all relevant facts and a statement of actions taken.”

“Compliance with the ADA gives Congress the confidence that the Department is not circumventing congressional direction and that the agency can properly track its funds,” wrote the Members. “In fact, the law can be considered as implementing Article One of the United States Constitution, which provides that ‘No money shall be drawn from the Treasury, but in consequence of appropriations made by law.'”

Sen. Carper’s Subcommittee on Federal Financial Management will further examine the troubled accounting and financial procedures of the DOD at its hearing on Thursday, Sept. 15 at 2:30 p.m.

A copy of the letter follows:

September 13, 2011

The Honorable Robert F. Hale
Under Secretary (Comptroller) and Chief Financial Officer
Office of the Secretary of Defense
United States Department of Defense
1100 Defense Pentagon, Room 3E770
Washington, DC 20301-1100

Dear Under Secretary Hale:

We are writing to express our concerns over the Department of Defense’s (DOD) reporting of violations of the Antideficiency Act (ADA), the key statute that ensures all expenditures by federal agencies conform with the authorized budgets and requirements established in law.

The ADA prohibits any DOD officer or employee from incurring obligations or making expenditures in excess of or in advance of appropriations or apportionments. The Act also requires DOD to establish a system of controls to restrict obligations and disbursements. Finally, when DOD determines that a violation of one of the ADA’s requirements has occurred, DOD is required to “report immediately to the President and Congress all relevant facts and a statement of actions taken.” Compliance with the ADA gives Congress the confidence that the Department is not circumventing congressional direction and that the agency can properly track its funds. In fact, the law can be considered as implementing Article One of the United States Constitution, which provides that “No money shall be drawn from the Treasury, but in consequence of appropriations made by law.”

In September 2008, the Government Accountability Office (GAO) reported on ongoing challenges faced by the DOD in following the ADA. Specifically, the GAO noted: “As a result of continuing financial management weaknesses, including difficulties in ensuring the proper authorization, processing, and recording of payments, DOD’s ability to timely and reliably determine the amount of funds that it has available to spend is impaired, and the department remains at risk of overobligating and overexpending its appropriations in violation of the ADA.”[1]

GAO’s findings are particularly noteworthy given that in recent testimony before Congress, you have testified that “…generally, our [DOD] violations of the Antideficiency Act… are quite low, very much lower I might add, than non-defense agencies taken as a whole.” [2] Further, you have indicated that how positively DOD has performed in terms of ADA violations is evidence that the Department is generally doing well on financial management.

According to information provided to our offices by GAO, between fiscal years 2005 and 2010, four military services have reported seventy-three ADA violations, totaling just over $602 million. In fiscal year 2011, two additional and large violations were reported by the Navy and Air Force for another $270 million. However, based on GAO and DOD Office of Inspector General reports, at least $817 million in unreported ADA violations have been identified, but not yet reported to the Congress.[3] [4] One violation worth $617 million is a case that has not been reported or closed since 2006. These unreported violations represent an almost doubling of DOD’s ADA violation dollar value, yet the Department has not concluded its assessments, and Congress has not yet been notified. Further, it is our understanding that DOD is reviewing other potential ADA violations before reporting to Congress.

As such, we are writing to request the following information:

1) When will the Department officially report to Congress on the two pending ADA violations totaling $817 million as identified by the GAO and OIG? Further, please explain why DOD has delayed the reporting of these identified violations.

2) To what extent are other potential violations under review by the Department? Please provide a current list of all ongoing ADA violation investigations, including the date the potential ADA violation was initially identified, the dollar amount of the potential ADA violation, the office or official assigned to review the potential violation, the account name and number in which the potential ADA violation occurred, the appropriation under which the potential ADA violation occurred, and an estimate of when the investigation of the potential ADA violation will be completed and reported to Congress.

3) What is the process undertaken by DOD to investigate a potential ADA violation, including any planned improvements to expedite the legally required reporting?

During your time as Under Secretary (Comptroller) and Chief Financial Officer, the Department has taken encouraging steps towards establishing a reliable department-wide financial management system. However, there is much more to do in order to overcome pervasive financial management problems that affect the Department’s ability to controls costs, anticipate future expenditures, measure performance, and prevent and detect fraud, waste, and abuse. The ultimate goal of strong financial controls and management is to have reliable information about funding available and expenditures made. Without a thorough process to track appropriations, obligations, and expenditures, the risk for ADA violations is high.

We request that you provide this information to us by October 30, 2011. We look forward to working with you during the months ahead.

Sincerely,

Thomas R. Carper
United States Senator

Claire McCaskill
United States Senator

Charles E. Grassley
United States Senator

Bob Corker
United States Senator

Jon Tester
United States Senator

Tom Coburn
United States Senator

Scott Brown
United States Senator

Susan M. Collins
United States Senator

John McCain
United States Senate

Todd Young
United States Representative

Adam Smith
United States Representative

Mike Conaway
United States Representative

Rob Andrews
United States Representative

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