Coast Guard CFO takes blame for $138M in misspending

CFO admits maintenance funds were used to meet shore facility construction needs

The Coast Guard’s chief financial officer is taking sole responsibility for the apparent misuse of $138 million despite federal auditors’ assertion that other Coast Guard officers and executives also ought to be considered responsible, according to a report issued today.

Rear Adm. Keith Taylor is taking full blame for the Coast Guard’s policy of improperly using maintenance funds to make up for a severe funding gap in construction and acquisition funds of shore facilities from 2003 to 2007.

The Coast Guard has acknowledged those actions were an apparent violation of the Anti-Deficiency Act, which requires that federal agencies spend appropriations only from the authorized accounts, according to today’s report from Anne Richards, assistant inspector general for audits at the Homeland Security Department.


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Violations of that law must be reported to the president, Congress and and the U.S. Comptroller General. According to Richards, the guard’s report on its apparent violations should include the names of the official responsible for the policy, the obligating official and certifying officer responsible for payment.

However, Taylor, in his response to Richards, wrote that he is the only one responsible.

“The Coast Guard asserts that the responsible official is solely the USCG Chief Financial Officer, who was responsible for the promulgation of financial policy,” Taylor wrote in an Oct. 29 memo to Richards in response to the audit.

Richards recommended that the guard submit a report of the 317 apparent violations that includes the names of the several officers involved. However, because of the disagreement over whether the CFO is solely responsible, the audit states that the recommendation is “open and unresolved.”

The guard’s Anti-Deficiency Act problems arose because of severe underfunding of the acquisition and construction accounts, the audit indicated.

“We identified a funding gap of approximately $511 million ... over the 4-year period,” Richards wrote. “We reported the Coast Guard improperly used maintenance funds to upgrade or expand its shore facilities to compensate for this gap.”

The guard estimated that it is likely that $131 million was improperly drawn from maintenance funds to augment acquisition, construction and upgrades to its shore facilities. Richards raised the estimated amount involved to $138 million.

The guard changed its policies in fiscal 2008 by getting authority from Congress to expend maintenance funds for minor shore construction projects not exceeding $1 million in total cost at any location. The service is seeking permanent legislation for this appropriation. The audit found no additional Anti-Deficiency Act violations in fiscal 2009 and 2010.

Richards made four other recommendations:

  • Review fiscal 2008 maintenance projects and report any Anti-Deficiency Act violations found.
  • Obtain a legal opinion from Coast Guard counsel.
  • Release clarifying guidelines for current policies.
  • Continue to pursue permanent legislation for appropriations for minor shore construction projects not exceeding $1 million in total cost at any location.

Coast Guard officials agreed with those recommendations.

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Reader comments

Wed, Mar 30, 2011 Mike mass

While I was in the CG back in the 80's, we did steal from peter to pay paul..if congress funded the CG like it should have, we wouldn't see this happen..Didn't know RDML Taylor, but man, I agree with LT, Nice to see a true LEADER! RDML, Taylor, hold the course! Do more with less motto..isn't the right way to go!

Sat, Jan 8, 2011

So who was CFO from 2003-2007 and is he or she still on active duty? Having the current CFO take the fall is ridiculous.

Thu, Jan 6, 2011 Ramjet

I would have expected no less from Radm Taylor. There is no question in my mind that his actions and motives were in the best interest of the Coast Guard. He is among the finest officers who serve. I have known Radm Taylor since the mid-80's and have the honor of having served with him during his formative years. He is a man of great personal integrity, who exemplifies the concept of personal accountability. This arcane budgetary mechanism must not be permitted to have a permanent negative effect on this fine officer's reputation and professional standing. All the best to you Keith

Thu, Jan 6, 2011 EJ in VA

CG officers across the board raise "stealing from Peter to pay Paul" to an art form. I agree that Adm Taylor was probably doing what needed to be done, but compare the sacrifice of a single officer, to the way all FOUR junior enlisted personnel were recently charged with manslaughter in a San Diego boating mishap.

Tue, Jan 4, 2011 Jim Koshar, LT, USCG(Ret.) Metro D.C.

I do not know RDML Taylor, but it is refreshing to see a high ranking member of the Armed Forces step out front and take full responsibility for actions taken. The Admiral has a full and distinguished career and I am sure that he did what he needed. My best wishes to the Admiral as he goes forward and to our Coast Guard.

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