A new Defense Department audit questions hundreds of millions of dollars of spending on Stryker infantry vehicles over the past six years because the Army could not verify that it paid for repairs out of the correct annual accounts.
It's possible that the Army reimbursed contractor General Dynamics Land Systems-Canada up to $866.8 million for work out of incorrect accounts, potentially muddling the military's budget projections for upcoming years, the report says.
As a result, the Army is reviewing tens of thousands of purchase orders it paid out for work on Strykers to clean up its records in the manner that the Defense Department Inspector General recommends.
The report, released last week, is the third and final deep look by the Defense Department Inspector General at how the Army paid to maintain its nearly 2,600 eight-wheeled Strykers while they repeatedly deployed to Iraq and Afghanistan.
The Army spent about $1.6 billion on its latest six-year maintenance contract for the work, and General Dynamics, the vehicle's manufacturer, excelled at its main task of fielding battle-ready Strykers.
But the three Inspector General reports suggest the Michigan-based Army office overseeing the work gave the company little incentive to keep down its costs.
General Dynamics had no competitors for the contract. It had a fixed profit and would be reimbursed for all costs up to the contract limit, according to the first audit.
Last fall, the Inspector General released a second audit showing nearly $900 million worth of excess and outdated Stryker inventory sitting in an Auburn warehouse. It had accumulated over time as General Dynamics adapted Strykers to the demands of the two wars. There are now 17 varieties of the vehicles, including heavily armored ones with slanted hulls specifically designed to deflect mines in Afghanistan.
More than 900 Strykers are based at Joint Base Lewis-McChord, their first home in the Army. The base grew by thousands of soldiers as the 19-ton machines built their reputation as fast and effective combat vehicles in Iraq a decade ago.
The third and latest audit showed the Stryker maintenance contract was set up in such a way that the Army would set aside several hundred million dollars for work in roughly 12-month periods.
General Dynamics was supposed to submit vouchers for reimbursements based on when the work took place. For example, parts purchased in 2008 should be billed to the 2008 contract line.
Instead, the auditors found that the company would seek reimbursements from annual contract lines until it depleted the funds. The Inspector General called that an "unacceptable accounting practice of disregarding the performance period in which costs were actually incurred."
The auditors further said misapplying the reimbursements to incorrect contract lines could lead the Defense Department to misjudge its future needs because planners would have a faulty understanding of Stryker inventory.
Army officials from the Michigan-based Ground Combat Systems office responded positively to the audit's recommendations, but they said their estimates for future needs are sound.
"Planning and budgeting for future material requirements are based on actual parts consumed in a given year by quantities, national stock number, and nomenclature during sustainment and overhaul activities and is not based on a financial system report of the year of the money charged, or budget line charged, for a part procured," wrote Ground Combat Systems Deputy Program Executive Officer Thomas Bagwell in a June reply to the Inspector General.
Bagwell's letter says that the Stryker program and General Dynamics would review nearly 625,000 parts and more than 62,000 past purchase orders to bring them into compliance with revised standards.
That could trigger reports that purchases violated the Anti-Deficiency Act, a federal law that prohibits government employees from making excessive expenditures, the report says. Potential violations will be flagged to an assistant secretary of the Army.