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article imageCanada: $1.5 billion in accounting errors found in Defence Dept.

By Mike White     Oct 10, 2013 in Politics
Ottawa - Federal auditors found $1.5 billion in "significant” accounting errors in the Defence Department's records during a routine study of department's books from last year. The information was recently released.
The Ottawa Citizen reported a $210 million error was counting the same ship-borne anti-missile system twice. Other mistakes included a $15 million mistake of listing the wrong price for torpedoes and failing to remove two CF-18 fighter jets the inventory, even though they had crashed the year before. That was a $27 million mistake.
In addition, the auditors, who were from the Auditor General’s Office, found an incorrect listing of $200 million for services that had not even been supplied yet. Problems were also noted as to how the National Defence deals with dinner and travel expense claims.
“The magnitude of errors listed above raises concern about the reliability of the department’s accounts and its reported financial information,” a letter from the auditors that was sent to senior defence officials in December stated. The letter was and recently obtained by Postmedia News.
According to canada.com, National Defence disagreed with the report from the auditors, a document showed. The article also noted the federal department had already taken a beating as far as its reputation for financial management.
The article also noted the defence department annually attempts to find ways through accounting to save $750 million to $1.2 billion annually. Such errors could reportedly make that harder.
The auditors did not attempt to examine every individual accounting entry. They instead reached the estimate of $1.5 billion in errors after a more limited review that found almost $700 million in problems.
A number of errors the auditors found focused on the department's inventory-tracking system. Errors that were found included not removing $36 million in vehicles from the accounting books that were being held for disposal at a depot in Montreal, and an $81 million listing for a retired Chinook helicopter fleet.
Errors were also found related to $45 million in listings for the expensing of spare parts held by contractors and counting of aircraft engines twice.
“National Defence should ensure that the quantities and prices of its inventory and asset pooled items are accurately and properly recorded,” auditors recommended after their audit.
The auditors noted the department was taking steps to attempt to solve some of the problems that had led to the errors. The steps include a new inventory system which will reported help stop counting different kinds of equipment twice.
The auditors noted, however, that the new system will not be used until at least 2016.
The article reported that the department did not respond to questions about the auditors’ report Tuesday. It added that officials are attempting to solve many of the problems listed in the future.
On the other hand, a separate briefing note to then-deputy minister Robert Fonberg attempted to make it clear that officials were not happy with the findings. Officials were preparing a letter for assistant auditor general Jerome Berthelette to “formally reiterate our concerns.”
Accountants have found errors previously in the department, according to the article.
The Vancouver Sun reported that a previous controversy about the true cost of the F-35 stealth fighter, as well as legal attempts to shield financial information from the Parliamentary Budget Office and opposition parties, as well as other issues, have damaged the department’s reputation as far as how it handles finances.
National Defence previously disagreed when the Auditor General’s office in April 2012 in a report stated the department had mishandled the F-35 project. It listed one mistake as understating the true costs of the fighter.
The department insisted it did nothing wrong. Nevertheless, the Conservative government froze the stealth fighter program. It also ordered officials to re-analyze potential options for replacing aging CF-18s.
More about federal auditiors, Found, $15 billion, significant accounting errors, Defence department
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