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Financial mismanagement takes flight

The GAO’s audit focused on the seemingly mundane task of maintaining fighter jets delivered to U.S. allies in recent years. These nations with F-35s rely on a pool of parts held across 50 warehouses and military bases worldwide. According to the GAO’s estimate, the U.S. Department of Defense could spend $1.7 trillion over the life of its F-35 aircraft program.

“One contributing factor to DOD's lack of accountability over these spare parts,” the report reads, “is the lack of agreement among various organizations” who exactly was responsible for tracking the parts.

As a result, the department “was unable to provide the cost, total quantity, and locations of spare parts in the global spares pool,” reads the report. It appears the Pentagon relies on its partners, including Lockheed Martin, the supplier of the F-35 jets, and Pratt & Whitney, which makes their engines, to track this inventory.

This gap in the accounts resulted in the Pentagon failing its audit — for a fifth consecutive time.

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Indefensible failures at the defense department

This isn’t the first time the U.S. defense agency has lost track of money or equipment. Back in 2016, auditor Ernst & Young revealed that the Pentagon had failed to properly document costs related to construction projects collectively worth more than $800 million, according to Politico.

That amount was dwarfed a few years later. In 2018, the Pentagon announced an “accounting adjustment” worth $30.7 trillion. For context, U.S. GDP was merely $20.5 trillion that year. This was followed by another accounting adjustment worth $35 trillion in 2019.

These frequent and enormous adjustments reveal the Pentagon’s weak internal financial controls. Mismanagement of public funds could also partly explain why the U.S. defense budget is larger than the next 10 countries combined, according to the Peter G. Peterson Foundation. In fact, the U.S. defense budget is multiple times greater than China, yet the rivalry — and the political notes of patriotism that accompany it — has compelled lawmakers to keep pushing the Pentagon’s budget higher.

Boosting the defense budget could be one of the few non-partisan issues in America. The Biden administration is calling on Congress to provide $842 billion in defense spending for the 2024 budget. Meanwhile, the Trump administration raised the annual budget from $716 billion to $750 billion over the first few years of its tenure.

As for the public: 74% of Americans want to either sustain or expand the defense budget — which, if you think about, makes a $600 hammer, or a $6,000 hammer, and all those lost aircraft parts begin to sound like the (very wasteful) cost of doing business.

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About the Author

Vishesh Raisinghani

Vishesh Raisinghani

Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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