Poor records blind Pentagon, official says Fund handling questioned on Hill


WASHINGTON -- A senior Pentagon official told Congress yesterday that the military's terrible financial records are making it hard to identify excess bases, supply depots and other costly overhead, threatening military readiness.

As members of the House Armed Services subcommittee on readiness quoted from recent articles in The Sun about the financial disarray at the Pentagon, Alice C. Maroni, a senior assistant to Defense Secretary Les Aspin, and other witnesses confirmed the newspaper accounts of widespread management troubles in the $81 billion Defense Business Operations Fund.

Managers of the fund, which was created two years ago to help the Pentagon deliver goods and services to the military more efficiently, cannot produce accurate balance sheets or other financial data needed to control overhead costs, inventories and budgets, the witnesses agreed.

To cut defense spending, Mr. Aspin must make big reductions in overhead costs -- including cuts in military bases, repair and supply depots and other support "infrastructure" -- but this cannot be accomplished without improved financial management, said Ms. Maroni, who has been nominated to be the Pentagon's principal deputy comptroller.

Support costs, which include jet fuel, military base and laundry services, now exceed the cost of annual military operations, such as field training and overseas missions, she said.

They also consume more than half the defense budget, she said.

Moreover, actual budget cuts in the support areas have been lagging behind cuts in military forces, despite base closings and inventory reductions, Ms. Maroni said.

"Every dollar that we save by minimizing our support infrastructure means a dollar available for real military muscle," Ms. Maroni said.

The troubled business fund provides the military services with everything from ship and aircraft repairs to toilet paper.

Created by consolidating nine revolving funds, it was designed to impose fiscal discipline on managers by forcing them to pay closer attention to the costs of doing business.

Instead, complained Rep. Earl Hutto, the Florida Democrat who heads the subcommittee, senior military leaders are warning "that our readiness and battlefield safety are in serious jeopardy because of the fiscal train wreck."

"We will not sit idly by and allow the buck merely to be passed back to the Bush administration because most of the people who caused the problems are still in place," he warned the witnesses.

Although she conceded that Mr. Aspin's "financial managementeam" is not yet in place, Ms. Maroni refused to let the panel put the current regime on the defensive.

And she made a promise the panel hears nearly every year: Top defense officials will "bring our financial systems into the next century."

"There are some important mistakes that have been made, and we are determined to correct them," she said, taking a swipe at the Bush administration.

Last month, shortly after The Sun reported that the business fund was plagued by extensive management problems, Mr. Aspin ordered a top-level review of the operation and threatened to kill it "if acceptable oversight of this system cannot be established."

But yesterday, Ms. Maroni said a review team led by Deputy Defense Secretary William J. Perry, which will include outside specialists, will devise a plan in 60 to 90 days to "restructure" the fund.

She urged the panel not to allow a "sunset" provision in the law to abolish the fund next year, which she said would set back attempts to reform "age-old" financial practices.

Mr. Aspin will create a new post of chief financial officer at the Pentagon, she said. The Pentagon comptroller usually assumes this role, but she said that the new position is being created "to guarantee senior leadership attention to these financial problems."

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