Questions raised about one of Obama's defense picks

By SHAUN WATERMAN, UPI Homeland and National Security Editor  |  Jan. 15, 2009 at 9:18 AM
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WASHINGTON, Jan. 15 (UPI) -- William Lynn, whose nomination as deputy secretary of defense will be considered Thursday by the Senate Armed Services Committee, may face questions about his record as the Pentagon's top budget manager under President Bill Clinton.

In interviews with United Press International, two highly experienced defense budget and procurement experts criticized Lynn's record as Pentagon comptroller from 1997 to 2001.

"Neither before nor since have I seen defense budgets filled with as many and as ludicrous politically driven gimmicks as they were under Lynn," said Winslow Wheeler, a three-decade Capitol Hill veteran who was a senior staffer on the Senate Budget Committee at the time.

Franklin "Chuck" Spinney, who worked for a quarter-century at the internal Pentagon oversight effort called Program Analysis and Evaluation, said Lynn's record, in particular on the issue of accounting standards for Defense Department projects, was "a window into the mentality of Pentagon managers -- basically they don't care … about accountability."

Lynn's defenders say that budgetary and accounting problems were endemic at the Pentagon long before he arrived, and that he worked hard to alleviate them. Nonetheless, the issue may resonate in Thursday's hearing and beyond, because the Pentagon is heading for a budgetary crunch as spiraling federal budget deficits meet the growing expense of replacing equipment worn out or destroyed in the wars in Iraq and Afghanistan, as well as the ballooning costs of high-technology Pentagon weapons programs.

Wheeler, who worked for both Democrats and Republicans on Capitol Hill, said that, at the end of the 1990s, the Clinton administration was also under pressure on defense spending -- in its case from two opposite directions. "On the one hand, they did not want to allow the Republicans to portray them as 'weak' on national security. … On the other hand, for the Democratic caucus, they were trying to show that they hadn't caved in to Republican demands to spend more on defense."

In response, said Wheeler, now director of the Straus Military Reform Project at the Center for Defense Information, Lynn helped Defense Secretary William Cohen prepare and present to Congress a budget for Fiscal Year 2000 that "sought to achieve two totally contradictory objectives: They wanted to make the increases in the defense budget seem both larger and smaller than they actually were."

In an analysis of the 2000 defense budget request published under the pen name "Spartacus," Wheeler described how, in an effort to deflect criticism from Republicans and others that the administration was being "soft on security," Lynn attempted to exaggerate the amount by which the budget increased defense spending.

In a briefing to Senate staff, Lynn said the $280.8 billion budget request boosted defense spending by $12.6 billion, although in actual fact it represented an increase of only $1.4 billion over the amount appropriated by Congress for the previous year.

"By misrepresenting (the budget figures), he sought to protect Clinton and the Democrats," said Wheeler, adding that Lynn used "a lunatic collection of tricks and gimmicks," including changing the baseline against which the 2000 request was compared; counting savings from the previous year's budget that had never been made; and including nearly $4 billion of savings resulting from lower fuel prices and inflation, and a stronger dollar, than anticipated in previous spending projections.

At the same time, Wheeler said, the White House Office of Management and Budget sought to conceal the fact that the request was more than $6.5 billion above the spending level specified in the 1997 budget deal between the president and Congress. A different set of accounting tricks was used by Lynn to square that circle, said Wheeler.

"While he was politicizing the top line budget," said Wheeler, "all the endemic (budget and accounting) problems (at the Pentagon) continued merrily along."

Indeed, according to Spinney, Lynn was responsible for stymieing an important effort to fix one significant element of those problems: the attempt to impose on Pentagon managers a requirement to provide a valuation of Defense Department assets.

"I need for you to help us adapt the standards that you're developing to make them relevant for the line managers in the Pentagon," Lynn told the Federal Accounting Standards Advisory Board in June 1998. The board was holding hearings on the Defense Department's implementation of the requirements of the 1990 Chief Financial Officers Act.

"In effect they said: 'Don't make us account for these costs. We can't do it, and it is damaging morale,'" said Spinney of Lynn's testimony. He said Lynn had succeeded in gutting the requirements of the act as they were applied to the Department of Defense. "It was a very low bar," Spinney said of the requirements imposed by the act, "and they still couldn't get over it."

In 1998, he noted, the Defense Department inspector general had found that Pentagon financial statements were "unreliable, unverifiable and inaccurate," in the words of the IG's report.

At the same advisory board hearing later that month, Lynn said the Pentagon was "still putting the foundations in place" to be able to produce auditable financial statements so that officials could accurately account for the billions of dollars spent by the department every year.

Noting the Pentagon, 10 years later, is still not able to produce auditable financial statements, Spinney said, "Nothing has changed, except that it has gotten worse."

"They always 'bow-wave' it, pretending they're going to fix it in the future," continued Spinney. "This is not a small problem. … The most important power allocated to Congress by the Constitution is the power of the purse, and without this data there is really no way of knowing if (the Defense Department) is spending its funds as Congress intended."

Tommy Vietor, a spokesman for the Obama transition team, told UPI that Lynn came "so highly recommended by both Republican and Democratic experts that the president-elect thought it was critical to appoint him to this post."

He cited testimony to Congress, by both the Government Accountability Office and the Defense Department inspector general, praising Lynn's tenure.

"We have seen a strong commitment by the (Defense Department) comptroller and his counterparts in the military services to addressing longstanding, deeply rooted problems," the GAO's Jeffrey Steinhoff testified in May 2000.

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