The U.S. Government Accountability Office has released a detailed report on the Pentagon's miscalculation of security assistance to Ukraine under the Presidential Drawdown Authority (PDA) program. This is not the first time: in June 2023, auditors discovered that Washington had made a $6.2 billion mistake in the cost of aid allocated to Ukraine.
The report noted that about 12% of the total allocated funds were processed without taking into account audit recommendations, and another 61% did not have documentation confirming the price, so it could not be verified. As of March 2024, the total amount of assistance under the PDA program amounted to almost $24 billion.
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The main reason for the error was that the Defense Department initially calculated the price of the transferred weapons based on the cost of their replacement. The infographic above is an example from the report showing a military truck costing almost $403,500 in 2012 had a net book value of $0 in 2022 due to depreciation, but replacing it with a similar 10-year-old vehicle in 2022 would cost $198,479, while procuring a new one would cost $497,500.
This led to the initial error estimate of $6.2 billion noticed in June 2023. Yet, when the Pentagon started to re-evaluate the weapons and equipment it had sent to Ukraine, it decided to take a simplified approach and automated the process using the average book value or standard price.
Also, the automated process could sometimes not make the necessary changes due to lack of data. Upon the new recount, the actual error was found to be not 6.2 but 8.2 billion dollars, revealing an additional $2 billion.
Moreover, U.S. GAO stressed that the Pentagon still lacks a single, clear, approved algorithm for calculating the price of transferred weapons. Therefore, Congress should normatively determine the pricing method within the PDA program, and the U.S. DoD should update the instructions and add all necessary documentation.
For Ukraine, the main concern is whether these additional $2 billion will translate into more weapons from the USA. In that regard, Defense Express reminds that despite the discovery of "extra" $6.2 billion in 2023, the Pentagon could not use them for weapons.
That was a factor for why between December 27, 2023, and March 12, 2024, Ukraine did not receive any arms packages until the new U.S. defense budget and a $61 billion aid package were approved.
In March 2024, Washington tried to explain why this happened despite the formal presence of funds to utilize, stating that the Pentagon uses the residual value to calculate the cost of weapons transferred to Ukraine. However, determining what can or cannot be transferred needs an estimate of real stock quantities, own defense capability needs, and (anyway) replacement costs.
In other words, for the Pentagon, the estimated value of a transferred weapon unit at the time of transfer and the remaining budget in the PDA program is less important than the cost of replenishment.
Here we can provide a very illustrative example: on July 11, a $225 million aid package under the PDA program was announced, it included NASAMS missiles, HIMARS systems, Stingers, artillery shells, and a Patriot battery. The Patriot battery alone is worth hundreds of millions of dollars, but its cost within the security assistance program might have been estimated at tens of millions instead, according to the procedures.
Regardless, the Pentagon maintains its own accounting records and estimates replacement costs at current prices. If there is insufficient budget to purchase replacements, the weapon in question may not be provided.
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