March 21, 2024

ICYMI: At Hearing, Warren Calls out DoD Budget Mismanagement and Lack of Accountability

“If DoD has more tools to cover up its mistakes, then I think it becomes even more tempting to low ball the costs and the risks of a new program. This looks to me like the perfect recipe for mismanaging tens of billions of dollars.”

Video of Exchange (YouTube)

Washington, D.C. – At a hearing of the U.S. Senate Armed Services Committee, U.S. Senator Elizabeth Warren (D-Mass.) questioned Secretary Robert F. Hale, former Under Secretary of Defense (Comptroller) and Chair of the PPBE Commission, about how the Pentagon allocates budgetary resources and their requested increase in allocation flexibility. 

Senator Warren highlighted that the Department of Defense has never passed an audit and that no other agency has the two-bite funding where the agency proposes a budget to Congress and individual divisions come back to Congress to request funding for its wish lists. Hale said he was not aware of any other agencies that engage in the same practice. Senator Warren called for DoD to guarantee responsible spending before Congress approved the requested budget. 

Transcript: Hearing [t]o Receive Testimony on the Final Report of the Planning, Programming, Budgeting, and Execution Reform Commission 
U.S. Senate Armed Services Committee 
March 20, 2024

Senator Elizabeth Warren: You three are testifying because Congress directed your commission to take a look at how the Pentagon allocates its budgetary resources and make recommendations about how the process could be improved, and as I read most of your recommendations, it's about providing increased flexibility for DoD to move money around to different programs as it sees fit, outside of what Congress specifically authorizes. 

This is troubling because, if anything, the Pentagon arguably has too much flexibility as it is when it comes to spending taxpayer dollars, and I just want to run through a few examples. The Chief Financial Officers Act requires annual financial audits for every government agency, Mr. Hale. You have spent years working on DoD's financial management issues. Has the Department of Defense ever passed an audit – ever? 

Robert F. Hale, Chair of the PPBE Commission: DoD as a whole not, but the Marine Corps just passed, got an unmodified opinion, and a number of other – DoD as a whole, not. 

Senator Warren: You know - good for the Marine Corps, but I have to tell you that's a terrifying answer, because not only has DoD not, what you are really saying is only the Marine Corps has – which is a way of saying all the other divisions as well, have not. 

In other words, I think we can say from that, DoD is not doing a good job of keeping track of where its money goes. So it's puzzling that despite this failure of basic internal controls, this commission is asking for DoD to have significantly more flexibility to move money around. 

Let's look at another example. Each year, DoD proposes a budget to Congress, but once that overall budget is submitted, individual divisions within the DoD get a second bite at the apple. They can come to Congress separately and ask for more funding, so-called unfunded priorities. 

Mr. Hale, do you know how many other agencies do this kind of two-bite funding, once for the overall Department, where all the balances are made about priorities, and then a second time for practically every section in the Department to advance its own priorities without any curbs on the balances among them? 

Chair Hale: I'm not aware of what other departments do. I will say –-

Senator Warren: So do you know of any that permit that two-bite funding? 

Chair Hale: I don’t – that does not mean there aren’t some. 

Senator Warren: Well, I’ll tell you the answer as best as I can figure it out – it's zero. This is something that no one else does. And why? Because it is a terrible idea and it leads to chaotic budgeting. DoD itself has supported my bipartisan bill to get rid of this approach. Nowhere else is this form of budgeting permitted and yet your commission report just kicks the can down the road. Some watchdog you turned out to be here. 

One more example. The Air Force recently reported that its new intercontinental missile program is going to cost nearly 40% more than originally expected. They have admitted that they started out with bad data. I think it may be worse than that. I think there's an open question about whether Congress was purposely misled about the real costs of this project in order to get Congress to approve it. Mr. Hale, does giving the Pentagon more flexibility to move money around from program to program make it more likely or less likely that DoD will provide accurate cost estimates for major programs? 

Chair Hale: I don't think it will affect the accuracy of the programs because they are moving money around within the guidelines of the justification books and they told you how it will be spent. It would not solve some of the problems you are raising but I don't think it would worsen any of them. And it would allow us to react to technological change – or allow DoD to react to technological changes in ways that I think will strengthen national security. 

Senator Warren: I have to say, since your job was on budgeting, I'm a little alarmed at your casual approach to the implications of being able to do this. 

If DoD has more tools to cover up its mistakes, then I think it becomes even more tempting to lowball the costs and the risks of a new program. This looks to me like the perfect recipe for mismanaging tens of billions of dollars. 

I am all for improving how DoD allocates its budget, but I don't see how these recommendations get us there. It seems to me that DoD has plenty of flexibility when spending taxpayer dollars. Before Congress gives DoD the $850 billion it requested for this year, I think we should insist on some guarantees that DoD will spend that money more responsibly. Thank you, Mr. Chairman.