Senator JOHN GLENN (D-OH) (Senate Armed Services Committee, 2 Feb. '94):

"...built-in problems you have in management and procurement and -- not only procurement, but in management

once this stuff is procured and is out there is just -- the situation is abominable."

Senator CHARLES GRASSLEY (R-IA): How can you have this sort of irresponsible expenditure of taxpayers' money when you don't match a specific dollar spent with a specific purchase?

WILLIAM PERRY, Secretary of Defense-designate (Confirmation Hearing before Senate Armed Services Committee, 2 Feb. '94):

"Our financial procedures, our financial data processing systems, our financial processes are obsolete

and inadequate to the task."

["AMERICA'S DEFENSE MONITOR" program introduction.]

Admiral GENE LaROCQUE: Welcome once again to "AMERICA'S DEFENSE MONITOR."

Throughout our history Americans have been willing to provide the necessary funds in order to maintain a military establishment adequate to defend the United States and to carry out our role in the world. They're perfectly willing to put up the money, to buy the weapons, to train the troops, conduct operations and to pay our troops a living wage. Americans also feel, however, that they are entitled to a fair accounting of these huge sums of money which the Pentagon spends each year.

You'll find in this program today a lot surprises. The Pentagon doesn't always know where the money it spends goes.

NARRATOR: Secretary of Defense William Perry promises to reform the way the Pentagon manages its finances. He will have his work cut out for him. The US Department of Defense will spend about $270 billion this year. An additional $12 billion is spent on nuclear weapons programs by the Department of Energy. The combined total comes to over $5 billion each week, every week this year. That is a lot of money.

Currently there are nearly eight million Americans who depend on a Pentagon paycheck each month. This large workforce includes 2.5 million civilian employees who work in military-related industries. Nearly three million people are on the military payroll as members of the active and reserve armed forces, and a little less than one million civilians draw pay working directly for the Pentagon.

Add to these employees the 1.5 million retired officers and enlisted people who receive Defense Department checks each month and the grand total of Americans who are either directly or indirectly on the Pentagon's payroll is eight million people.

The Pentagon payroll will cost $71 billion. Even more costly than the vast payroll of the military are the new weapons the Pentagon continues to build, and the training and military operations the armed forces perform every day.

These three categories -- payroll, new weapons and operations -- consume most of the money Congress provides to the military each year.

Buying more weapons will cost taxpayers about

$61 billion this year -- $61 billion to pay for more planes, more helicopters, more ships, more missiles, tanks, trucks, and equipment.

The military annually writes checks for yet another

$36 billion to research and develop the weapons that we will be buying in the future. Many of these way-out weapons and technolo-gies are of doubtful military value. Even so, the Pentagon devotes 12 percent of its spending to research and development, a greater share than during the height of the Cold War.

Twenty percent of the Pentagon's total procurement and Research and Development weapons contracts goes to the five largest commercial contractors:

...McDonnell Douglas, for the past several years, has received over $5 billion annually.

...Northrup, Lockheed, General Dynamics each receive about $4 billion in military contracts each year.

...And General Electric received $3.5 billion last year alone.

The third major component of military spending is "operations." It includes training of troops; maintenance of ships, tanks, airplanes, helicopters and other equipment; operation of more than 470 military installations across the United States and 95 military bases in US territories and foreign countries; and conduct of military operations, such as flying fighters over Bosnia-Herzegovina and sending ground troops to Somalia.

All of these operations and maintenance will consume $88 billion in 1994, unless the administration asks Congress for even more money before the year is over. The Pentagon has already received an extra $1.2 billion in 1994 for its operations in Somalia, the former Yugoslavia, and Haiti.

The secretary of defense faces the challenge of managing this gigantic enterprise. The task so far has been overwhelming. No previous secretary of defense has succeeded in bringing the Pentagon budget under control. Secretary William Perry thinks he can succeed where all others have failed.

Secretary-designate PERRY (Confirmation hearing before Senate Armed Services Committee, 2 Feb. 1994):

"I pledge to institute innovative management techniques to vigorously foster acquisition reform and to preserve a necessary industrial base. I also pledge to come to you in the Congress to seek the help that I will need to fulfill this responsibility."

NARRATOR: Republican Senator Charles Grassley of Iowa has been a leading advocate of Pentagon spending reform for almost two decades.

Senator GRASSLEY: Number one is the fact that we've got this constant problem between the secretary of defense supposedly managing the Defense Department and having these ideas for reform, and can he carry them out? If he's a very good person, he tries, but then what happens? He runs up against the military services.

NARRATOR: Jack Anderson, the dean of investigative reporting on government spending, cites the enormous expansion of the Pentagon bureaucracy that's in the way of financial reform.

JACK ANDERSON: It's an experience that I've watched over and over again during my 47 years of covering the Pentagon. I came out of World War II. We had 10 million men and women under arms fighting a war. We have more generals, we have more field officers today with a peacetime army of less than two million men and women than we had fighting World War II with 10 million men and women under arms. It seems that everytime we give up guns, they buy more swivel chairs.

DAVID SEGAL: Now when the Pentagon goes to war, they have huge numbers of scenarios: worst-case scenarios, best-case scenarios and everything in between. Not when it comes to budgeting. They only assume that they're going to get tremendous sums of money.

NARRATOR: David Segal covers the Pentagon for the Washington Monthly, the premier journal of Washington insider politics. He observes that any reform must address the way that the military has become accustomed to doing business.

Mr. SEGAL: What you would do is revamp the budgeting process and try in some way to change the culture of the place; so that it's not the case that the person who procures the most and brings the most money in wins, but the person who brings in the most efficient programs and oversees and manages money in the best way.

NARRATOR: The Constitution bestows on the Congress the power over the federal purse. Each year Congress decides what America's military priorities will be by authorizing funds for Pentagon programs. In order for reform of any sort to take place, the Pentagon must be accountable to Congress for the money it spends.

Senator GRASSLEY: First of all, I think it's very important that the Congress of the United States through its constitutional power of oversight make sure that every dollar is spent legally, instead of allowing this sort of slush fund environment we have over there to exist. Number one: If Congress rides herd the way it should, things will change, the culture will change.

NARRATOR: If the Pentagon ignores the will of Congress or fails to keep track of the money it spends, our democratic control of government is weakened, as is our economy.

Many recall with outrage stories of wildly overpriced coffee pots, toilet seats, and spare parts that dominated debate about military spending 10 years ago.

Senator GRASSLEY: The Defense Department wants you to believe that they are making dramatic changes in the way things are purchased, particularly spare parts. I think the most out-standing example is the $600 toilet seat of 1983. And we thought that we had that problem taken care of and, 16 years later, the $600 toilet seat was costing $1800.

NARRATOR: Jack Anderson highlights a telling instance of the Pentagon's bureaucratic defiance of the will of Congress.

Mr. ANDERSON: They were authorized under the regulations to recycle tin cans, cardboard boxes, that sort of thing, to use the money from the recycling for safety, environmental purposes, but if there was any surplus, they could use it for recreation. So, what they did was start recycling everything, recycling things that were not recyclable: jet engines, and crashed airplanes, and electronics equipment, big equipment.

Mr. SEGAL: The Pentagon is sort of like a drunkard in denial: They don't believe that they have a problem and they need to sort of scrap everything.

NARRATOR: Analysis by the General Accounting Office suggests that military spending is so great that the Pentagon itself is at a loss to account for where it spends its share of the nation's treasure.

The Comptroller General of the United States, Charles Bowsher, who heads the General Accounting Office, delivered a scathing report to Congress castigating the Pentagon for its failure to get rid of poor financial management practices.

CHARLES BOWSHER: The first audit was the audit of the Army. The second was the audit of the Air Force. And we found all the usual problems you'd find in any large entity that's being audited for the first time: Lots of accounting mistakes. A lot of adjustments had to be made to the closing statements. The inventories were -- hard to tell just how much money we really had in inventories. A lot of the assets were hard to account for. So, it's a real big problem and it's something that is long overdue because in the next four years, we'll spend a trillion dollars in defense.

NARRATOR: The General Accounting Office, or GAO, an arm of the US Congress, is charged with the broad responsibility to provide members of Congress and the public with independent analysis of government spending and activities. The GAO's investigations are not influenced by partisan politics or outside influences.

For the Congress and a public concerned with the high cost of weapons, the poor supervision of Pentagon spending and

a lack of accountability by Pentagon officials, the General Accounting Office has been the country's watchdog. Appointed by President Reagan, Charles Bowsher's inspired and skillful leader-ship has consistently documented thousands of Pentagon practices that have resulted in the waste of billions of dollars due to poor management and outright fraud.

Mr. BOWSHER: The amount of money that is being wasted or mismanaged is hard to quantify, but certainly the amount of adjustments were tens of billions of dollars on the financial reports. And then how that rolls into some of the other problems, we're not quite sure, but we know it's very large money. And I think the military leaders today recognize this, they've just never made the investment, and I don't think the civilian leadership has made the investment over there to really get on top of this problem.

NARRATOR: Congressman John Conyers of Michigan is the highly respected chairman of the House Government Operations Committee, a leader in the effort to control government spending. He frequently cites the important work of the GAO.

Rep. JOHN CONYERS (D-MI): Well, without the General Accounting Office, the investigative arm of the Congress, we'd be hobbled. I'd need five times as many staff because there's no way in the world that we could even begin to track all of the issues that need oversighting. So, what I am is a great supporter of GAO.

NARRATOR: Here are some examples of GAO fact-finding.

As of February 1993 the Navy had written upwards of $12.5 billion of what are known as "unmatched disbursements." GAO chief Charles Bowsher explained to Congress that "unmatched disbursements" are analogous to writing checks but not knowing which bills are paid.

Mr. SEGAL: You'll find reports about all sorts of weapons systems that the GAO has investigated. And years before it hit the headlines in the newspapers, years before there was a great stir about how problematic this program was, you'll find a GAO report that absolutely nailed down all of its problems, but Congress ignored it.

NARRATOR: The GAO also took public issue with the Army Materiel Command's inadequate financial recordkeeping. The Army, perhaps in an attempt to out-perform the Navy, wrote $29 billion worth of checks for various purchases and failed to keep finan-cial records of the transactions.

According to Bowsher's report to Congress, out of 829,000 active Army payroll records, some 203,000 -- 24 percent -- did not correspond to personnel records.

Mr. ANDERSON: GAO has a number of good auditors who do excellent jobs. They do point out waste and abuse. We're eternally grateful for their reports. We use their reports as a guide for our own investigations.

NARRATOR: All of the military services are having problems keeping track of the money they spend. Air Force books listed $630 million paid out for communications satellites stored by contractors. But no one, according to the GAO, seems to know where, if anyplace, the satellites exist. They are not shown in the Air Force property management records.

Once the Air Force noted discrepancies in their accounting practices, the GAO reported that they made billions of dollars in unsupported adjustments to their financial records and failed to investigate billions of dollars' worth of financial irregularities in order to cover their tracks.

Senator GRASSLEY: You tend to think you're more secure than you really are because everybody's talking in terms that we're going to be able to carry out our national security needs, when, in fact, we can't carry them out as defined because we haven't made revolutionary changes in our approach to defense policy.

NARRATOR: The military's consistent failure to keep track of the money they spend not only wastes taxpayer money, but can also reduce the nation's combat readiness. According to an analysis by the GAO of equipment distribution during the war with Iraq, "failure to maintain accurate property accounts" caused some units to be unable to deploy. Combat readiness suffered because some units received more equipment than they needed, while others did not receive enough.

Mr. BOWSHER: The importance of this is that if you waste money, like on inventory that you don't need because your accounting systems or your inventory systems indicate that maybe you don't have something, so somebody orders something to make sure that they don't run out -- It's those kind of things where the money gets used for something that is not needed. Therefore, you're either impacting readiness or you're wasting taxpayer dollars. It has to be one or the other, and that's not a good situation, especially when you're dealing in billions of dollars.

Senator GRASSLEY: A major problem with the General Account-ing Office is that if they come up with something very, very good that you can sink your teeth into it, and then maybe Congress, in turn, when those changes need to be made or when the General Accounting Office needs to be backed up, their recommendations carried out, well, maybe the Congress of the United States gets a little nervous and pulls back.

NARRATOR: Unfortunately, the extensively documented investigations of the GAO have resulted in little action by Congress or the individual military services.

Mr. ANDERSON: Well, the GAO doesn't do much to correct the problems. The GAO works for Congress and it's up to Congress to correct most of those problems. Congress has been ineffective in correcting the problems. Congress has too many ties to the Pentagon, too many ties to the defense contractors, too many ties to the special interests.

NARRATOR: The GAO has identified widespread abuses by the Pentagon. Yet, Congress seems unwilling or unable to take the military to task for financial mismanagement, lost checks, or duplicate payments to military contractors.

If Congress is serious about cutting government waste, it would do well to start with government's biggest bureaucracy, the Department of Defense.

The GAO is also charged with reviewing programs already funded by Congress in order to determine if the taxpayers' money is being used properly. In many cases, the GAO analyses suggest that programs once thought necessary are no longer needed. Once again, the recommendations of the GAO are often ignored.

Another obstacle to accountability is secrecy. The public is left in the dark and the Congress cannot do its job if the Pentagon can hide its programs by declaring a military project to be secret; also known as "classifying" it.

Rep. CONYERS: One of the easiest things for the Pentagon to do in order to justify systems and additional appropriations for systems that might be questionable is to classify them or classify some part of the production of them. And unfortunately, too many times, that classification is only a way to try to prevent us from finding out how inefficiently they've handled very large amounts of money.

NARRATOR: The ongoing story of the F-22 Air Force fighter program offers a disturbing picture of the power of the Air Force and military contractors to ride roughshod over Congress.

In 1992, the General Accounting Office reported that the F-22 would cost $16 billion to develop alone. The total cost of the program is estimated at $87 billion if the Air Force has its way.

The GAO's analysis recommended to Congress and the Air Force that the Lockheed F-22 fighter program be delayed by seven years because our existing fleet of F-15 fighter planes meets the country's military needs. The Air Force reacted to the GAO's advice by making their report secret. In the case of the F-22 -- an $87 billion program -- the Air Force not only ignored the GAO's report, but has denied much of Congress and all of the public the benefit of the GAO's investigation.

The Department of Defense continues to evade account-ability to the Congress and the American public as it continues to spend money at nearly Cold War levels.

Senator GRASSLEY: The Defense Department has plans to build or expend money, $50-, $60 billion more than there's money in the budget to do it. And it's kind of like trying to put five pounds of manure into a four-pound bag. It's just very difficult to do. And that's been the situation, even under a Reagan, when there was much more money than there is now under Clinton and there's a lot less money to spend.

NARRATOR: The F-22 fighter plane is just one example of a widespread problem in all weapon acquisitions. In a 1992 report, the GAO charged that, "Historically, DoD has overestimated the amount of future funding that will be available for specific weapons acquisitions and/or has underestimated the cost of such weapons."

Mr. SEGAL: When the Pentagon makes a budget, one of the things they don't do is have any kind of worst or best-case scenarios. They only have the best-case scenario. They assume that they are going to get a colossal sum of money everytime. Even during the Reagan buildup, when we were spending more on defense than any nation had ever spent, the Pentagon overesti-mated what it was going to get.

NARRATOR: Unfortunately, the enormous financial problems caused by overestimating future funding, while at the same time underestimating the costs of building weapons, does not become clear until long after the development of the weapon has begun. By then, billions of dollars have already been spent and billions more have been budgeted for further development.

The General Accounting Office has repeatedly said that it is unable to cover or analyze the Pentagon because of false or inaccurate records. And the Pentagon continues to spend billions of billions of dollars with little or no accountability, with taxpayers footing the bill.

Mr. BOWSHER: The unfortunate thing is there's been good intentions for the last 25 years and nothing of major accomplish-ment, in my estimation, has been really brought to fruition. And so, I'm hoping that as we get going here with the new administra-tion now, that we have a real program to straighten things out and make some real progress. If we don't, I think the patience of the Congress and of the taxpayer is going to start to wear out.

Senator GRASSLEY: I could live to be a hundred years old and be remarkably successful as one senator in doing some of these things. But to be perfectly candid with you, I think the problem is so great out there that you just kind of scratch the surface, regardless of how successful you are.

NARRATOR: Secretary Perry inherits a massive Pentagon bureaucracy that is scrambling to find billions of dollars to continue development of a host of weapons which were designed to fight the former Soviet Union.

The Pentagon wants to spend billions of dollars on future weapons like:

...the new FA-18 attack plane, $91 billion

...the C-17 transport plane, $40 billion

...the V-22 Osprey, $30 billion

...the F-22 fighter plane, $87 billion

...and US troops for the defense of Europe will cost

$100 billion

As long as the secretary of defense continues to advocate spending billions on the weapons and forces we do not need, financial reform will be as much of an illusion as the enemy these forces are designed to fight. And scarce resources will be unavailable for domestic programs that could make us a stronger, healthier nation.

Mr. BOWSHER: I think if you don't have accountability, people eventually begin to worry about whether their money should be going in that area. For many years, we had the Cold War, and so there was a sense of urgency. But that sense of urgency isn't there like it was, and so now I think one of the things that's important for the military and for the Department of Defense is to show that they are using the taxpayers' money very well and that they certainly can at least account for it.

Admiral LaROCQUE: Well, during all the years I spent in the Pentagon and the military service, I knew that there were times when we did not always know where the money that we had spent actually went. But I had no idea the magnitude of the problem until I became immersed in these General Accounting Office reports. And they detail time and time again, in reports to the Congress, that billions of dollars are being spent every year in the Pentagon and there's simply no accountability. The fact is, the Pentagon spends billions of dollars and they simply don't know what they spent it for.

Now the Congress could do something about this, but so far they've been impotent and perhaps unwilling to do anything about it. The amounts of money being spent that are not account-able are huge, billions of dollars each year. That's taxpayers' dollars and I think those funds will continue to be spent -- unaccounted for -- until the American taxpayer wakes up and says enough is enough.

Until next time, for "AMERICA'S DEFENSE MONITOR," I'm Gene LaRocque.

[End of broadcast.]