Pentagon's overpriced fuel leads to slush fund allegations: report

Pentagon's overpriced fuel leads to slush fund allegations: report
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The Pentagon has amassed nearly $6 billion in seven years by charging the military excessive prices for fuel, using the money on underfunded — and in some cases mismanaged — defense programs, The Washington Post reports.

The Defense Department has, since 2015, used the extra dollars for $80 million to train Syrian rebels, $450 million for a fraud-riddled prescription-drug program and $1.4 billion to cover unanticipated expenses from fighting in Afghanistan, according to the Post, which cited military accounting records. 

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Critics accuse Pentagon officials of gaining the extra money by billing the military branches for fuel at much higher rates than what commercial airlines paid for jet fuel on the open market.

Pentagon officials deny that the fuel accounts are being used as a slush fund, arguing that lawmakers have approved requests to use money from such accounts to balance agency budgets.

The Defense Department — the largest single buyer of fuel in the world — each year purchases about 100 million barrels of refined petroleum from the Defense Logistics Agency, then doles it out to the military services. The services pay for it from their own separate budgets, a process that is meant to reduce duplication.

But Congress is becoming more critical of the department’s budgeting and is questioning the methods used to create such a large surplus of fuel dollars.

Officials from military branches have accused the Defense Department of intentionally overbilling on fuel in order to pocket the extra money, called the “bishop’s fund.”

The Pentagon told the Post in a statement that it had accumulated $5.6 billion in “enterprise gains” from fuel buys between 2010 and 2016 but said the extra money was the result of falling oil prices in the past two years.

“Sometimes you overestimate what the price will cost and you get an asset, and sometimes you underestimate and you get a deficit,” Deputy Defense Secretary Robert Work told the Post.

The Pentagon has done a poor job of projecting its annual fuel budget, so much so that in 2015 Congress asked the agency to give back $1 billion and reduced some military program budgets by $2.6 billion to reflect lower fuel costs.

The Senate Armed Services Committee last year said it was “concerned about the quality and transparency” of the Pentagon’s fuel price methodology.

John Roth, the Defense Department's acting comptroller and chief financial officer, denied that the Pentagon was manipulating its fuel prices to create a slush fund. He told the Post the military branches may complain about expensive fuel prices, but the extra money is usually moved to accounts that ultimately benefit them.