An inability to keep track of critical materiel is not the only consequence of the military's "bowl of spaghetti" accounting, as one Pentagon officer called it. Yet, while the similarly confused, and sometimes illegal, bookkeeping practices of Enron, WorldCom and Global Crossing have thrown the stock market into a tailspin, CEOs into police custody, and lawmakers into a frenzy to clean up financial fraud, the military's monetary mishandling has escaped political action, public outrage and comprehensive media scrutiny.

Like a film loop of Enron's collapse projected into a fun-house mirror, the Defense Department's financial problems turn up again and again in the press, but the popular cliché is usually just a crude caricature of what lies beneath. A $640 toilet seat, $4,500 of "white beach sand" for an Army base in Saudi Arabia, $1,800 for a pillow -- these are symbols of jaw-dropping waste that suggest the system is in serious trouble, but they are rarely painted into a complete picture. Or, as often appears to be the case, they are given a knowing wink, the assumption being that these are inalienable features of a bureaucracy too unwieldy, bloated and calcified with conflicting interests to ever change.

Just prior to last year's terrorist attacks -- indeed, the very day before -- Rumsfeld declared war on that bureaucracy, characterizing his attempt to bring order to his department's ledgers as a "life-and-death" struggle. "We are, as they say, tangled in our anchor chain," he explained on Sept. 10. "Our financial systems are decades old. We cannot share information from floor to floor in [the Pentagon] because it's stored on dozens of technological systems that are inaccessible or incompatible."

There is no easy way to explain how the system got this way. "The key word is 'evolved,'" said Spinney. A former senior member of the Defense Department inspector general's office, who asked not to be identified, agreed. "You could argue that it started at the very dawn of the application of computers to the Pentagon's financial management," he said. "The Defense Department computerized its functions in the 1960s, and in retrospect, it is clear that there was not enough emphasis on central management, so basically every organization in the department developed its own system. It got worse and worse. When the [Y2K] problem came along, the department had great difficulty even determining what systems were in place because management had been decentralized for so many decades -- it became just the way of doing business."

Another contributing factor, the official went on to explain, arose from a negligent Congress, which over the years did not pay close enough attention to the kind of information technology it approved for the Pentagon's business operations. "Congress was certainly party to the creation of all the Defense Department's [financial management] systems. They put up the money for every single one. They appropriated billions of dollars that went into developing systems without really understanding what they were buying. You don't have to be a genius to know what an airplane is, but when you start babbling about fairly esoteric information-systems type stuff, most members of Congress can't get out of the room fast enough."

Given the accumulated problems, Rumsfeld, a former CEO, announced a year ago that he would enact a variety of programs to straighten out the way the Pentagon operates. He commissioned an independent study and convened a number of top-level committees to figure out how the Pentagon's accounting system could be improved. The Defense Department's Quadrennial Defense Review Report last September was the first to include financial transformation as a crucial element of military reform. "While America's businesses have streamlined and adopted new business models to react to fast-moving changes in markets and technologies," the report stated, "the Defense Department has lagged behind without an overarching strategy to improve its business practices."

Last year, the Pentagon received $100 million from Congress to begin overhauling its financial systems; this year it is requesting a similar amount. Currently, IBM is designing the architecture of a plan to bring all the Pentagon's disparate financial systems under one umbrella. According to Greg Kutz, the GAO auditor, "the Secretary of Defense has made the fundamental transformation of business practices throughout the department a top priority."

But defense-spending experts have found it difficult to be sanguine about these initiatives. The type of transformation Rumsfeld envisions has proven controversial and not necessarily directed toward increasing extramilitary oversight. Although the Pentagon's "defense streamlining initiative" -- a recent effort to drop numerous Defense Department requirements to report to Capitol Hill and to force military initiatives through Congress with limited debate -- was formally abandoned by the administration, it illuminates the kind of relationship Rumsfeld envisions for the Pentagon and Congress. According to the Los Angeles Times, the defense secretary favors eliminating the financial disclosure statements he must currently file to legislators; he has argued that these reports often go unread and place unnecessary constraints on Pentagon operations.

For in-house reforms that may be less provocative, Rumsfeld faces overwhelming institutional inertia and cultural resistance. Some experts, such as Spinney at the Defense Department, cite the large amount of political capital Rumsfeld expended in his fight to kill the Crusader artillery program -- a Pentagon faction that wanted to keep the Crusader took the fight out of the department to Congress. The experts then compare that battle with the much more challenging steps required to bring order and accountability to the entire Defense Department. Others note that Pentagon reforms tend to wither before they accomplish anything substantial. "Over the past 12 years, the department has initiated several broad-based department-wide reform efforts intended to fundamentally reform its financial operations as well as other key business areas," Kutz said during a congressional hearing on Pentagon financial management in June. "These efforts have proven to be unsuccessful despite good intentions and significant effort."

Recently, some members of Congress express frustration at the pace of Rumsfeld's reforms and seek to play a greater role in the process. In the Senate, lawmakers attached a provision to their version of the 2003 Defense Authorization bill; it calls on the Pentagon to issue semiannual updates on its financial revamp. The provision also expresses concern that the Defense Department's "own financial reports indicate that few of the funds appropriated last year for [financial] systems improvements have actually been spent."

Meanwhile, in House debates on the same bill, lawmakers approved an amendment that would withhold 1 percent of the budget of any military division unable to pass a financial audit. That amendment, introduced by Kucinich, came about partly as a response to the news that the Pentagon was unable to locate the 1.2 million JSLIST suits. "Just as investors withhold their supply of capital to a company that fails to meet its expectations, Congress must refuse to supply additional funds to the Pentagon until its books are in order," Kucinich said during a Government Reform subcommittee hearing earlier this year.

The Senate and House versions of the Defense Authorization bill will soon be reconciled, and it is uncertain whether either provision will remain.

Repeated requests for an interview with the Defense Department comptroller's office could not be processed in time for this story. However, Pentagon comptroller Dov Zakheim has told Inside the Pentagon, a news service that specializes in defense, that restructuring the military's accounting system could take up to seven years and that attempts to speed up any changes would only create larger problems. "The greatest disservice we could do to the American taxpayer is to rush what we're trying to do," he said. Another Defense Department official, speaking anonymously, pointed out that the war on terrorism might have brought a shift in priorities as well. "Going to war is taxing," the official said, "but then again, what are we here for? When that job does come down the pike it's not something we look at as something extra -- we look at some of these other things as something extra."

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