This happens all the time in government, because they’re not dealing with their own money. They’re dealing with money that’s been confiscated from Americans through taxation. There’s no incentive for them to be careful with that money.
This would never happen to this extent in a privately run business. They have accountants keeping track of every penny, and since they’re dealing with money they’ve earned, they have every incentive in the world to be careful with it.
The State Department’s Inspector General sent out a “Management Alert” to the State Department, notifying them of a total of $6 billion that had gone “missing” and unaccounted for:
“The Office of Inspector General (OIG), in recent audits, investigations, and inspections, has identified significant vulnerabilities in the management of contract file documentation that could expose the Department to substantial financial losses. Specifically, over the past 6 years, OIG has identified Department of State (Department) contracts with a total value of more than $6 billion in which contract files were incomplete or could not be located at all. The failure to maintain contract files adequately creates significant financial risk and demonstrates a lack of internal control over the Department’s contract actions. This Management Alert is intended to alert senior Department management to the serious nature of the issue and provides recommendations to assist in eliminating or mitigating those vulnerabilities.”
Here are some examples listed in the Management Alert:
“A recent OIG audit of the closeout process for contracts supporting the U.S. Mission in Iraq revealed that contracting officials were unable to provide 33 of 115 contract files requested in accordance with the audit sampling plan. The value of the contracts in the 33 missing files totaled $2.1 billion. Forty-eight of the 82 contract files received did not contain all of the documentation required by FAR 4.8. The value of the contracts in the 48 incomplete files totaled an additional $2.1 billion. An ongoing OIG audit of Bureau of African Affairs contracts revealed that CORs were unable to provide complete contract administration files for any of the eight contracts that were reviewed. The value of these contracts totaled $34.8 million. […]
“In the case of work undertaken by OIG’s Office of Investigations, one investigation revealed that a contract file did not contain documentation reflecting that modifications and task orders were awarded to the company owned by the spouse of a contractor employee performing as a Contract Specialist for the contract. This contract was valued at $52 million.
In another investigation, OIG found that a CO falsified Government technical review information and provided the contractor with contract pricing information. The related contract file was not properly maintained and for a period of time was hidden by the CO. This contract was valued at $100 million. In a third investigation, OIG found that a COR allowed the payment of $792,782 to a contractor even though the contract file did not contain documents to support the payment. Furthermore, an additional OIG investigation revealed that the contract file was missing a COR appointment letter required by FAR 1.602-2 (d).”
The Inspector General’s recommendation was basically to have the State Department implement more bureaucratic processes (what they call “internal controls) to prevent this sort of financial mismanagement from happening in the future. Again, it’s other people’s money, so it’s not that big of a deal.