oversight

Department of Defense's Compliance with Public Law 92-545

Published by the Government Accountability Office on 1977-01-31.

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

                         DOCUENT RFESUSE
00651 - [A0751127]
[Department of Defense's Compliance with Public Law 92-545].
CED-77-35; B-133102. January 31, 1977. 7 pp. + enclosure (1
pp.) ·
Report to Secretary, Departaent of Defense; ty Henry Eschwege,
Director, Community and Economic Development Div.

Issue Area: Domestic Housing and Community Develcpment (2100).
Contact: Community and Economic Development Div.
Budget Function: National Defense: Depaztment of Defense -
    Military (except procurement S contracts) (051).
Organization Concerned: Department of the Air Force; Department
    of the Army; Department of the Navy.
Congressional Relevance. House committee on Armed Services;
    Senate Committee on Armed Services.
Authority:   (P.L. 92-545; 42 U.S.C. 1594j-1(a)). rOD Instruction
    7220.16.

          Under P.L. 92-545, DOD-owned family housing can be
declared inadequate for public quarters and rented to military
personnel with an appropriate reduction of basic allowance for
quarters (BAQ). GAO performed a review of housing management at
five DOD installations.   Findings/Conclus.ons: The installations
studied were not insuring that income from operating inadequate
family housing covered expenses, as the law requires. Fiscal
year 1975 and 1976 family housing expense reports for these
installations showed that housing expenses allocated to
inadequate housing exceeded rental income; however, onlj Fort
Bragg raised the rental rate in the second quarter of fiscal
year 1976 in an attempt to cover expenses. Even at the higher
rate, which was 100 percent of the occupant's BAQ, expenses
exceeded rental income for the last 8 months of the fiscal year.
DOD's cost accounting system for family housing expenses did not
requize allocating administrative and some maintenance expenses
to the individual housing categories. This precluded a valid
ceaparison of income and expenses for inadequate housing. It
appeared that Fort Bragg and HacDill Air Force Base had
improperly declared some housing units as inadequate.
Recommendations: An appropriate charge for inadequate family
housing should be established when the expenses to operate and
maintain the units exceed the income produced by the 75 percent
forfeiture level. The issues involving retention of inadequate
housing costing more than the total BAQ forfeiture should be
studied and the resulting proposal should be discussed with the
Armed Services and Appropriations Committees of Congress. DOD
Instruction 7220.16 should be revised to require that all
administrative, maintenance, equipment replacement and repair,
and household furnishing expenses be allocated among the
different housing categories. The justifications that the
military services used to declare family housing units
inadequate should be reviewed. Units improperly classified as
inadequate should be reclassified as adequate housing, and the
occupants should be required to forfeit their entitlecent to
BAQ. (Author/SS)
                              UNITED STATES GENERAL ACCOUNTING OFFICE
         \     4   ,x<\
                                                   D.C.   tMHING~WASHINGTON,
                                                           0548


    COMMUNITY AND ECONOMIC
      DEVILOPrMNTir VnISION
k
                                                                JAN 31 1977
             B-133102



          The Honorable
          The Secretary of Defense
          Dear Mr. Secretary:
              We have examined the Department of Defense's (DOD's)
         compliance with Public Law 92-545, enacted on October
         1972, under which DOD-owned family housing can be      25,
         inadequate for public                              declared
         nel with an appropriatequarters and rented to military person-
                                  reduction of basic allowance for
         quarters (BAQ). We performed our work at Fort Bragg,
         Carolina; Oceana Naval Air Station, Virginia; Camp     North
         Marine Corps Base, North Carolina; Cherry Point     Lejeune
                                                          Marine Corps
         Air Station, North Carolina; and MacDill Air Force
         Florida.                                            Base,

              We found that the above installations were not
         that income from operating inadequate family housing insuring
         expenses as Public Law 92-545 requires. Fiscal year covered
                                                                1975 and
         1976 family housing expense reports for these installations
         showed that housing expenses allocated to inadequate
         exceeded rental income; however,                       housing
                                          only Port Bragg raised the
         rental rate in the second quarter of fiscal year
                                                           1976 in an
         attempt to cover expenses. Even at the higher rate,
         100 percent of the occupant's BAQ, expenses exceeded which was
                                                                renta:
         income for the last 8 months of the fiscal year.
              Further, DOD's cost accounting system for family
         expenses did not require allocating administrative       housing
         maintenance expenses, which were significant at      and  some
                                                          the
         tions visited, to the individual housing categories,  installa-
                                                                such
         as inadequate housing. This precluded a valid comparison
         income and expenses for inadequate housing, as the           of
         requires.                                            law

             Additionally, it appeared that Fort Bragg and MacDill
        Air Force Base had improperly declared some housing units as
         inadequate.


                                                                           CED-77-35
B-133102



BACKGROUND

     Over the years the Congress has authorized the Secretary
of Defense to build housing, usually on military installations,
to meet the military's family housing needs.   Since DOD cannot
build enough housing for all its military families, those
families unable to obtain onbass housing are paid BAQ to help
defray the cost of obtaining housing in the civilian community.
Military families living in adequate onbase housing forfeit
their entitlement to BAQ.

     Public Law 92-545 authorized the Secretary of Defense to
designate as rental housing DOD-owned units that the Secretary
determined to be inadequate public quarters and to lease such
inadequate housing to military personnel and their faimilies.
The law provided that the occupants of inadequate housing
                                                           were
entitled to their BAQ but were required to pay a fair market
rent which wound not exceed 75 percent of the occupant's BAQ;
if the expenses of operating and maintaining the un;.s exceeded
the rental income at the 75 percent level, a higher rent suvld
be charged.  The law provided, however, that the total rent. :n
occupant could pay was the total amount of his BAQ.

     DOD established the guidelines to comply with the law.
Units would be considered inadequate if:

     -- Location and site condition were hazardous to the
        health or safeil of the occupants.

     -- The living units (1) were not structurally sound,
        (2) had incomplete heating systems, (3) had rooms that
        were poorly arranged, such as a bathroom opening into
        the living room, (4) did not meet DOD's minimum size
        standards.

     -- Improvements to correct the above could not be made for
       $10,000 or less per unit.
     DOD delegated the responsibility of complying with the
law to the military installation commanders, and required
income must cover expenses of operating and maintaining in-that
adequate housing.




                              2
B-133102



INSTALLATIONS WERE NOT
COMPLYIOG WITH THE LAW

     For fiscal year 1975 all of the fi'e installations
visited charged ,ccupants of inadequate housing 75 percent of
their BAQ. Expenses of operating and maintaining the units
exceeded income obtained under this arrangement by $584,000.
Four installations, however, did not raise the BAQ forfeiture
rate for fiscal year 1976; consequently, expenses again
exceeded income by $1.1 million.   (See enclosure.) Fort Bragg,
in the second quarter of fiscal year 1976, recognized the
problems and raiseC the forfeiture rate to 100 percent,
attempting to cover expenses. However, even at this level,
expenses exceeded income.   (See enclosure.)
     We did not attempt to determine if the same conditions
occurred throughout the three military services. However, an
Air Force study entitled "Rental Charges for Inadequate Quar-
ters," dated June 1J, 1976, showed that 11.4 percent of the
rental rates the Air Force established for inadequate housing
were too low to cover expenses.

     Section 508(a) of Public Law 92-545 provided no guidance
where 100 percent forfeiture of BAQ did not cover the expenses
of operating and maintaining the units. A review of DOD and
Army, Navy, and Air Force regulations indicated that, when the
expenses of operating and maintaining inadequate housing ex-
ceeded 100 percent of forfeiture of BAQ, the units should be
scheduled for disposition at the earliest practicable date,
taking into consideration the degree of need for the units.
We believe that even where there is a critical need" for
inadequate housing, 42 U.S.C. 1594j-l(a) prohibits DOD from
indefinitely retaining the units.

     However, the added expense of operating inadequate units
at a loss may be a better course of action than destroying
the units and programing for new onbase housing.

Conclusions

     In fiscal year 1976, four of the five installations
visited did not raise the BAQ forfeiture rate for inadequate
family housing after experiencing a loss from operating such
housing in fiscal year 1975; therefore, they did not properly
comply with section 508(a) of Public Law 92-545.




                              3
B-133102



     Public Law 92-545 provides no guidance where 100 percent
forfeiture of BAQ does not cover the expenses of operating and
maintaining inadequate family housing. DOD instructions and
42 U.S.C. 1594j-l(a) prohibit indefinitely retaining the units.
However, retaining the units reduces the need to build new
onbase housing.

Recommendations

     We recommend that the Secretary of Defense:

     -- Require that an appropriate charge for inadequate family
        housing be established--up to 100 percent forfeiture of
        BAQ--when the expenses to operate and maintain the units
        exceed the income produced by the 75 percent forfeiture
        level.

     -- Require that DOD study the issues involved in retaining
        inadequate housing costing more than the total BAQ
        forfeiture, and discuss with the Armed Services and
        Appropriations Committees DOD's proposed approach which
        could include (1) retaining the units, (2) disposing of
        the units, or (3) recommending a change in the law.

COST ACCOUNTING SYSTEM
MASKS HOUSING EXPENSES

     DOD Instruction 7220.16, dated December 7, 1971,
established a uniform cost accounting and reporting system
for military family housing expenses. The instruction did
not require allocating administrative and some maintenance
expenses to the individual housing categories, one of which
is inadequate housing. The expenses for equipment replacement
and repair and household furnishings were similarly not allo-
cated.  Consequently, total inadequate'housing expenses were
understated and precluded a valid comparison of income with
expenses, as Public Law 92-545 requires. At the five instal -.
lations visited, these unallocated expenses were significant
ranging from 7 to 21 percent of total expenses.

     We discussed this with Army, Air Force, and Marine Corps
officials who agreed that to fully comply with Public Law
92-545 and to account for all housing expenses by the indi-
vidual housing categories, these expenses should be allocated
to inadequate housing. Navy officials disagreed, citing DOD
Instruction 7220.16, which did not require allocating these



                              4
B-133102



expenses. We noted that prior to fiscal year 1975 Oceana
Naval Air Station allocated th¢ e expenses to inadequate
housing, but beginning in fiscal year 1975 it ceased to do
so when the procedures in the DOD instruction were followed.
For fiscal years 1975 and 1976, Oceana reported to Navy head-
quarters that income exceeded expenses. Bad Oceana allocated
the expenses for the 2 fiscal years, expenses would have
exceeded income.  (Oceana made the allocation for their own
records but reported to Navy headquarters housing expenses
without the allocation.)

     DOD Instruction 4165.39, dated September 22, 1964,
required that nonLoutine repairs and capital improvements to
inadequate housing be limited to those expenses which can be
amortized through income within a 2-yeer period. The five
installations visited charged nonroutine repairs and capital
improvement expenses to 1 year only which resulted in an
overstatement of expenses for that year.  The installations'
housing directors said that they were not sure when to begin
amorrizing such expenses because the DOD instruction was
unclear in this regard.

     The absence of clear instructions hindered an accurate
matching of yearly expense to income.  For fiscal years 1975
and 1976, we amortized nonroutine repairs and capital improve-
ment expenses that had been charged to a 1-year period over
a 2-year period and found that expenses still exceeded income
in both periods.

Conclusions

     DOD's cost accounting system for family housing expenses
should require allocating administrative expenses, all main-
tenance expenses, equipment replacement and repairs, and
household furnishings among the different housing categories
to permit a valid comparison of income and expenses.

Recommendations

     We recommend that the Secretary of Defense:

     -- Revise DOD Instruction 7220.16 to require that all
        administrative: maintenance, equipment replacement
        and repair, and household furnishing expenses be
        allocated among the different housing categories.




                              5
B-133102



     -- Clarify DOD Instruction 4165.39 to require that the
        amortization period for nonroutine repairs and
        capital improvement expenses should begin when the
        contracting officer, or other appropriate official,
        certifies that the nonroutine repair or capital
        improvement work is substantially complete.

UNITS MAY HAVE BEEN IMPROPERLY
DECLARED INADEQUATE

     Pulblic Law 92-545 authorized the Secretary of Defense
to designate as rental housing DOD-owned units that the Sec-
retary determined to be inadequate as public quarters and to
lease such inadequate housing to military personnel and their
families. The House Subcommittee on Military Construction
Appropriations indicated to DOD that the intent of Public Law
92-545 was to declare as inadequate those units whose useful
life precluded the economical upgrading of the units to
adequate standards.

     Fort Bragg declared 312 units inadequate because of a
poor functional arrangement--kitchens were considered too
small and the washer and dryer outlets were in the dining
room. Fort Bragg estimated that these deficiencies could
have been corrected for $7,500 a unit. Although Fort Bragg
declared the units inadequate, it is now considering remodeling
the units at a cost of $9,000 each.

     MacDill Air Force Base declared 635 units inadequate
because the units were too small. However, 418 units exceeded
DOD's prescribed square footage requirements and, therefore,
should not have been considered inadequate based on square
footage.

Conclusions

     Declaring 730 units inadequate at Fort Bragg and MacDill
Air Force Base appears improper. The 312 units at Fort Bragg
could have been renovated within DOD's cost limitation, and
the 418 units at MacDill exceeded DOD's minimum square footage
standards for adequate housing.

Recommendations

     We recommend that the Secretary of Defense review the
justifications that the military services used to declare
family housing units inadequate.  Units improperly classified


                                 f
B-133102



as inadequate should be reclassified as adequate housing, and
the occupants should be required to forfeit their entitlement
to BAQ,



     On September 22, 1976, we sent a draft of this report
to DOD for comments. Since the normal 60 days imposed on DOD
to respond to our draft report expired on November '2, 1976,
we are issuing the report to you without DOD comments.

     As you ::now, section 236 of the Legislative Reorganization
Act of 1970 recuires the head of Federal agencies to submit a
written statement on actions taken on our recommendations to
the House and Senate Committees on Government Operations not
later than 60 days after the date of the report and to the
House and Senate Committees on Appropriations with the agency's
first request for appropriations made more than 60 days after
the date of the report.

     Copies of the report are being sent to the House
Committees on Appropriations, Government Operations, and Armed
Services; the Senate Comlittees on Government Operations and
Armed Services and Subcommittee on Defense of the Senate Com-
mittee on Appropriations; the Director. Office of Management
and Budget; and the Secretaries of the Army, Navy, and Air
Force.

                              Sincerely yours,




                              Henry Eschwege
                              Director
Enclosure




                              7
ENCLOSURE I                                                                          ENCLOSURE I


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