Lawmakers Cite $100 Billion in Federal ‘Slush Funds’ : Budget: A study finds departments accumulate appropriated but unspent money. Administration officials say the practice allows flexibility.

Sensing a threat to their congressional powers and a potential for abuse, House members Wednesday accused the Defense Department and 12 other agencies of maintaining “slush funds” totaling $100 billion that can be tapped without Congress’ consent.

Results of a congressional investigation released Wednesday found that every federal department and agency has amassed “merged accounts”--so-called M accounts--money appropriated for specific programs but never spent. The Defense Department leads the pack, having accrued more than $50 billion in such funds.

Those financial leftovers from yearly appropriations have been used since 1956 by departments and agencies--particularly the Pentagon--to pay off unforeseen cost overruns on contract commitments.

During Wednesday’s meeting between two House subcommittees, lawmakers contended that executive branch departments are abusing this power--by independently using the funds not just to cover debts on items for which the appropriations were approved, as the law intended, but to expand programs.

Also, they expressed concern that the M accounts are poorly documented and vulnerable to abuse--not only by departments looking to circumvent congressionally mandated budget limits but by individual employees seeking to cheat the Treasury.

However, three financial officials from the Defense, Energy and Health and Human Services departments testified that the M accounts do not act as slush funds laundered through the Treasury Department, as the bipartisan collection of House members contended.

The Administration officials emphasized that the “funds” are more precisely “budget authority” granted by Congress--the power to go to the Treasury and demand a check to cover cost overruns on previously authorized projects.

They maintained that killing the M accounts would deny departments the flexibility they need to adjust for unforeseen costs on multiyear projects.

Bruce F. Chafin, a House special aide who led the congressional investigation, told the subcommittees that, in one case, an employee at the Agency for International Development complained to his superiors that they were not watching how the budget authority was being used. AID currently has an M account that totals $11 billion.

The employee’s superiors did not respond, Chafin said, so he took advantage of the laxness by filing $1.4 million in phony expenses and travel vouchers. He is in prison today only because the fruits of his M account embezzlement--including a luxurious home, five cars, a pool and a gazebo--aroused suspicions, the subcommittees were told.

The House investigator cited the findings of a recent Defense Department report: “M account policy is incomplete, inconsistently interpreted and implemented and inadequately enforced.”

The lawmakers focused much of their concern on agencies that use the funds in ways Congress never intended.

For example, the investigators noted that the Air Force last year gave more than $500 million in M account funds to a contractor that had supplied faulty avionics for the B-1B bomber. That expenditure for the controversial strategic bomber went beyond the scope of the original contract and should not have been made without congressional authorization, House members charged.

“No one ever envisioned that these accounts would grow into a hundred-billion-dollar fund spread across the various federal agencies which could be drawn upon whenever (an) agency concludes that these monies could be used to fund obligations ‘within the scope’ of existing contracts,” Chafin said.