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Senators urge Pentagon to end systematic faking of its accounts

By Scot J. Paltrow

WASHINGTON (Reuters) - Four senators have called on the Defense Department to end a practice that involves deliberately inserting false numbers into the Pentagon's accounting ledgers and financial reports.

The senators sent a letter to Defense Department Comptroller Robert Hale urging the Pentagon to stop an accounting practice widely known as "plugging." The letter, dated June 12, 2014, said that plugs are fictitious dollar amounts inserted into financial ledgers to make it appear that the Pentagon’s books balance.

The letter (http://1.usa.gov/1kwEY2X) was sent by Charles Grassley, Tom Coburn, Thomas Carper and Ron Johnson. The four senators have been pressing for a solution to severe accounting problems at the Pentagon, whose spending accounts for the largest chunk by far of the annual federal budget approved by Congress. Grassley is the senior Republican on the Senate Judiciary Committee; the others hold top positions on the Homeland Security and Governmental Affairs Committee.

The senators said that plugs, called "reconciling amounts" by the Pentagon, totaled $9.6 billion in 2013 - an 80% increase since 2008. The letter asked Hale and Pentagon Inspector General Jon Rymer to provide the senators with a plan to end the practice, including a specific timetable.

The legislators criticized the Office of the Inspector General - the internal Pentagon unit charged with policing the agency - for using more than $200 million worth of plugs to balance its own accounts. "In order to play a leadership role in financial management reform, the DoD OIG should start by ending the use of plugging in its own financial statements," they wrote.

The Pentagon's practice of faking its budget numbers was the subject of a Reuters investigation last year on accounting malpractice at the Defense Department. The Senate letter to Hale and Rymer cited the findings of the Reuters series. (http://www.reuters.com/investigates/pentagon/#article/part2)

"The department will respond to the letter in an appropriate manner," a Pentagon spokesman said.

Michael Thiem, spokesman for the inspector general, said: "At the office of the inspector general, we are committed to accurate and transparent financial reporting." He said the office would continue "aggressive oversight" of the Defense Department to improve accounting systems.

(Edited by Michael Williams)

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