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Defense official says Pentagon hid unspent funds in accounts
USA Today
By Matt Kelley, USA TODAY
January 17, 2007

WASHINGTON — The Pentagon has hidden at least $1.4 billion in other agencies' accounts instead of returning unspent money to the U.S. Treasury, the Defense Department's internal watchdog told Congress Wednesday.

Thomas Gimble, the Pentagon's acting inspector general, said Pentagon offices between 2002 and 2005 used the General Services Administration (GSA) and the Interior Department "to 'park' or 'bank' funds that were expiring."

GSA and Interior then spent the money on Pentagon contracts, circumventing the law, Gimble said.

Pentagon officials did this because they either wanted to hire a particular company, spend money before it had to be returned or could not respond quickly enough to Defense Department customers, Gimble said.

In written responses to Gimble and other federal investigators, Pentagon and Interior officials have acknowledged problems with their contracting processes and said they are working to fix them. GSA officials have returned $600 million in unused funds to the Defense Department.

When his office started its work, Gimble said, the Pentagon had "unclear" policies about how to use such accounts. The Pentagon's chief financial officer issued new, clearer policies in October, he said.

Gimble told a Senate Armed Services panel that a $100 million office space contract for the Counterintelligence Field Activity (CIFA) was more evidence of a pattern of poor oversight of military contracts.

Often, he said, Pentagon contracting officers award billions of dollars in deals without proper planning, documentation or oversight.

The 10-year, $100 million CIFA lease was "one of the potentially most serious problems" his investigators found with contracts made through an Interior Department office, Gimble said. That arrangement of using Interior, he said, is supposed to save time and money but often results in expensive and possibly illegal deals.

Such contracts also make "end runs" around Congress and higher-level agency officials and hide how the Pentagon spends its money, Gimble said.

The Pentagon needs to clean up its act, senators said.

"If there's not accountability when something like that happens, we might as well throw in the towel," said freshman Sen. Claire McCaskill, D-Mo.

At CIFA's request, Interior hired a company called TKC Communications to provide office space. The agency oversees efforts to track and block terrorism and espionage threats against U.S. military bases and personnel.

The deal was written as one for office space management, but the payments went to lease and renovate that space, investigators found. That arrangement was probably illegal and evaded required Pentagon and congressional oversight, Gimble and a separate Interior report found.

Federal contracting records show Interior has paid TKC more than $66 million since 2003, including more than $11 million after auditors criticized the deal.

Interior officials have defended the contract, saying it was legal and approved by Interior and Justice Department lawyers

Brooke Smith, TKC's chief operating officer, said in an interview that no one from the Pentagon questioned the contract and that CIFA liked the arrangement.

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