Most government bureaucracies are hobbled by bloat, but in the case of the Department of Defense, the fat and mismanagement have begun to hurt military readiness in the field, according to a government study.

On July 7, the Government Accountability Office (search), formerly the General Accounting Office, released a report detailing how financial and business mismanagement is crippling the Pentagon. Key problems facing the military include National Guard (search) soldiers who don’t get paid, necessary equipment and supplies that don’t reach the soldiers in the field, and billions of dollars that get sucked into the black hole of bureaucracy each year.

"These instances are troubling because they hinder operational effectiveness," said Rep. Todd R. Platts, R-Pa., chairman of the Government Efficiency and Financial Management Subcommittee of the House Government Reform Committee (search).

He said the report should be interpreted, in part, as an alarm bell for soldiers' safety in the war theater. "Americans should be rightly outraged that this kind of system has been allowed to exist."

Platts held a hearing on the day the report was released to discuss the problems issued by the study, entitled, "Department of Defense: Long-standing Problems Continue to Impede Financial and Business Management Transformation."

For example, the report showed that of the 481 mobilized Army National Guard soldiers in six GAO case studies, 450 had at least one pay problem associated with their mobilization. According to Gregory D. Kutz, director of Financial Management and Assurance for the GAO, the problems have hurt retention.

"DOD’s inability to provide timely and accurate payments to these soldiers, many of whom risked their lives in recent Iraq or Afghanistan missions, distracted from their missions, imposed financial hardships on the soldiers and their families and has had a negative impact on retention," he said in the study and in testimony before the subcommittee.

The report also found that DOD incurred "substantial logistical support problems" in Operation Iraqi Freedom. In simple terms, those problems amounted to shortages in field supplies, backlogs of materials delivered to the wrong place in the war theater, cannibalization of vehicles due to a lack of new parts, unnecessary duplicate supply orders and a missing $1.2 billion in supplies that were shipped but apparently never received.

To highlight these problems, the GAO said that a 2003 analysis of more than 50,000 maintenance work orders opened during the deployment of six Navy battle groups showed that 58 percent of them could not be completed because they didn’t have the repair parts available on the ships.

"Such problems not only have a detrimental impact on mission readiness," said Kutz, "they also may increase operational costs."

A spokesperson at the DOD told FOXNews.com that the safety of the soldiers is always the top priority.

"The needs and requirements of the young men and women in the field are our number one priority. While we have no specific examples where mismanagement caused pay errors or a delay in the delivery of critical operational supplies, we recognize that problems caused by systems, training or process failure can adversely affect morale and readiness," the spokesperson said in a statement.

In one notable case, however, the GAO found that the DOD was selling chemical-biological weapons protection suits over the Internet for $3 while an audit indicated the department paid upwards of $200 each for them. Furthermore, the study found that the DOD mistakenly sold thousands of defective chem-bio suits to law enforcement agencies across the country.

Also, millions of dollars have been lost or squandered on airline tickets in the last several years, according to the report, which found that nearly 58,000 tickets totaling $21 million were paid for by the Pentagon in 2001 and 2002, though they were never used.

About 72 percent of the 68,000 premium class tickets that were paid for by the Pentagon in 2001 and 2002 were not properly authorized, and 73 percent not properly justified, said the GAO. During those years, the department spent $124 million on business class tickets. The report also found out that at least $8 million was lost due to the Pentagon paying twice for airline tickets, reimbursing personnel who never paid for the airfare in the first place.

Taken together, said Kutz, "these problems have left the department vulnerable to billions of dollars of fraud, waste and abuse annually, at a time of increasing fiscal restraint."

Chuck Pena, director of defense policy studies, said the problem is not necessarily the lack of money, but the bloat of money, and particularly money getting lost and going to the wrong places. He advocates strategic cuts in the budget, plain and simple.

"Until all the parties including the military, the civilian leadership and the Congress agree to do the right thing, you will continue to have this out-of-control budget elephant," he said, adding that it could affect the DOD's most important missions — like the War on Terror (search).

"At the very micro-level, there are some things that need to be fixed if people are in the field and they are not getting what they need when it's bought and paid for," he said.

Jack Spencer, a senior policy analyst at the Heritage Foundation (search), said the problems associated with the massive Pentagon bureaucracy — which accounts for over $2.5 trillion in assets and liabilities, approximately 3.3 million military personnel and annual disbursements of over $416 billion — have petrified over the decades.

"Over the years, the Pentagon, like any other government agency, has become bloated and imbued by red tape," he said, noting that bureaucracies "much prefer the status quo," so it is difficult to induce change, creating stagnation in thinking and reform.

"That’s why Secretary of Defense [Donald] Rumsfeld is such a controversial figure in the Pentagon — he’s like a big bull in a china shop, he doesn’t care who he upsets," he said.

Rumsfeld has pushed for reforms at the DOD since before the Sept. 11 terrorist attacks. Some of his proposals include more rapid acquisition of supplies in theater and more flexibility in hiring and firing personnel. He has been successful in some areas but has hit brick walls in others.

"I have to commend Secretary Rumsfeld and the administration — from day one they made getting the DOD in financial order a top priority," Platts told FOXNews.com.

But the GAO report gently suggests that while the administration has taken bold steps to show that it is interested in reform, results are still difficult to grasp, and in some cases previous recommendations made by the GAO were seemingly ignored.

Though the DOD has made some "encouraging progress in addressing specific challenges, after about three years of effort and over $203 billion in reported obligations, we have not seen significant change in the content of DOD’s architecture or in its approach to investing billions of dollars annually in existing and new systems," Kutz said.

Larry J. Lanzillotta, acting comptroller for the DOD, testified to the subcommittee that the horizon is nonetheless brighter, the result of three years of active reforms that he believes will result in greater efficiency department-wide.

"We are making progress to correct weaknesses," he said. "Strong and consistent congressional support of this transformation is vital to sustaining our progress."

Pentagon officials are imploring both the Senate and House conferees to replace money that was cut in their respective budgets for DOD reforms. The conference committee approved the defense authorization bill earlier this week.