The Insider

The Defense Department has released its annual financial report covering the recently completed fiscal year 2010 period.

Deputy Defense Secretary Bill Lynn laid out the department's view of how finances were handled over the past 12 months:

In FY 2010 – while military operations continued in Afghanistan, Iraq, and elsewhere in the world – DoD launched an equally important battle: to improve efficiency, effectiveness, and cost-consciousness within its own organization. Initial efforts focused on ending or restructuring troubled or excess weapons programs. In FY 2010, about 20 programs were affected, with additional changes included in the FY 2011 budget request.

The savings were substantial. The Nation’s difficult economic and financial situation means, however, that additional changes will be needed so the Department can maintain the modest, real budget growth necessary to sustain current force structure and make additional investments in modernization.

An issue that has plagued DOD for years is the inability to produce a "clean" audit. The poor performance of the department's financial management systems is to blame. Further in the annual report, the department's inspector general alludes to this problem:

We are unable to express an opinion on the DOD Agency-Wide FY 2010 and FY 2009 Basic Financial Statements because of limitations on the scope of our work. Thus, the financial statements may be unreliable.

Army Gen. Carter Ham and Air Force Gen. Robert Kehler are being considered this morning by the Senate Armed Services Committee to fill key military billets, -- commander of U.S. Africa Command and U.S. Strategic Command, respectively.

Their prepared answers to advance questions asked by the committee are here.

Last week it was President Obama's deficit-reduction task force rolling out lots of options for getting America's finances in order; today the Bipartisan Policy Center's Debt Reduction Task Force takes a crack at it, including some defense budget-cutting moves.

In a 140-page report released today, the task force recommends freezing defense spending at fiscal year 2011 levels for the next five years. The Obama administration is requesting $708 billion for FY-11.

Some of the options the task force is offering include shrinking the size of the uniformed military and canceling or slowing down several high-priced weapons programs including the Joint Strike Fighter, the V-22, the Expeditionary Fighting Vehicle, the Virginia Class submarine and the ballistic missile defense program.

If these options are adopted, the United States would still have the most formidable military in the world, the task force argues:

Setting mission priorities and accounting for the fiscally constrained environment must be a part of defense planning discipline. After the kind of force and budgetary restructuring that we discuss here, the Task Force believes that the U.S. would have a military tailored to meet the priority missions that it will be asked to perform after the conflicts in Iraq and Afghanistan conclude. The options described here are based on an evaluation of the strategic and military risks that the U.S. might face in the future. The illustrative package gives top priority to counter-terror and cyber-security operations, and assigns significant priority to deterrence and reassurance, sea patrol, humanitarian relief, and peacekeeping. Conversely, the options assign low priority in the future to counterinsurgency, stabilization, and governance. The plan also provides a sizable and important hedge for conventional combat and strengthens the military “tooth” (combat forces) relative to the support “tail.” Setting these priorities allows for a reduction of 275,000 in the active duty force. Approximately 1.21 million troops would remain – a large, modern, and more deployable force than any other country in the world.

The task force is chaired by former Senate Budget Committee Chairman Pete Domenici (R-NM) and former White House Budget Director and Federal Reserve Vice Chair Alice Rivlin.

Senate Minority Leader Mitch McConnell (R) made news this week when he turned 180 degrees on his opposition to a ban on budget earmarks. The issue is at the top of the list for the new wave of Republicans coming into Congress.

But yesterday, two Republican senators spoke up unabashedly in support of the earmark process, citing prominent defense programs in doing so. The occasion was a press conference announcing new leadership for the Senate National Guard Caucus. Joining Sen. Pat Leahy (D-VT) were Republicans Kit Bond (MO) and new caucus chair Lindsey Graham.

A reporter asked about the earmark ban. Bond said a ban "doesn't make sense," and the following exchange then took place:

SEN. GRAHAM: Yeah. Okay. Earmarks have been abused. There's plenty of examples of times when the money was wasted. I can give you one example of where an earmark, I think, was wisely invoked. Remember the up-armored humvee debate and the MRAP debate? I went to Iraq and Afghanistan like these gentlemen do. Kit's had a son over there in the Marines.

And I'm for the moratorium up to the point that it puts my nation at risk. And I've said that in a public statement today. I would support the moratorium, but if there was a national security issue that the moratorium affected in an adverse way, I will do what's necessary.

The Marines were really down on the up-armored humvee. I had a Marine captain tell me in 2004, '05 -- I can't remember the year -- that he would get court-martialed before he sent his Marines out beyond the wire in an up-armored humvee because they were coffins.

The Marines had access to MRAPs, and they have to take them in South Carolina, so I knew about them. And as a result, the up-armored humvee program was taking precedent over the MRAP program. And it was going to be terminated. Senator Levin and myself in the Defense authorization bill put $7 million into the budget to keep that line open. And when Secretary Gates came about a month later, the rest is history.

And what they've done on the equipment side, they're not giving themselves enough credit. I've been in the Guard and Reserves for over 20 years now. I've never seen a time where the Guard has the access to the equipment, modern capabilities, that they do today. And the only reason that happened is because of these two guys making sure the Guard didn't get left out.

So I'm willing to do the moratorium, but if I find a national security issue that's not being taken care of by the Pentagon, and we come together and say, "You know what, our men and women are going to suffer," I'm going to do what's necessary for the men and women.

SEN. LEAHY: Thank you.

SEN. BOND: Abu Musab al-Zarqawi, if you could ever reach him, is a great opponent of earmarks because we earmarked the LITENING pod for the F-16, which took out Abu Musab al-Zarqawi, the infamous leader of Ansar al-Islam.

SEN. LEAHY: And he never -- he never thanked us. (Laughter.)

SEN. BOND: He's up there with the -- looking for the 72 virgins, I guess. Okay. Thanks.

SEN. LEAHY: I'll leave that one alone. (Laughter.)

With money tight everywhere, the Obama administration is focusing on getting back taxpayer dollars that were doled out improperly.

In a 10-page memo sent out today to all federal agencies, the administration says it wants every department to submit a "recapture audit plan" by Jan. 14, 2011. These plans will form the main thrust of President Barack Obama's goal of cutting government-wide improper payments by $50 billion and retrieving at least $2 billion in improper payments by fiscal year 2012.

The memo explains:

As part of its Accountable Government Initiative, the Administration has moved to cut programs that do not work, streamline how government operates to save money and improve performance, and make government more open and responsive to the needs of the American people. One of the biggest sources of waste and inefficiency is the nearly $110 billion in improper payments1

made in Fiscal Year (FY) 2009 to individuals, organizations, and contractors. Whether the errors resulted from inadequate record keeping, inaccurate eligibility determinations, inadvertent processing errors, the lack of timely and reliable information to confirm payment accuracy, or fraud, the amount of payment errors is unacceptable and must be addressed aggressively and comprehensively.

Each federal agency must publicly report its improper payments annually starting in FY-11.

On Nov. 19, Lt. Gen. Mark Welsh, the CIA’s associate director for military affairs, will wrap up over two years of “exceptional service” to the agency, CIA Director Leon Panetta said today in a note to agency officials. Having earned a fourth star, Welsh is slated to take command of U.S. Air Forces in Europe (USAFE).

Beginning this week, Panetta added, CIA officials will see a new three-star Air Force general walking the halls: Lt. Gen. Kurt Cichowski. Effective Nov. 22, Cichowski will officially take over associate director for military affairs. Cichowski previously served as vice commander of Air Force Special Operations Command.