By Flor Blanco and James Bradley, July 8, 2024
On July 3rd, US Secretary of State, Anthony Blinken announced another $2.3 billion of US military aid to Ukraine. This agreement was solidified nearly one month after Joe Biden bound the US to a 10-year bilateral security agreement with Ukraine to provide US military support. The decision was made to ensure that Ukraine would meet the military requirements for becoming a member of NATO.
US financial support to Ukraine continues despite many red flags, which include:
- Zelenskyy’s questionable role as the Ukrainian president mentioned in the Uncensored Beat
- Potential violations of the US Foreign Aid Act of 1961as reported in the Uncensored Beat
- Potential violations of the Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act of 1992 mentioned in the Uncensored Beat
- Ongoing dispute that Ukraine’s entry into NATO would violate the original pact between the US, NATO and Russia in 1989
- A growing number of Americans who believe funding of Ukraine is excessive.
Additionally, two separate audits performed to evaluate aid to Ukraine found issues with tracing funds and problems with reconciling the dollar amount of aid given.
A recent audit published in March, 2024, by the US General Accounting Office (GAO), indicated a that a majority of the $33.8 billion in aid sent to Ukraine, which was funneled from the US State and USAID Departments, could not be tracked. The audit reviewed funds sent to Ukraine since the start of the Russian conflict in 2022 up to the end of 2023. Although the State Dept and USAID had existing reports in place to account for the total funds sent to their departments, none were designed to track funding specifically related to monies and/or support given as aid to Ukraine resulting from the Russian conflict. The report goes on to state that obligations, disbursement and status of funds in question could not be traced. The GAO review only evaluated 33.8% of the total aid sent to Ukraine as of Dec, 2023.
The remaining 66.2% of aid, which was estimated by the GAO report to be about $77.1 billion, consisted of aid disbursed by the US Department of Defense (DOD) and portions of the US State Department that were aligned with Ukraine security, such as the Ukraine Security Assistance Initiative. These funds were reviewed in a separate but recent audit published on June 11, 2024, by the US Office of Management and Budget (OMB), just two days prior to the 10-year foreign aid agreement that Biden secured with Ukraine. In that audit, the OMB found an initial $6.2 billion overstatement of US military equipment, referred to as “drawdowns,” sent to Ukraine. The $6.2 billion overstatement, which existed in the accounting books of the DOD and State, was re-evaluated using an adjusted accounting calculation announced by the DOD Comptroller in March of 2023. The findings and related adjustments are significant because under the Foreign Assistance Act of 1961 (FAA), which was updated by the Democrat-controlled congress, foreign aid to a country could not exceed $11billion for FY 2022 and $13.4 billion for FY 2023.
A deeper dive into the proposed calculation adjustments set forth by the DOD Comptroller in March, 2023, show a change to the accounting practices. The changes excluded the calculation of replacement costs for General Equipment (GE), like vehicles, aircraft, and other items subject to depreciation. The changes impacted GE the that were acquired either through an exchange between the DoD and a non-federal agency or acquired as a donation. Historically, this type of aid included the cost of replacing the item. Instead, the Net Book Value (NBV) calculation was used to estimate the value of GE items given to Ukraine, which is a method typically used to when calculating the value of GE acquired via transfer between two federal agencies. The revised process allowed for GE to be given with a NBV of zero. Replacement costs were also removed from Operational Materials and Supplies (OM&S), like spare parts, ammunition, and other defense items not subject to depreciation, that were provided as aid. This change was also different from how the DoD typically calculated the value of OM&S inventory.
Together, these changes helped to reduce the total value of all DoD and State Security aid sent to Ukraine, allowing for an even greater number of munitions and weaponry to be sent, without considering costs to replenish or replace the items. The tables below are excerpts from the audit report. The values in the Revised GE Value column reflect the how removal of replacement costs impacted the value of the military and security aid to Ukraine.
Why were these changes made? The memorandum from the DoD Comptroller, which announced the accounting changes, provided no reason as to why replacement costs would not be considered, even when the drawdown equipment was not derived from excess military inventory or stock. Nor was there any explanation as to why this change was being done specifically for aid issued under the Presidential Drawdown Authority, which allows for US military support and equipment to be given to another country because of a crisis.
Although federal agencies are granted the ability to allocate funds based on their own discretion, their practices cannot be unlawful. These proposed accounting changes were signed off by the US Inspector General. Yet, the audit report included a comment from independent auditors, which stated the auditors could not conclude that “the DoD presented the financial statements fairly and in accordance with generally accepted accounting principles.”
The unusualness of the PDA support for the Russia-Ukraine conflict was noted in the audit, “The DoD’s management, tracking, and reporting processes and procedures for PDA were not built to sustain a large‑scale, extended war effort using PDA to support an ally against a significant military power.” According to the State Department the Secretary of State, Anthony Blinken, initiated a drawdown of military equipment for Ukraine a total of 44 times. Both comments hint at excessive efforts to provide aid to Ukraine. The findings of the OMB audit that refer to methods to “massage” values imply a coordinating effort to minimize the perception of excessive support.
Despite both the GAO and OMB audits identifying major issues related to aid to Ukraine, the Biden administration continues to increase support by now graduating support from PDA to a bi-lateral security agreement, which can potentially continue beyond his presidency. Not all issues with the audits have been addressed with a resolution. Yet, Biden and Blinken with the support of Congress have allegedly overburdened the taxation of US Citizens, without their knowledge potentially through creative accounting methods and claims of reporting deficiencies. The question is how long will the American public allow their dollars to be used without safeguards that ensure spending limits are not exceeded and excessive materiel decreases to our miliary do not happen?
Upcoming: Smoke and Mirrors – Tracing US Funds to Ukraine Part 2: How Are Funds Used?