TREA Washington Update for May 2, 2008

From the Washington Office:

1.      Senate Committee Passes Defense Authorization Bill

2.      Veterans’ Benefits Boost Approved by House VA Committee 

3.      Congress Still Working on Defense Supplemental Appropriations Bill

4.      Bipartisan Update to Montgomery GI Bill

5.      DoD Still Has No Idea Where Its Money Goes

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From TREA HQ

6.      May is Designated Military Appreciation Month

7.      Army Reserve Celebrates 100 Years of Service

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From the Washington Office:

1.      Senate Committee Passes Defense Authorization Bill-The Senate Armed Services Committee approved a defense authorization bill on Wednesday evening of this week that would authorize $612.5 billion in fiscal 2009, including $70 billion for military operations in Iraq and Afghanistan, the Armed Services Committee said in a statement Thursday.

The measure was approved in a closed-door session, which prompted criticism from one of the committee’s newest members, Democrat Claire McCaskill of Missouri. The House Armed Services Committee writes its version of the same bill every year in public view, except when classified information requires closed sessions, McCaskill said. “We should always come down on the side of openness and transparency when doing the people’s business,” she said in a statement.

Four subcommittees secretly reported their portions of the bill to the full Armed Services Committee: Personnel, Seapower, Readiness and Management Support and Emerging Threats and Capabilities.

While most of the media attention on the bill was focused on issues involving funding of the Iraq war, the bill is of major significance for TREA members because it authorizes the entitlements of military retirees. (However, it does not fund them. Funding comes in the appropriations bill.) Regarding theses issues, the bill would deviate significantly from the Bush administration’s blueprint.

Instead of the 3.4 percent across-the- board pay increase for uniformed personnel that President Bush had proposed, the panel approved a 3.9 percent hike, sources said. The committee also rejected Bush’s proposal to increase fees, deductibles and drug co-pays for participants in the Tricare health care system. Although it is possible the increases could still be resurrected before the end of the current session of Congress, rejection by the Senate committee makes it increasingly unlikely.

According to TREA’s Legislative Director, Larry Madison, “TREA has been actively fighting to stop the Tricare increases the administration has been proposing for several years and we will continue to do so as long as there is any support for them from either the administration or from members of Congress. We are grateful that members of the Senate Armed Services Committee have wisely decided to kill the increases once again this year.”

Armed Services Chairman Carl Levin, D-Mich., said he hopes the entire Senate will take up the bill by the end of May.

The bill does not contain language to require the withdrawal of U.S. forces from Iraq. When the measure comes to the floor, Levin said he and Jack Reed, D-R.I., may propose a modified version of their longstanding amendment on troop withdrawals. It remains to be seen to whether the senators’ provision would be advisory or mandatory. Levin said the amendment would be offered when the Senate takes up a war supplemental spending measure in the days ahead.

2.      Veterans’ Benefits Boost Approved by House VA Committee-The House Veterans’ Affairs Committee approved a routine cost-of-living increase for disabled veterans

on Wednesday of this week. The bill (HR 5826) would provide an increase in veterans’ disability benefits and dependency and indemnity compensation for veterans’ families.

A spokesman for the bill’s sponsor, Ciro D. Rodriguez, D-Texas, said the measure has particular importance this year because of the lagging economy and because some veterans live solely on the payments.

The cost-of-living increase, to be effective Dec. 1, 2008, is based on the Consumer Price Index and tied to the annual cost-of-living increase awarded for Social Security payments. That figure has not yet been determined, but last year’s increase was 2.3 percent.

Senate Veterans Affairs Chairman Daniel K. Akaka, D-Hawaii, is sponsoring the Senate companion bill (S 2617). The Congressional Budget Office has not issued a cost estimate for either measure so far.

The bill is expected to pass the House and Senate and be signed by the president, Rodriguez’s spokesman said. Congress can block the benefit increases, but it has approved them every year since fiscal 1976. Source: CQ Today Online News

3.      Congress Still Working on Defense Supplemental Appropriations Bill-Democratic leaders in both chambers signaled on Thursday of this week that action on a fiscal 2008 war supplemental spending bill may slip until June, as they continued to struggle over funding and process.

The desire to add items to the supplemental bill is driven in large part by the realization that Congress might not be able to pass regular appropriations bills this year at all, making the supplemental the only chance to get some funding.

Traditionally, a supplemental spending bill has been used to fund completely unanticipated circumstances which arose after the budget for the current fiscal year was already approved. Supplemental spending bills are usually introduced mid-way through a fiscal year.

However, since the Iraq invasion in March 2003, the Bush administration has insisted on paying war-related expenses through ad hoc supplemental spending bills. It contends that the conflicts are temporary and that military costs cannot be anticipated well enough to be included in the regular budget process. But supplemental spending bills also lack the level of detail used to justify the federal government’s annual budget requests, making accountability more difficult, and supplemental funding is left out of the deficit projections that accompany the annual budget.

Lawmakers in both parties have protested this approach, which they said has disguised the war's true fiscal impact. As the process becomes routine, another danger is that the supplementals will become must-pass magnets for unrelated pet projects.

"In emergency legislation, we have a lot of things that really aren't emergencies," said Sen. Tom Coburn (R-Okla.), who led a largely futile fight to strip extraneous provisions from the bill. "I think we as a body ought to look at that and use self-discipline."

The supplemental bill will fund the wars until June 2009, according to House Defense Appropriations Subcommittee Chairman John Murtha (D-Pa), but a fiscal 2009 defense appropriations bill to fund the Defense Department starting Oct. 1 might not be doable in this session.

Murtha has been using recent hearings to ask military officials what they would like to see in a continuing resolution, which would be needed if no defense appropriations bill is completed by then.

“I would say it’s about 50/50 whether we are going to have a [defense appropriations] bill this year,” Murtha said, “Everybody wants a defense bill, but how you get it . . . will be very difficult.”

4.      Bipartisan Update to Montgomery GI Bill-The House Committee on Veterans’ Affairs has unanimously passed H.R. 5684, a bipartisan bill to modernize the Montgomery GI Bill for a new generation of American veterans. H.R. 5684, introduced by Economic Opportunity Subcommittee Chairwoman Stephanie Herseth Sandlin (D-S.D.) and co-sponsored by Economic Opportunity Subcommittee Ranking Member John Boozman (R-Ark.), includes landmark improvements to the education and training benefits for active duty service members and members of the National Guard and Reserves.

H.R. 5684, also known as the Veterans Education Improvement Act of 2008, increases the basic active duty education benefit to $1,450 per month and adds a $500 monthly stipend, bringing the total school year payment for a veteran to $17,550, roughly equal to the cost of attending a 4-year public institution.

The Congressional Research Service (CRS) reports that the current education benefit under the Montgomery GI Bill covers just 73% of the cost of a four-year public university. This deficit in coverage has led to a significant number of servicemembers who qualify for education benefits but do not use them. “Thirty percent of veterans do not use their GI Bill benefits and I am very pleased that the improvements to the GI Bill we are making today should go a long way to reducing that number,” Boozman said.  

The Veterans Education Improvement Act would help address this shortfall, along with other important improvements. The bill would:

·                     Dramatically expand the opportunity for servicemembers to enroll for the benefits, even if they are beyond the initial opportunity for automatic enrollment;

·                     Broaden the types of education and training eligible for benefit payments;

·                     Allow the overall assistance to be used for both business courses and licensing and certification exams, and authorizes benefits to repay up to $6,000 per year in federal student loans;

·                     Allow a veteran to enroll in the GI Bill at any time during an enlistment;

·                     Increase payments to On the Job Training (OJT) and apprenticeship participants;

·                     Raise the rate of reimbursement for State Approving Agencies, an important partner in administering the benefits with the VA;

·                     Authorize benefits for veterans who received a general discharge under honorable conditions;

·                     Increase administrative payments to schools;

·                     Expand the types of work study positions on campuses;

·                     Add VA staff;

·                     Fund education information technology;

·                     Overhaul advance pay procedures; and

·                     Extend the time to use dependents’ education benefits to 20 years, more fully accommodating the transition from military to civilian life.

5.      DoD Still Has No Idea Where Its Money Goes-Have you ever had trouble with your retirement pay? Have you wondered how DoD can foul up something and then take forever to get it fixed?

If you have, you’re about to find out why that happens. According to an article in Portfolio.com ,

“Since 2004, the Pentagon has spent roughly $16 billion annually to maintain and modernize the military's business systems, but most are as unreliable as ever—even as the surge in defense spending is creating more room for error. The basic defense budget for 2007 was $439.3 billion, up 48 percent from 2001, excluding the vast additional sums appropriated for the wars in Iraq and Afghanistan. According to federal regulators and current and former Pentagon officials, the accounting process is so obsolete and error prone that it's virtually impossible to tell where much of this money ends up. While the department's brass has made a few patchwork improvements, billions are still unaccounted for. The problem is so deeply rooted that, 18 years after Congress required major federal agencies to be audited, the Pentagon still can't be.

For the first three quarters of 2007, $1.1 trillion in Army accounting entries hadn't been properly reviewed and substantiated, according to the Department of Defense's inspector general. In 2006, $258.2 billion of recorded withdrawals and payments from the Army's main account were unsupported. It's as if the Army had submitted multibillion-dollar expense reports without any receipts.

Preoccupied with protecting their turf, the Army, Navy, Air Force, and Marines continue to maintain separate, increasingly outdated systems that can't talk to each other, trace disbursements, or detect overbilling by contractors. At the Indianapolis facility, as at the Defense Department's four other main U.S. centers for financial operations, accounting programs under the same roof can't share information without extensive jury-rigging, as though contracts, payments, and accounting had nothing to do with one another.”

"In the Defense Department, what you have now are material weaknesses that are in every single area, in every part of the department, so deep and so wide you do not really have any way of figuring out where money is being spent," says Linda Bilmes, a federal budget expert at Harvard's Kennedy School of Government.

Every year, the Pentagon tries to justify its budget request to Congress by submitting three years of financial data: "actual" performance for the past fiscal year plus projections for the current year and the next. But because of the lack of reliable accounting, these totals are largely fictional. That, in turn, raises major questions about whether the government will be able to meet skyrocketing commitments for future spending on ships, planes, and high-tech ground weapons, especially given the expected growth in spending on Social Security and Medicare, and the impact of tax cuts.

According to David Walker, who recently left his post as head of the Government Accountability Office, the failure of the Pentagon's outdated and incompatible systems to keep tabs on expenditures—even as the wars in Iraq and Afghanistan eat up an ever-bigger chunk of the federal budget—puts several Defense Department agencies high on the G.A.O.'s list of federal programs that are mismanaged and prone to fraud, waste, and abuse.

John Evans, a retired Pentagon official who oversaw more than half of the defense budget, says that all this just encourages the military branches to conceal spending. "If you want to know how much one of the services is paying, you have to ask them," he says. "They say, 'Why do you want to know?'" When Evans did a formal review to see if spending was on track, he says "it was like a C.S.I. crime drama to find out where the services spent money and where they squirreled it away."

To enter the Indianapolis center is to pass through a time warp, to a place where the most critical software programs date from the dawn of the computer age. They run on old-style I.B.M. mainframes and rely on Cobol, the ancient Sumerian of computer languages. "This was a bunch of systems patched together," says Greg Bitz, a former director of the center. "I never went home at night without worrying about one of them crashing." Bitz predicts a crisis as older programmers retire. "Try to find somebody today who knows Cobol," he says.

Hilligoss and other clerks sit in long rows of identical cubicles and enter endless sequences of numbers and letters by hand. The strings signify contract terms, identifying information, due dates, and accounting and appropriations codes. Even if the workers input all the information accurately, they can't prevent mistakes and miscommunications down the line. Indeed, the moment they authorize payment, triggering the transfer of money, any ability to reliably trace it disappears.

Since the scandal in 1985, which revealed that the Navy paid Lockheed $640 each for airplane toilet seats, Congress, military leaders, and regulators have agreed that the Defense Department's internal accounting system is in shambles. What's startling is the scope of the problem and the government's seeming inability to fix it. Over the past two decades, the Pentagon has repeatedly tried to design new computer systems to replace the antiquated ones. Even today, new incompatible financial systems continue to proliferate within the services, contrary to directives from the secretary of Defense's office.

In a September 10, 2001, speech, Secretary of Defense Donald Rumsfeld pressed for a top-to-bottom overhaul of Pentagon financial systems, which he later estimated would save the department as much as $25 billion a year. "It is not, in the end, about business practices, nor is the goal to improve figures on the bottom line. It's really about the security of the United States of America," Rumsfeld said, arguing that waste, mismanagement, and overspending on bureaucracy were taking resources away from weapons and troops.

The next day's terrorist attacks diverted his attention. Although the Pentagon took some initiative, including paying I.B.M. $250 million to help streamline business processes, it wasn't until 2005 that the Defense Department launched another major financial reform, and that one was just as problematic as its predecessors. Since 9/11, weaknesses in Pentagon financial systems have become more glaring as defense spending has climbed to record highs, with a request for $481.4 billion pending for 2008. In addition, the White House pushed through emergency defense appropriations—supplemental funds that don't undergo the usual congressional review—totaling $287.2 billion in 2006 and 2007.

The Indianapolis center and other back offices are supposed to comply with a congressional mandate to track how much of each year's emergency appropriations are spent on the Bush administration's declared global war on terrorism. But a former senior official from the Indianapolis center, who requested anonymity, says that its outmoded systems can't be tweaked to produce such data. Instead, it's done offline by workers combing through computer data and pulling out what they think should be attributed to the war on terrorism. Their guesswork, the source says, is probably way off.

The dysfunction stems in part from the traditional independence of the military branches. Over several decades, they have cobbled together separate processes for identical functions, resulting in the uncontrolled growth of more than 4,000 accounting, financial, and inventory systems. Their names form an acronym soup: CAPS, Stanfins, IAPS, Somards, Samms, Mocas, HQARS, Stars. The department's primary system for handling weapons contracts and payments dates from 1958; a costly attempt to replace it was abandoned in 2002 as a failure. The Army's notoriously inaccurate main accounting system was created in 1966.

In 1990, Congress enacted legislation requiring all federal agencies to pass independent audits. Every year, the Defense inspector general dispatched dozens of auditors to the military's financial and accounting centers. Every year, they reported back that the job couldn't be done. Defense Department records were in such disarray and were so lacking in documentation that any attempt would be futile. In 2000, the inspector general told Congress that his auditors stopped counting after finding $2.3 trillion in unsupported entries made to force financial data to agree.

In 2002, Congress relented. Until the Pentagon can get its records in order, no comprehensive audit is required. Instead, the department writes each year to the inspector general certifying that "material amounts" in its financial reports can't be substantiated.

That it can't be audited "goes to the heart of the department's credibility," says Dov Zakheim, who was Defense Department chief financial officer and comptroller under Rumsfeld. "Nobody would trust even a half-million-dollar enterprise if its books weren't clean."

The Pentagon has repeatedly assured Congress that it is working toward an audit. Yet the projected date continues to slip further away. In 1995, Pentagon officials testified that it could be audited by 2000. In 2006, an audit wasn't envisioned until 2016.

Without an audit, anecdotal evidence suggests, contractor fraud is likely to go undetected for years. Two South Carolina sisters who supplied small parts to the military bilked it of more than $20 million by charging wildly inflated shipping costs for low-priced items, like $998,798 for shipping two 19-cent washers to an Army base in Texas. The scheme lasted six years before they were caught in 2006.

Since 2005, the Pentagon has been carrying out what it says is the most comprehensive reform ever. Undersecretary of Defense Tina Jonas, who is now the comptroller and chief financial officer, is heading up an elaborate effort—once again—to develop compatible systems to share information seamlessly. A 2007 department report foresees the Pentagon becoming "as nimble, adaptive, flexible, and accountable as any organization in the world."

Unfortunately, flawed planning and internal resistance have hampered the current reform effort. Far from being nimble, the bureaucracy set up by Jonas and her staff seems nearly as convoluted as the financial systems that it's supposed to streamline. Beginning at the top, there is the Defense Business Systems Management Committee, which oversees a committee of principal staff assistants, and under that, the Business Transformation Agency, which is made up of eight separate directorates.

Early initiatives have done little to inspire confidence. For example, the Army is introducing an overall accounting system for its general fund that is expected to be fully operational in 2011. "By all the measures one can usually rely on to predict success, this one is doing fine," the Army's acting undersecretary, Nelson Ford, said in a November interview. Just weeks later, though, the Defense inspector general found that the new system was "at high risk for incurring schedule delays, exceeding planned costs, and not meeting program objectives."

Overburdened by wars in Iraq and Afghanistan, the individual services remain reluctant to commit staff members and money to Jonas' financial-reform effort. The Navy stymied Jonas' plan to create a single Defense Department system for military pay. While the Army is already converting to this common pay process, Navy Secretary Donald Winter says the new system doesn't meet his service's particular needs. The Navy will eventually adopt it, he says, but only after it has been thoroughly tested and debugged. At the same time, the Army and the Defense Logistics Agency—a separate branch of the Pentagon—are each going ahead with costly new systems for tracking billions of dollars' worth of supplies and replacement parts from purchase to their ultimate delivery to military units, even though government auditors say neither one yields reliable data. Together, the two systems cost about $2 billion.

Jonas says that her approach is working and that eight small Pentagon branches, like the Army Corps of Engineers, have now passed audits. "I think we're making good progress," she says.

Nevertheless, the four military services still can't be audited, and Jonas declines to predict when the entire Defense Department will finally pass an audit. "We don't know what we don't know," she says.

You can read the entire article online at: http://www.portfolio.com/news-markets/national-news/portfolio/2008/04/14/Pentagons-Accounting-Mess

From TREA HQ

6.      May is Designated Military Appreciation Month-For over 232 years, the men and women of our military have helped to build, defend and protect our country. Every day the U.S. Armed Services put their lives on hold to serve us – everyday should be Military Appreciation Day. This month, make every effort to thank these brave men and women for their service. 

To all our TREA members:  Thank you for your service over the years. United We Stand!

7.      Army Reserve Celebrates 100 Years of Service-The U.S. Army Reserve celebrated its 100th anniversary last week. This milestone not only acknowledges the United States' enduring need for such a force, but also provides the opportunity to reflect on the transformation of the Army Reserve throughout the years. What began as the Medical Reserve Corps, consisting of 160 doctors, that could be ordered to active duty by the Secretary of War during times of emergency. Today the Army Reserve has exploded into a force of 195,000 Citizen Soldiers, 26,000 of which are currently on active-duty.

Army Reserve men and women were on the front lines of this first war of the 21st century from its outset, with a number of Reserve soldiers among the killed at the Pentagon and the World Trade Center. Army Reserve units and individual soldiers responded to the attack immediately and carried out a host of missions to support rescue and recovery operations and to secure federal facilities nation-wide. Throughout its first 100 years, the Army Reserve changed from a force that was a smaller mirror image of the Active Army to one that complemented the Total Force with combat support, combat service support and training capabilities.

Not all of the Army Reserve’s battles in the 21st century have been against armed foes. Nature was also a tough adversary. In 2005, Army Reserve soldiers kept busy providing assistance to the victims of numerous natural disasters at home and abroad. Especially valuable were the Army Reserve helicopter units that provided assistance to the people of the U.S. Gulf Coast following Hurricane Katrina and to the people of Pakistan following a devastating earthquake.

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