Since 2004, the Pentagon has spent roughly $16 billion annually to maintain and modernize the military's business systems, but most are as unreliable as ever—even as the surge in defense spending is creating more room for error. The basic defense budget for 2007 was $439.3 billion, up 48 percent from 2001, excluding the vast additional sums appropriated for the wars in Iraq and Afghanistan. According to federal regulators and current and former Pentagon officials, the accounting process is so obsolete and error prone that it's virtually impossible to tell where much of this money ends up. The problem is so deeply rooted that, 18 years after Congress required major federal agencies to be audited, the Pentagon still can't be.

For the first three quarters of 2007, $1.1 trillion in Army accounting entries hadn't been properly reviewed and substantiated, according to the Department of Defense's inspector general. In 2006, $258.2 billion of recorded withdrawals and payments from the Army's main account were unsupported. It's as if the Army had submitted multibillion-dollar expense reports without any receipts.

According to David Walker, who recently left his post as head of the Government Accountability Office, the failure of the Pentagon's outdated and incompatible systems to keep tabs on expenditures—even as the wars in Iraq and Afghanistan eat up an ever-bigger chunk of the federal budget—puts several Defense Department agencies high on the G.A.O.'s list of federal programs that are mismanaged and prone to fraud, waste and abuse.

In a September 10, 2001, speech, Secretary of Defense Donald Rumsfeld pressed for a top-to-bottom overhaul of Pentagon financial systems, which he later estimated would save the department as much as $25 billion a year. "It is not, in the end, about business practices, nor is the goal to improve figures on the bottom line. It's really about the security of the United States of America," Rumsfeld said, arguing that waste, mismanagement, and overspending on bureaucracy were taking resources away from weapons and troops.

In 1990, Congress enacted legislation requiring all federal agencies to pass independent audits. Every year, the Defense inspector general dispatched dozens of auditors to the military's financial and accounting centers. Every year, they reported back that the job couldn't be done. Defense Department records were in such disarray and were so lacking in documentation that any attempt would be futile. In 2000, the inspector general told Congress that his auditors stopped counting after finding $2.3 trillion in unsupported entries made to force financial data to agree.

Without an audit, anecdotal evidence suggests, contractor fraud is likely to go undetected for years. Two South Carolina sisters who supplied small parts to the military bilked it of more than $20 million by charging wildly inflated shipping costs for low-priced items, like $998,798 for shipping two 19-cent washers to an Army base in Texas. The scheme lasted six years before they were caught in 2006.

As the second or third largest line item on the national budget it is essential that the Department of Defense be properly audited and accounted for.  Not only will this reduce fraud, waste and abuse, it will potentially save trillions of dollars and provide a safe means of accounting for the country's most dangerous expenditures.