The Trillion Dollar Plugs

Stories continually surface about fraud, waste and abuse of taxpayer dollars. Whether fact, fiction, big or small, they all have a common thread; an erosion of public trust in the government. Financial mismanagement can occur with individuals, companies and charities as well, but given the enormity of the U.S. government, errors by the federal government impacts a large number of people.

Wasteful spending by the Department of Defense seems to be a recurring problem. Ever heard about those $600 dollar toilet seats? Last week a Department of Defense Inspector General report discovered the U.S. Army's accounting records were so bad, they recorded $6.5 trillion of wrong accounting entries in Fiscal 2015 in order for their books to balance. 

In the world of accounting, a "plug" is referred to an amount that can't be identified but is recorded to balance the books. As a simple example, you may be balancing your checkbook and you're off by $10 that you can't find. What do you do? You simply adjust the balance by $10 for your checkbook to be in balance with the bank. Accountants refer to the $10 as a plug.

Back to the U.S. Army. In order for Army's books to balance last year, the cumulative total of their plugs was $6.5 trillion. That doesn't necessarily mean they lost $6.5 trillion or there was that much fraud. However, it does indicate some fairly atrocious accounting practices. The budget for the entire Department of Defense was less than $600 billion in 2015. It's unfathomable how one branch of the military could have errors more than 10 times the entire Defense budget.

These trillion dollar plugs may be primarily accounting errors and not the loss of real dollars. However, it doesn't instill much confidence in the government's ability to appropriately manage our money if their systems are that messed up.