Even as the debate on Defense spending rages on Capitol Hill, a recent report has raised new questions about how the Department of Defense (DOD) manages its money.

A General Accounting Office (GAO) report found that the Pentagon misused $615 million last year, paying contractors with funds that the agency was not supposed to use for that purpose.

Congress passed a law in 1990 saying that appropriations were to be closed after five years and any remaining money was to be returned to the Treasury. Before the law went into effect an appropriation stayed open indefinitely. Even with the change in the law, though, there have been only slight improvements in how the Pentagon does business.

By allowing adjustments to be made in the financial records of closed appropriations, the law gave DOD officials a way to use money from the canceled accounts. If the Pentagon needed money, then accountants could take money from a technically closed account and adjust it so the money found its way into an appropriation that was within the five-year period.

In one of the most egregious examples, the Pentagon paid a $79 million research and development bill in 1999 by drawing money from a 1992 account. Since the account was outside the five-year period, the agency just moved the money to an account that fell within the required period.

From the time of the enactment of the law until September 1999, the DOD adjusted a total of 333 accounts to the tune of $26 billion. Similar adjustments for all other federal agencies totaled just 21 accounts valued at $5 million. In fiscal year 2000 alone, DOD adjustments to closed appropriation accounts were more than $2.7 billion.

Of the $615 million cited in the GAO report, $364 million was deemed improper because the original payments were charged to the correct appropriations account, but adjustments were used to cover up other recording errors.

David Walker, the Comptroller General of the GAO gave the DOD a D-plus in financial management, noting that the mismanagement is draining billions of dollars away from more urgent needs.

It is high time that the Pentagon follows the advice of numerous GAO investigations and frustrated members of Congress. The Pentagon recently received $5.6 billion in supplemental spending and will no doubt ask for additional funds in the coming months. If Congress is going to make funds available to the DOD, then the agency must prove it can be trusted to use them appropriately.