oversight

Year 2000 Computing Crisis: Costs and Planned Use of Emergency Funds

Published by the Government Accountability Office on 1999-04-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to the Majority Leader, House of
                  Representatives



April 1999
                  YEAR 2000
                  COMPUTING CRISIS

                  Costs and Planned Use
                  of Emergency Funds




GAO/AIMD-99-154
                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548                                                         Leter




                   Accounting and Information
                   and Management Division

                   B-282567.1                                                              Letter

                   April 28, 1999

                   The Honorable Richard Armey
                   Majority Leader
                   House of Representatives

                   Dear Mr. Armey:

                   At your request, we obtained information on Year 2000 (Y2K) costs and
                   funding at 41 federal agencies and organizations. Our objectives were to
                   identify agency-reported Y2K costs through fiscal year 1998 and the agency
                   processes used to track these costs; determine the reported status of fiscal
                   year 1999 obligations for Y2K activities; identify the estimated Y2K costs
                   for fiscal year 1999 and the planned uses of emergency funds; and identify
                   the estimated Y2K costs for fiscal year 2000. On April 9, 1999, we briefed
                   your office on the results of our work. The briefing slides are included in
                   appendix I.

                   This report provides a high-level summary of the information presented at
                   that briefing including background information, reported Y2K costs prior to
                   fiscal year 1999 and cost tracking processes identified by the agencies,
                   status of fiscal year 1999 obligations, estimated costs for fiscal year 1999
                   and proposed use of emergency funds, and agency estimates of Y2K costs
                   for fiscal year 2000.



Results in Brief   According to the February 1999 quarterly status reports to OMB, the total
                   estimated Y2K cost for the 24 major federal agencies is about $7.5 billion.
                   This estimate has more than tripled from the $2.3 billion estimate in
                   February 1997. The agencies reported to us that less than half of the
                   $7.5 billion in Y2K costs had been incurred prior to fiscal year 1999.
                   However, these reported costs were generally estimates and not actual
                   costs. Of the 24 major agencies, only 7 reported that they separately
                   tracked actual costs of Y2K activities and 5 reported that they tracked some
                   actual costs and estimated other costs.

                   The lack of tracking of Y2K costs was also reflected in the reported
                   obligations for the first quarter of fiscal year 1999. Obligations of $68.4
                   million for Y2K costs were reported by 24 organizations, including 2
                   organizations that reported only obligations of emergency funds. However,
                   eight organizations did not know what their obligations of appropriated
                   and emergency funds were for the quarter and the remaining nine



                   Page 1                               GAO/AIMD-99-154 Year 2000 Emergency Funds
                         B-282567.1




                         organizations, including five major agencies, did not provide obligation
                         information.

                         The estimated Y2K costs reported by the 24 major agencies for fiscal year
                         1999 have increased during the last year from about $1.1 billion in February
                         1998 to $2.8 billion in February 1999, according to their quarterly reports to
                         OMB. Beginning in November 1998, the agencies requested emergency Y2K
                         funds for some of these costs. The civil agencies plan to use the emergency
                         funds for a variety of activities including renovation, validation, and
                         implementation of systems; replacement of personal computers and
                         network hardware and software; outreach; and independent verification
                         and validation. The Department of Defense plans to use emergency funds
                         for testing, operational evaluations, and contingency planning. According
                         to their justification submissions, organizations requested emergency
                         funds because they identified new requirements such as outreach activities
                         and decisions to replace personal computers and networks; had increased
                         costs of ongoing Year 2000 activities; and/or regular appropriations were
                         not available for planned Y2K activities.

                         For fiscal year 2000, the major agencies estimate that Y2K activities will
                         cost about $1.1 billion, according to their February 1999 quarterly reports
                         to OMB. Only one major agency--the Department of Health and Human
                         Services--reported to us that it expected to have Y2K costs beyond those
                         projected in its budget submission.



Objectives, Scope, and   As requested, our objectives were to (1) identify agency-reported Y2K costs
                         through fiscal year 1998 and the agency processes used to track these
Methodology              costs, (2) determine the reported status of fiscal year 1999 obligations for
                         Y2K activities, (3) identify estimated Y2K costs for fiscal year 1999 and the
                         planned uses of the emergency allocations, and (4) identify the estimated
                         Y2K costs for fiscal year 2000.

                         In October 1998, we requested documentation from the Office of
                         Management and Budget (OMB) on federal agencies’ required submissions
                         of comprehensive plans and associated funding requirements for achieving
                         Year 2000 computer compliance. We made follow-up contacts in an
                         attempt to obtain this information. OMB did not respond to our request for
                         documentation; therefore, we requested the necessary information directly
                         from agencies.




                         Page 2                                GAO/AIMD-99-154 Year 2000 Emergency Funds
             B-282567.1




             We requested documentation from 29 of the 33 federal agencies that
             provide quarterly reports to OMB (information was not requested from 4
             agencies1 that are government sponsored enterprises and did not receive
             emergency funds) and an additional 12 agencies and organizations that
             received emergency Y2K funds. A list of organizations included in the
             review is contained in appendix II.

             To identify agency-reported Y2K costs through fiscal year 1998, we
             obtained agencies’ descriptions and sample reports of the processes and
             systems used to track and manage actual or estimated costs of Y2K
             activities. To determine the reported status of fiscal year 1999 obligations
             for Y2K activities, we collected data from the agencies on the first quarter
             fiscal year 1999 obligations for Y2K activities.

             To identify estimated Y2K costs for fiscal year 1999 and the planned uses of
             the emergency allocations, we analyzed the emergency allocation
             justifications that agencies provided to the Office of Management and
             Budget and Congress. We analyzed projected costs for mission critical and
             non-mission critical systems by type of Y2K activity.

             To identify the estimated Y2K costs for fiscal year 2000, we collected
             information on agencies’ budget requests. We also collected information
             from the agencies on additional Y2K costs that are not included in agencies’
             current projections for fiscal year 2000 .



Background   The estimated Y2K costs by the 24 major federal agencies have more than
             tripled during the last 2 years to a total of about $7.5 billion, according to
             the agencies’ February 1999 quarterly status reports to OMB. In addition,
             last year the Congress passed The Omnibus Consolidated and Emergency
             Supplemental Appropriations Act, 1999, (P.L. 105-277) that appropriated
             $2.25 billion for civilian agencies and $1.1 billion for the Department of
             Defense for emergency expenses related to Year 2000 conversion of federal
             information technology systems. OMB made three allocations totaling
             $1.468 billion to civil agencies (65 percent of their emergency funds) and
             one allocation of $935 million to the Department of Defense (85 percent of
             its funds) through February 1999. On March 5, 1999, OMB submitted a
             fourth civil agency allocation of $61.8 million for the District of Columbia.


             1
               We did not request information from the Federal Housing Finance Board, National Labor Relations
             Board, Tennessee Valley Authority, and Postal Service.




             Page 3                                          GAO/AIMD-99-154 Year 2000 Emergency Funds
                         B-282567.1




                         In addition, on April 2, 1999, OMB submitted to Congress a fifth proposed
                         civil agency allocation of about $199 million for 20 agencies.



Reported Y2K Costs for   Reported Year 2000 costs have increased dramatically over the prior 3
                         fiscal years. They have gone from about $74 million for fiscal year 1996, to
Fiscal Years 1996–1998   $837 million for fiscal year 1997, to $2.745 billion for fiscal year 1998 for the
Have Increased           24 major agencies and 10 other organizations included in our review (7
                         additional organizations did not provide information on prior Year 2000
Dramatically But         costs). The reported costs for these prior years represent less than half of
Agencies Generally Do    the $7.5 billion total Y2K costs estimated by the 24 major agencies.
Not Track Actual Y2K
                         Of the 24 major agencies, only 7 agencies reported separately tracking
Costs                    actual Y2K costs for fiscal years 1996 through 1998. Five additional major
                         agencies said they tracked some actual costs—such as contract costs—but
                         estimated other Y2K costs—such as labor costs. Nine of the other major
                         agencies reported that they did not separately track actual Y2K costs for
                         fiscal years 1996 through 1998 and three agencies did not provide
                         information on Y2K cost tracking.2 Of the seven major agencies tracking
                         actual costs, three agencies used financial management systems and four
                         used reports from component entities to track costs.



Appropriations           In the first quarter of fiscal year 1999, obligations for Y2K activities totaled
                         about $68.4 million, as reported by the 22 organizations that provided their
Obligated for Y2K        total obligation data and 2 organizations that provided data only on
Activities in the 1st    obligations of emergency funds. Nine organizations, including five major
                         agencies, did not provide information on first quarter fiscal year 1999
Quarter of Fiscal Year   obligations.3 Eight organizations in the review did not know what their
1999 Were About $70      Y2K obligations of appropriated and emergency funds were in the quarter.
Million


                         2The major agencies that did not track actual costs for fiscal years 1996 through 1998 were the
                         Departments of Commerce, Defense, Energy, the Interior, Justice, and Veterans Affairs, and Federal
                         Emergency Management Administration, National Aeronautics and Space Administration, and Office of
                         Personnel Management. Information on Y2K cost tracking was not provided by the Departments of
                         Agriculture, State, and the Treasury.

                         3
                           Information on obligations was not provided by the Departments of Agriculture, the Interior, State, and
                         the Treasury, and the Small Business Administration, U.S. Trade Representative, U.S. Information
                         Agency, Overseas Private Investment Corporation, and the District of Columbia.




                         Page 4                                             GAO/AIMD-99-154 Year 2000 Emergency Funds
                        B-282567.1




Agencies Requested      The estimated Y2K costs reported by the major agencies for fiscal year 1999
                        have increased by 148 percent during the past year. In their February 1998
Emergency Funds for a   quarterly status reports to OMB, the 24 major agencies estimated their
Variety of Activities   fiscal year 1999 Y2K costs to be $1.138 billion, but their estimates of these
                        costs increased to $2.824 billion in the February 1999 reports.

                        The agencies have received emergency Y2K funds for some of the costs.
                        The civil agencies plan to use these funds for a variety of activities
                        including

                        • $607 million of the emergency funds on renovation, validation, and
                          implementation;
                        • $87 million for outreach activities;
                        • $86 million for independent verification and validations;
                        • $50 million for contingency planning;
                        • $32 million for assessing and replacing embedded systems; and
                        • $571 million for other activities—primarily replacement of non-
                          compliant personal computers and network hardware and software.

                        The Department of Defense is targeting use of $524.5 million of its
                        emergency funds for testing, $148 million for operational evaluations, and
                        $262.4 million for contingency planning.

                        According to their justification submissions to Congress and OMB,
                        organizations cited three categories of reasons for requesting emergency
                        funds--new requirements that had not been planned for fiscal year 1999,
                        increases in costs to complete ongoing Year 2000 activities, 4 and regular
                        appropriations not being available for planned Y2K activities. Concerning
                        new requirements, 22 organizations cited new requirements for outreach
                        activities and independent verifications and validations as reasons for
                        requesting emergency funding. In addition, 18 organizations requested
                        emergency funds because of decisions to replace personal computers and
                        network hardware and software.5 There were 21 organizations that
                        requested funding for increased costs of ongoing activities, such as
                        renovation, validation, and implementation.

                        4The organizations cited several reasons for the increased costs including underestimates of the level of
                        effort needed, increased contract costs, and the need to accelerate schedules.

                        5
                          In their justification, some organizations said they determined that the personal computers and
                        network hardware and software could not be upgraded to become Y2K compliant and in other cases
                        they determined that it would not be economical to upgrade equipment that was obsolete.




                        Page 5                                             GAO/AIMD-99-154 Year 2000 Emergency Funds
                          B-282567.1




                          In addition, seven organizations reported that emergency funds were
                          necessary because regular appropriations were not available for planned
                          activities. For example, the Departments of the Treasury, State, and Justice
                          said that their budget requests were reduced by $253 million, $38 million,
                          and $20 million, respectively, and that the Congress expected them to
                          obtain emergency funds to cover these costs. Included in Treasury’s $253
                          million was $92 million for non-Y2K information technology investments.



Agencies Y2K              According to agency quarterly reports to OMB, the Y2K cost estimates of
                          the 24 major agencies for fiscal year 2000 have increased substantially–
Activities Estimated to   from $124 million in February 1998, to about $1.1 billion in February 1999.
Cost $1.1 Billion In
                          Thirty-nine organizations responded to our questions on fiscal year 2000
Fiscal Year 2000          Y2K costs. Twenty-eight told us that they expected to have some Y2K-
                          related costs in fiscal year 2000. The remaining 11 did not expect to have
                          any costs. Of the 28 agencies that expected to have costs, 13 specified the
                          type of activity that required the funds--such as remediation, testing, and
                          business continuity and contingency planning. Two organizations specified
                          the systems on which the funds would be expended, and three identified
                          the funding required for each component agency. Ten organizations
                          provided only a total estimated dollar amount but did not provide a
                          breakdown of costs.

                          With the exception of the Department of Health and Human Services
                          (HHS), no agencies reported that they expect to have costs beyond those
                          that were projected in their budgets. HHS said it had begun to identify
                          possible Y2K funding needs of grantees and was discussing this possibility
                          with OMB.


                          As agreed with your office, unless you publicly announce the contents of
                          this report earlier, we will not distribute it until 30 days from its date. At
                          that time we will send copies to Senator Ted Stevens, Chairman, and
                          Senator Robert C. Byrd, Ranking Minority Member, Senate Committee on
                          Appropriations; Representative C. W. Young, Chairman, and David R. Obey,
                          Ranking Minority Member, House Committee on Appropriations; John
                          Koskinen, Chairman of the President’s Council on Year 2000 Conversion;
                          The Honorable Jacob J. Lew, Director, Office of Management and Budget;
                          and other interested parties. Copies will also be made available to others
                          upon request.




                          Page 6                                GAO/AIMD-99-154 Year 2000 Emergency Funds
B-282567.1




If you have any questions on matters discussed in this letter, please contact
me at (202) 512-6253, or James R. Hamilton, Assistant Director, at (202)
512-6271. Other major contributors to this report are listed in appendix III.

Sincerely yours,




Joel C. Willemssen
Director, Civil Agencies Information Systems




Page 7                               GAO/AIMD-99-154 Year 2000 Emergency Funds
Contents



Letter                                                                   1


Appendix I                                                              10
Briefing on Year 2000
Costs

Appendix II                                                             32
Federal Agencies and
Organizations Included
in the Review

Appendix III                                                            34
Major Contributors to
This Report




                         Page 8   GAO/AIMD-99-154 Year 2000 Emergency Funds
Contents




Abbreviations

HHS        Department of Health and Human Services
OMB        Office of Management and Budget
Y2K        year 2000



Page 9                           GAO/AIMD-99-154 Year 2000 Emergency Funds
Appendix I

Briefing on Year 2000 Costs                                                           AppIexndi




             Accounting and Information Management
             Division


             Briefing for the Office of the
                House Majority Leader

                          Y2K Costs



                              April 9, 1999




                    Page 10                   GAO/AIMD-99-154 Year 2000 Emergency Funds
                 Appendix I
                 Briefing on Year 2000 Costs




      Briefing Purpose & Outline

    • Purpose - present results of our review of reported
      federal agency costs to address the Year 2000
      (Y2K) computing challenge.

    • Outline:
       • Objectives & Scope
       • Background
       • Prior Year Costs and Tracking Systems
       • Status of Fiscal Year 1999 Obligations
       • Estimated Costs for FY 1999 and Use of
         Emergency Allocations
       • Estimated Y2K Costs for Fiscal Year 2000

2




                 Page 11                       GAO/AIMD-99-154 Year 2000 Emergency Funds
                Appendix I
                Briefing on Year 2000 Costs




      Objectives & Scope

    The review objectives were to
    • identify agency-reported Year 2000 costs through
      fiscal year (FY) 1998 and the agency processes
      used to track these costs
    • determine the reported status of FY 1999 obligations
      for Year 2000 activities
    • identify estimated Year 2000 costs for FY 1999 and
      the planned uses of emergency allocations
    • identify the estimated Year 2000 costs for FY 2000



3




                Page 12                       GAO/AIMD-99-154 Year 2000 Emergency Funds
               Appendix I
               Briefing on Year 2000 Costs




      Objectives & Scope (continued)

    In October 1998, we requested documentation from
    the Office of Management and Budget (OMB) on
    federal agencies’ required submissions of
    comprehensive plans and associated funding
    requirements for achieving Year 2000 computer
    compliance. We made follow-up contacts in an
    attempt to obtain this information.
    OMB has not responded to our request for
    documentation; therefore, we requested the necessary
    information directly from agencies.




4




               Page 13                       GAO/AIMD-99-154 Year 2000 Emergency Funds
                Appendix I
                Briefing on Year 2000 Costs




      Objectives & Scope (continued)

    We requested documentation from 29 federal agencies
    that provide quarterly reports to OMB (information was
    not requested from 4 agencies that are government
    sponsored enterprises) and an additional 12 agencies
    and organizations that received emergency funds.




5




                Page 14                       GAO/AIMD-99-154 Year 2000 Emergency Funds
                                                         Appendix I
                                                         Briefing on Year 2000 Costs




                       Background

         The estimated total reported costs of Year 2000 for 24 major federal
         agencies activities have more than tripled during the last 2 years.

                              8
                                                                                                                                                          7.5
                                                                                                                                            7.2
                              7

                                                                                                                             6.3
                              6
                                                                                                                                                                   Note: OMB’s quarterly reports issued on
                                                                                                                                                                         December 8, 1998 and March 18,
                              5                                                                                5.0                                                       1999, did not include $81.3 million
                                                                                                4.7                                                                      and $91.7 million in Transportation
                                                                                                                                                                         and Treasury costs, respectively, that
                              4                                                   3.9                                                                                    they stated were non-Y2K costs
                                                                   3.8
                                                                                                                                                                         funded from emergency
                                                                                                                                                                         supplemental funds.
                              3
                                                     2.8
                                       2.3
                              2

                              1


                              0

                                Feb-          M ay-         Aug-           Nov-          Feb-          M ay-          Aug-          Nov-           Feb-

                                  97            97             97            97             98            98             98            98             99


    Source: February 1997 data is from OMB’s report Getting Federal Computers Ready for 2000, February 6, 1997. May 1997 to May 1998 data are from OMB’s quarterly reports. The August 1998,
            November 1998, and February 1999 data are from the quarterly reports of the 24 major federal departments and agencies.


6




                                                         Page 15                                                                               GAO/AIMD-99-154 Year 2000 Emergency Funds
                  Appendix I
                  Briefing on Year 2000 Costs




      Background (continued)

    The Omnibus Consolidated and Emergency
    Supplemental Appropriations Act, 1999, appropriated
    funds for emergency expenses related to Year 2000
    conversion of federal information technology systems in
    the amounts of
       • $2.25 billion for civilian departments and agencies
          • $16.873 million was designated for the Legislative
            Branch
          • $13.044 million was designated for the Judiciary
       • $1.1 billion for the Department of Defense



7




                  Page 16                       GAO/AIMD-99-154 Year 2000 Emergency Funds
                                  Appendix I
                                  Briefing on Year 2000 Costs




     Background (continued)

    By February 1999, OMB had made three allocations of the
    emergency funds totaling $1.468 billion (65%) to civil agencies
    and one allocation of $935 million (85%) to the Department of
    Defense. On March 5, 1999, OMB submitted to Congress a 4th
    civil agency allocation for $61.8 million for the District of
    Columbia. The largest allocations to civil agencies were
        • $570 million to Treasury
        • $282 million to HHS
        • $159 million to Transportation
        • $84 million to Justice

    On April 2, 1999, OMB submitted to Congress a 5th proposed
    allocation of about $199 million for 20 agencies.
      Note: The total allocation includes about $14 million that was allocated but not transferred to the Department of Energy.


8




                                  Page 17                                                                     GAO/AIMD-99-154 Year 2000 Emergency Funds
                                                    Appendix I
                                                    Briefing on Year 2000 Costs




                      Year 2000 Costs Prior to Fiscal Year
                      1999
                    Agencies Reported Y2K Costs for                                Agencies’ reported Y2K costs
                    Fiscal Years 1996 - 1998                                       escalated dramatically from FY
3,000,000
                                                                                   1996 to FY 1998.
                                                            2,745,589




2,500,000
                                                                                   We could not obtain this information
                                                                                   from 7 organizations.
2,000,000
                                                                                    • The Federal Trade Commission
1,500,000
                                                                                      and the African Development
                                                                                      Foundation did not collect Y2K cost
1,000,000                                837,234
                                                                                      information.

    500,000
                                                                                    • The Smithsonian, the U.S.
                     73,532
                                                                                      Information Agency, Overseas
          0                                                                           Private Investment Corporation,
                    FY 1996             FY 1997             FY 1998
                                                                                      U.S. Holocaust Memorial Council,
              Note: One organization did not have FY 1996-1998 costs and
              another reported costs in FY 1996 that included prior years costs.      and the District of Columbia did not
Source: Data reported by 34 agencies. In 11 cases, these reports were
                                                                                      provide information on Y2K costs.
the agencies’ February 1999 quarterly reports.


9




                                                    Page 18                                       GAO/AIMD-99-154 Year 2000 Emergency Funds
                                         Appendix I
                                         Briefing on Year 2000 Costs




                Year 2000 Cost Tracking Systems
                24 Major Agencies
                                               9 of the 24 major agencies reported that they did
                                               not track FY 1996-1998 actual costs (they used
       3
                                               estimates) and 3 agencies did not provide us
                              7
                                               information on Y2K cost tracking.
                                               7 of the major agencies reported that they tracked
                                               actual costs of Year 2000 activities for FY 1996-
                                               1998. Also, 5 major agencies reported that some
 9
                                               costs were actual while others were estimates (e.g.,
                          5
                                               contract costs were actual but labor costs were
                                               estimates or that actual costs were not captured for
     Ac tua l
                                               all years).

     Som e a c tua l, s om e e s tim a te s
                                               Agencies reported tracking actual Year 2000 costs
                                               through
     Es tim a te s

                                                    • financial management systems - 3 agencies
     Not prov ide d                                 • reports from component entities - 4 agencies


10




                                         Page 19                            GAO/AIMD-99-154 Year 2000 Emergency Funds
                                         Appendix I
                                         Briefing on Year 2000 Costs




                Year 2000 Cost Tracking Systems
                Other Organizations
                                               Of the 17 other organizations reviewed, 5 reported
                                               that they did not track FY 1996-1998 actual costs (2
     3
                                               used estimates and 3 did not collect Y2K costs) and
                              5
                                               3 agencies did not provide us information on Y2K
                                               costs tracking.
                                               5 of the other organizations reported that they
3
                                               tracked actual costs of Year 2000 activities for FY
                                               1996-1998. Also, 4 organizations reported that
                                               some costs were actual while others were estimates
     2                   4
                                               (e.g., contract costs were actual but labor costs
     Ac tua l                                  were estimates or that actual costs were not
     Som e a c tua l, s om e e s tim a te s
                                               captured for all years).
     Es tim a te s
                                               Organizations reported tracking actual Year 2000
     Did not c olle c t Y2 K c os ts
                                               costs through
     Not prov ide d
                                                    • financial management systems - 4 agencies
                                                    • project tracking systems at the Department
                                                      level - 1 agency
11




                                         Page 20                           GAO/AIMD-99-154 Year 2000 Emergency Funds
               Appendix I
               Briefing on Year 2000 Costs




     Obligations of Appropriations and
     Emergency Funds in FY 1999
     24 organizations reported obligating about $68.4
     million in the 1st quarter of FY 1999.
     10 organizations did not know what their total Y2K
     obligations were in the first quarter of 1999, but 2
     provided data on obligations of emergency funds
     (these obligations are included in the above total)
     9 organizations, including 5 major agencies, did not
     provide this information.




12




               Page 21                       GAO/AIMD-99-154 Year 2000 Emergency Funds
                                                 Appendix I
                                                 Briefing on Year 2000 Costs




                       Year 2000 Costs
                       Increased Estimates for FY 1999
                                                                        FY 1999 Y2K estimated costs
                 Estimated Y2K Costs Reported
                 by 24 Major Agencies for FY
                                                                        reported by the 24 major agencies
                 1999                                                   have increased by 148 percent
3,000                                                        2,824
                                                                        from February 1998 to February
                                                                        1999.
                                                    2,470
2,500




2,000
                                         1,691




1,500
                           1,243
             1,138



1,000




 500




    0


          Feb-98         May-98        Aug-98     Nov-98    Feb-99




   Source: Agency quarterly reports to OMB




  13




                                                 Page 22                             GAO/AIMD-99-154 Year 2000 Emergency Funds
                                                       Appendix I
                                                       Briefing on Year 2000 Costs




                         Use of Year 2000 Emergency Funds
                         By Type of Activity
                                    Civil Agencies Proposed Use                          Civil agencies most frequently
                                    of Emergency Funds
                                                                                         specified renovation, validation, and
Independent verification &
                                          86                                             implementation of systems as the
        validation
                                                                                         planned use of emergency funds.
       Embedded systems              32
                                                                                         In the “other” category, a primary
                   Outreach               87                                             use of funds is the purchase of
                                                                                         replacement personal computers
    Contingency planning             50                                                  and network hardware and software.
    Renovation, validation,
       implementation
                                                                     607                 Defense plans to use $524.5 million
                                                                                         for testing, $148 million for
                       Other                                       571
                                                                                         operational evaluations, and $262.4
               $ millions
                                                                                         million for contingency planning.
                                0              200   400         600        800



 Note: This chart does not include one or more allocations to Dept. of Energy, Small
 Business Administration, Smithsonian Institution, District of Columbia, and African
 Development Foundation because they did not provide the justification
 documentation. The justification data from four organizations did not equal the total
 allocations reported by OMB.


 14




                                                       Page 23                                           GAO/AIMD-99-154 Year 2000 Emergency Funds
               Appendix I
               Briefing on Year 2000 Costs




     Reasons Organizations Requested
     Emergency Funds
     According to their justification submissions to
     Congress and OMB, organizations requested
     emergency funds for a variety of reasons
        • new requirements
        • increased costs of ongoing Y2K activities
        • activities for which regular appropriations were
          not available




15




               Page 24                       GAO/AIMD-99-154 Year 2000 Emergency Funds
                 Appendix I
                 Briefing on Year 2000 Costs




     Reasons Organizations Requested
     Emergency Funds (continued)
     Emergency funds were requested for a variety of
     new requirements:

     • New outreach and independent verification and validation (IV&V)
       requirements were cited by 22 organizations
        • For example, Commerce requested $31.6 million for IV&V activities
          and $25 million for outreach activities that it did not have in its plans for
          FY 1999
     • Decisions to replace personal computers and network hardware
       and software were cited by 18 organizations
        • For example, Agriculture requested $8.5 million for Rural Development
          to accelerate the replacement of personal computers


16




                 Page 25                              GAO/AIMD-99-154 Year 2000 Emergency Funds
               Appendix I
               Briefing on Year 2000 Costs




     Reasons Organizations Requested
     Emergency Funds (continued)
     Funds were requested for increased costs of
     ongoing activities:
         • 21 organizations cited costs for ongoing activities, such
           as validation and implementation, had increased
           beyond the projections for the FY 1999 budget
           requests. For example,
            • Energy requested $13.8 million because its Y2K costs
              had increased since April 1998 to accelerate renovation,
              validation, and implementation activities that were behind
              schedule

            • HHS’ Health Care Financing Administration requested
              $28.3 million for IV&V activities because they had
              increased beyond the level planned for FY 1999

17




               Page 26                          GAO/AIMD-99-154 Year 2000 Emergency Funds
                   Appendix I
                   Briefing on Year 2000 Costs




     Reasons Organizations Requested
     Emergency Funds (continued)
     Emergency funds requested for activities for which regular
     appropriations were not available:
         • According to their emergency fund justifications, Treasury, State, and
           Justice had their FY 1999 budget requests reduced by $253 million,
           $38 million, and $20 million, respectively. The agency justifications
           stated that Congress expected them to obtain emergency funds to
           cover these costs. Included in Treasury’s $253 million was $92 million
           for non-Y2K information technology investments, according to
           information in OMB’s March 1999 quarterly report.

            We are aware of no explicit legislative or statutory provision directing the
            use of emergency funds as an alternative to general appropriations for
            Y2K compliance. The conference report on Treasury and State
            appropriations for FY 1999, however, acknowledges that additional funds
            would be required in FY 1999 for Treasury and State for Y2K compliance.
            Further, Section 513 of the Treasury and General Government
            Appropriations Act, 1999, permitted use of Treasury funds to achieve Y2K
            compliance “until such time as supplemental appropriations are made
            available for that purpose.”
18




                   Page 27                                GAO/AIMD-99-154 Year 2000 Emergency Funds
                Appendix I
                Briefing on Year 2000 Costs




     Reasons Organizations Requested
     Emergency Funds (continued)
     Emergency funds requested for activities for which regular
     appropriations were not available:
        • Four agencies (Commerce, Executive Office of the President-
          Administration, Federal Communications Commission, and
          National Archives and Records Administration) told us they
          received emergency funds for Y2K activities which, according
          to their submissions to OMB, they assumed would be funded
          by the regular FY 1999 appropriations. Because these
          agencies do not have a separate budget line item for Y2K
          costs, we are not sure whether their FY 1999 budget requests
          were reduced for these activities.




19




                Page 28                          GAO/AIMD-99-154 Year 2000 Emergency Funds
                                                       Appendix I
                                                       Briefing on Year 2000 Costs




                         Estimated Y2K Costs for FY 2000

                                                                        Estimated costs of Y2K activities for FY 2000
             Estimated Y2K Costs Reported by                            have increased by over 700 percent during
             24 Major Agencies for FY 2000                              the last year. 39 organizations responded to
                                                                        our questions on FY 2000 costs.
Feb-99                                              1,093




                                                                        28 organizations reported they would have
                                                                        Y2K costs in FY 2000 and 11 organizations
Nov-98                                                  1,182


                                                                        do not expect to have any costs

Aug-98                                               1,126
                                                                            • 13 organizations specified the type of
                                                                              Y2K activity requiring the funds
                                                                            • 2 organizations specified the systems
May-98             303

                                                                            • 3 organizations could only provide
                                                                              information on which component
Feb-98       124                                                              would receive the funds
                                                                            • 10 organizations did not provide a
         0               500                1,000               1,500         breakdown of costs
                               $ millions
   Source: Agency quarterly reports to OMB




  20




                                                       Page 29                                GAO/AIMD-99-154 Year 2000 Emergency Funds
                                                            Appendix I
                                                            Briefing on Year 2000 Costs




                          Estimated Y2K Costs for FY 2000
                          Reported Costs by Agency
 20 of the 24 major agencies provided us with estimates of their Y2K costs for FY 2000, 3
 agencies said that they do not expect to have such costs, and 1 did not respond to our request
 for this information. In addition, 8 other organizations reported estimated Y2K costs ranging from
 $50,000 to $8.3 million.
350,000

             295,625

300,000


250,000


200,000
                       165,168




150,000

                                 99,150

100,000


  50,000
                                          15,733
                                                   12,600   11,300   10,200   9,292   6,791   6,600   3,835   3,200   3,035   1,812   1,706   1,200   1,000   900   892   44


($ 1000s)0




   Note: Agencies Y2K cost estimates reported to us may vary from the amounts in their quarterly reports to OMB.



 21




                                                            Page 30                                                                   GAO/AIMD-99-154 Year 2000 Emergency Funds
                Appendix I
                Briefing on Year 2000 Costs




     Estimated Y2K Costs for FY 2000
     Uncertainties Associated with Estimates
     Very little documentation was provided to us for budget
     requests
        • 12 agencies reported that they listed Y2K costs in their
          FY 2000 budget request
        • Only 4 agencies provided documentation on their
          requirements for FY 2000
     No agencies, except for HHS, expected to have Y2K costs--
     such as Y2K costs of grantees or local governments--beyond
     those projected in their budgets. HHS has begun to identify
     possible Y2K needs of grantees.




22




                Page 31                        GAO/AIMD-99-154 Year 2000 Emergency Funds
Appendix II

Federal Agencies and Organizations Included
in the Review                                                                                     ApIpexndi




Agencies that Provide   Department of Agriculture

Y2K Status Reports to   Department of Commerce
OMB
                        Department of Defense

                        Department of Education

                        Department of Energy

                        Department of Health and Human Services

                        Department of Housing and Urban Development

                        Department of the Interior

                        Department of Justice

                        Department of Labor

                        Department of State

                        Department of Transportation

                        Department of Treasury

                        Department of Veterans Affairs

                        Environmental Protection Agency

                        National Aeronautics and Space Administration

                        Agency for International Development

                        Federal Emergency Management Agency

                        General Services Administration

                        National Science Foundation

                        Nuclear Regulatory Commission



                        Page 32                           GAO/AIMD-99-154 Year 2000 Emergency Funds
                      Appendix II
                      Federal Agencies and Organizations Included
                      in the Review




                      Office of Personnel Management

                      Small Business Administration

                      Federal Communications Commission

                      National Archives and Records Administration

                      Office of Administration, Executive Office of the President

                      Peace Corps

                      U.S. Trade Representative, Executive Office of the President

                      Social Security Administration



Organizations         African Development Foundation

Receiving Emergency   Corporation for National and Community Service
Allocations
                      District of Columbia

                      Federal Trade Commission

                      Office of Special Counsel

                      Overseas Private Investment Corporation

                      Railroad Retirement Board

                      Securities and Exchange Commission

                      Selective Service System

                      Smithsonian Institution

                      United States Holocaust Memorial Council

                      United States Information Agency




                      Page 33                                       GAO/AIMD-99-154 Year 2000 Emergency Funds
Appendix III

Major Contributors to This Report                                                                 AIpIexndi




Accounting and         Linda J. Lambert, Assistant Director
                       Daniel K. Wexler, Senior Information Systems Analyst
Information            Michael A. Tovares, Senior Information Systems Analyst
Management Division,   James C. Houtz, Senior Information Systems Analyst
Washington, D.C.




(511725)       eL
                rtet   Page 34                            GAO/AIMD-99-154 Year 2000 Emergency Funds
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