Coast Guard: Comprehensive Blueprint Needed to Balance and Monitor Resource Use and Measure Performance for All Missions

Published by the Government Accountability Office on 2003-03-12.

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

                            United States General Accounting Office

GAO                         Testimony
                            Before the Subcommittee on Oceans,
                            Atmosphere, and Fisheries, Committee on
                            Commerce, Science, and Transportation,
                            U.S. Senate
For Release on Delivery
Expected at 2:30 p.m. EST
Wednesday, March 12, 2003   COAST GUARD
                            Comprehensive Blueprint
                            Needed to Balance and
                            Monitor Resource Use and
                            Measure Performance for
                            All Missions
                            Statement of JayEtta Z. Hecker, Director
                            Physical Infrastructure

                                                  March 12, 2003

                                                  COAST GUARD

                                                  Comprehensive Blueprint Needed to
Highlights of GAO-03-544T, a testimony
before the Subcommittee on Oceans,
                                                  Balance and Monitor Resource Use and
Atmosphere, and Fisheries, Senate
Committee on Commerce, Science, and
                                                  Measure Performance For All Missions

The September 11th attacks                        The most recent levels of effort for the Coast Guard’s various missions show
decidedly changed the Coast                       clearly the dramatic shifts that have occurred among its missions since the
Guard’s priorities and markedly                   September 11th attacks. Predictably, levels of effort related to homeland
increased its scope of activities.                security remain at much higher levels than before September 11th. Levels of
Homeland security, a long-standing                effort for two major nonsecurity missions—search and rescue and aids to
but relatively small part of the
Coast Guard’s duties, took center
                                                  navigational—are now relatively consistent with historical levels. By
stage. Still, the Coast Guard                     contrast, several other missions—most notably fisheries enforcement and
remains responsible for many other                drug interdiction—dropped sharply after September 11th and remain
missions important to the nation’s                substantially below historical levels. Although the Coast Guard has stated
interests, such as helping stem the               that its aim is to increase efforts in the missions that have declined,
flow of drugs and illegal migration,              continued homeland security and defense demands make it unlikely that the
protecting important fishing                      agency, in the short run, can deliver on this goal. The 2004 budget request
grounds, and responding to marine                 contains little that would appear to substantially alter the existing levels of
pollution. For the past several                   effort among missions. The initiatives in the proposed budget relate mainly
years, the Coast Guard has                        to enhancing homeland security and search and rescue missions.
received substantial increases in its
budget to accommodate its
increased responsibilities. GAO
                                                  Although the 2004 budget request represents a sizeable increase in funding
was asked to review the Coast                     (9.6 percent), the Coast Guard still faces fundamental challenges in meeting
Guard’s most recent level of effort               its new security-related responsibilities while rebuilding its capacity to
on its various missions and                       accomplish other missions that have declined. Given the likely constraints
compare them to past levels,                      on the federal budget in future years, it is important for the Coast Guard to
analyze the implications of the                   identify the likely level of effort for each of its missions; lay out a plan for
proposed 2004 budget for these                    achieving these levels; and tie these levels to measurable outputs and goals,
levels of effort, and discuss the                 so that the agency and the Congress can better decide how limited dollars
challenges the Coast Guard faces in               should be spent.
balancing and maximizing the
effectiveness of all its missions.
                                                  Number of Resource Hours Spent on Drug Interdiction, by Quarter, October 1997-December

In order to monitor resource use
and measure performance, GAO
recommended in November, 2002
that the Coast Guard develop a
longer-term strategy outlining how
resources will be distributed across
missions, a time frame for
achieving this desired balance, and
a useful format for reporting
progress to the Congress. The
Coast Guard agreed with the need
for such a strategy and has started
an effort to develop one.

To view the full testimony, including the scope   Note: Drug interdiction is one of several missions with levels of effort that are substantially below
and methodology, click on the link above.         those that existed prior to the September 11th attacks. The dotted line shows actual quarter-by-
For more information, contact JayEtta Hecker      quarter totals; the thicker line is a regression line showing the general trend.
at (206) 512-2834 or heckerj@gao.gov.
    Madame Chair and Members of the Subcommittee:

    I am pleased to be here today to discuss the President’s fiscal year 2004
    budget request for the Coast Guard and the challenges the agency faces in
    this and future budgets. Since the terrorist attacks of September 11, 2001,
    the Coast Guard has had to reinvent itself in many respects, shifting its
    focus and resources from many of its traditional missions—such as
    stemming the flow of illegal drugs and protecting important fishing
    grounds—to homeland security. The President’s fiscal year 2004 budget
    request for the Coast Guard is $6.8 billion, a 9.6 percent increase in
    nominal dollars from the previous year. If the request is approved, about
    half of the agency’s operating expenses will be directed to fulfilling
    expanded homeland security responsibilities. How—and whether—the
    Coast Guard can continue to meet its responsibilities for all of its
    missions, given the increased emphasis on and resources required for
    homeland security, is a matter of great concern to the Congress.

    My testimony today, which is based on recently completed work,
    addresses three topics: (1) the most recent levels of effort for the Coast
    Guard’s various missions, and how these levels compare to those in the
    past; (2) the implications of the proposed 2004 budget for these various
    levels of effort; and (3) the challenges the Coast Guard faces in balancing
    its resources among its missions and ensuring and maximizing its
    effectiveness in each of its missions. The scope and methodology of our
    review is described in the appendix.

    In summary:

•   The most recent levels of effort for the Coast Guard’s various missions, as
    measured by the use of multiple-mission resources such as cutters, patrol
    boats, and aircraft, show clearly the dramatic increase in the amount of
    time spent on homeland security following the September 11th attacks. In
    the months after the attacks, as the initial surge in homeland security
    activities was abating, activity in many other missions began returning to
    pre-September 11th levels, but some have not yet recovered. For example,
    the amount of resource hours currently being spent on search and rescue
    and maintaining aids to navigation are fairly consistent with traditional
    levels over the last 5 years. However, there have been substantial declines
    from traditional levels of time spent on two law enforcement missions—
    fisheries enforcement and drug interdiction. Although the Coast Guard
    Commandant has stated that the Coast Guard would like to return all law
    enforcement missions to 93 percent of pre-September 11th levels by the
    end of 2003 and 95 percent by the end of 2004, it appears unlikely that the

    Page 1                                                          GAO-03-544T
    Coast Guard can meet these goals. Achieving these goals depends heavily
    on not having to respond to such contingencies as heightened terror alerts
    or deployment of Coast Guard resources in military operations. However,
    in the current environment, such contingencies continue to occur, as
    evidenced by the recent deployment of several cutters and patrol boats to
    the Persian Gulf as part of the Middle East buildup.

•   The fiscal year 2004 budget request for the Coast Guard contains little that
    would substantially change the levels of effort for most missions. The
    budget request of $6.8 billion represents an increase of about $592 million,
    or almost 10 percent over the previous year. About $168 million is
    earmarked for new initiatives, mainly in homeland security and search and
    rescue missions. Coast Guard officials said that some of the new
    initiatives, such as establishing better intelligence networks, would have
    potential benefit for other security-related missions, such as migrant and
    drug interdiction, but the initiatives do not directly pertain to augmenting
    activities or adding new capacity in those missions that have seen
    substantial declines in activity.

•   Although the Coast Guard has received substantial budget increases in
    recent years to deal with its increased responsibilities—a trend that
    continues in the proposed budget—the Coast Guard still faces
    fundamental challenges in being able to accomplish all the responsibilities
    it has been given. The Coast Guard’s Deepwater Project, a modernization
    effort for cutters, patrol boats, and aircraft, has already experienced
    delays in the delivery of key assets, jeopardizing the agency’s future ability
    to carry out a number of missions at optimum levels. This situation could
    worsen because the Coast Guard has tied successful completion of the
    project to levels of funding that are beyond what has been available.
    Another budgetary challenge is that, for the foreseeable future, the Coast
    Guard must implement a variety of recently mandated homeland security
    tasks by taking resources from other activities. Similarly, any unexpected
    changes—such as terrorist attacks or extended terror alerts—could also
    result in using resources for homeland security purposes that would
    normally be used for other missions. Such challenges raise serious
    concerns about the Coast Guard’s ability to meet traditional expectations
    across the broad range of all of its missions. In recent reports1, we have
    pointed to several steps that are needed in such an environment. One is to

    Coast Guard: Strategy Needed for Setting and Monitoring Levels of Effort for All
    Missions. GAO-03-155 (Washington, D.C.: Nov. 12, 2002), and Homeland Security:
    Challenges Facing the Coast Guard as it Transitions to the New Department.
    GAO-03-467T (Washington, D.C.: Feb 12, 2003)

    Page 2                                                                    GAO-03-544T
             continue finding ways to operate more efficiently to maximize the existing
             resources available. Another is to develop a comprehensive blueprint for
             accomplishing mission responsibilities. This blueprint needs to recognize
             the new operating reality created by the Coast Guard’s increasing
             homeland security role and translate that reality into establishing realistic
             level-of-effort targets for its all of missions, a plan for achieving these
             targets, and appropriate measurement and reporting of results so that the
             agency and the Congress can better decide how limited dollars can be

             The Coast Guard, which became a part of the Department of Homeland
Background   Security on March 1, 2003, has a wide variety of both security and
             nonsecurity missions. (See table 1.) The Coast Guard’s equipment includes
             141 cutters, approximately 1,400 small patrol and rescue boats, and about
             200 aircraft. Coast Guard services are provided in a variety of locations,
             including ports, coastal areas, the open sea, and in other waterways like
             the Great Lakes and the Mississippi River. The Coast Guard’s installations
             range from small boat stations providing search and rescue and other
             services to marine safety offices that coordinate security and other
             activities in the nation’s largest ports.

             Page 3                                                           GAO-03-544T
Table 1: Security and Nonsecurity Missions of the Coast Guard
    Mission area            Activities and functions within each mission area
    Security missions
    Ports, waterways,       Conducting harbor patrols, vulnerability assessments,
    and coastal security    intelligence gathering and analysis, and other activities to
                            prevent terrorist attacks and minimize the damage from attacks
                            that occur.
    Drug interdiction       Deploying cutters and aircraft in high drug trafficking areas and
                            gathering intelligence to reduce the flow of illegal drugs across
                            maritime boundaries.
    Migrant interdiction    Deploying cutters and aircraft to reduce the flow of
                            undocumented migrants entering the United States by maritime
    Defense readiness       Participating with the Department of Defense (DOD) in global
                            military operations; deploying cutters and other boats in and
                            around harbors to protect DOD force mobilization operations.
    Nonsecurity missions
    Maritime safety      Setting standards and conducting vessel inspections to better
                         ensure the safety of passengers and crew aboard cruise ships,
                         ferries, and other passenger vessels and commercial and fishing
                         vessels; partnering with states and boating safety organizations
                         to reduce recreational boating deaths.
    Search and rescue    Operating small boat stations and national distress and
                         response communication system; conducting search and rescue
                         operations for mariners in distress.
    Living marine        Protecting our nation’s fishing grounds from foreign
    resources            encroachment; enforcing domestic fishing laws and regulations
                         through inspections and fishery patrols.
    Environmental        Preventing and responding to marine oil spills; preventing the
    protection           illegal dumping of plastics and garbage into our nation’s waters.
    Aids to navigation   Maintaining the extensive system of navigation aids in our
                         waterways; monitoring marine traffic through traffic service
    Ice operations       Conducting polar operations to facilitate the movement of critical
                         goods and personnel in support of scientific and national security
                         activity; conducting domestic icebreaking operations to facilitate
                         year-round commerce.
Source: U.S. Coast Guard.
 The Coast Guard’s security and nonsecurity missions are delineated in the Homeland Security Act of
2002 (Pub. L. 107-296, Nov. 25, 2002).

As an organization that is also part of the armed services, the Coast Guard
has both military and civilian positions. At the end of fiscal year 2002, the
agency had over 42,000 full-time positions—about 36,000 military and
about 6,600 civilians. The Coast Guard also has about 7,200 reservists who
support the national military strategy and provide additional operational
support and surge capacity during emergencies, such as natural disasters.
In addition, about 36,000 volunteer auxiliary personnel assist in a wide
range of activities from search and rescue to boating safety education.

Page 4                                                                             GAO-03-544T
Overall, after using fiscal year 2003 inflation-adjusted dollars to adjust for
the effects of inflation, the Coast Guard’s budget grew by about 41 percent
between fiscal years 1993 and 2003. However, nearly all of this growth
occurred in the second half of the period. During fiscal years 1993-1998,
after taking inflation into account, the budget remained essentially flat.
(See fig. 1.) Significant increases have occurred since fiscal year 1998.

Figure 1: Annual Budgets for the Coast Guard, Fiscal Years 1993-2003

Note: Amounts are presented in fiscal year 2003 dollars.

The events of September 11th caused the Coast Guard to direct its efforts
increasingly into maritime homeland security activities, highlighted by the
Coast Guard’s establishing a new program area: Ports, Waterways, and
Coastal Security (coastal security). Prior to September 11th, activities
related to this area represented less than 10 percent of the Coast Guard’s
operating budget, according to Coast Guard officials. In the fiscal year
2004 request, Coastal Security represents about one-quarter of the Coast
Guard’s operating budget. Other mission areas, most notably drug
interdiction, have declined substantially as a percentage of the operating

Page 5                                                                 GAO-03-544T
                          The emphasis the Coast Guard placed on security after September 11th
Security Emphasis         has had varying effects on its level of effort among all of its missions, as
Continues to Affect       measured by the extent to which multiple-mission resources (cutters,
                          other boats, and aircraft) are used for a particular mission. The most
Levels of Effort in       current available data show that some security-related missions, such as
Some Missions             migrant interdiction and coastal security, have grown significantly since
                          September 11th. Other missions, such as search and rescue and aids to
                          navigation remained at essentially the same levels as they were before
                          September 11th. However, the level of effort for other missions, most
                          notably the interdiction of illegal drugs and fisheries enforcement, is
                          substantially below pre-September 11th levels.

Missions with Increased   Missions such as ports, waterways, and coastal security, and migrant
Levels of Resources       interdiction have experienced increased levels of effort. Coastal security
                          has seen the most dramatic increase from pre-September 11th levels. (See
                          fig. 2.) For example, it went from 2,400 resource hours2 during the first
                          quarter of 1999, peaked at 91,000 hours during the first quarter of fiscal
                          year 2002 (immediately after September 11, 2001), and most recently stood
                          at nearly 37,000 hours for the first quarter of fiscal year 2003. In figure 2, as
                          well as the other resource hour figures that follow, we have added a line
                          developed by using a linear regression3 to show the general trend for the
                          period. It is important to note that while such lines depict the trend in
                          resource hours to date, they should not be taken as a prediction of future
                          values. Other activity indicators, such as sea marshal4 boardings, also
                          demonstrate an increased emphasis in this area. Before September 11th,
                          such boardings were not done, but as of the first quarter of 2003 there
                          have been over 550 such boardings. Similarly, vessel operational control

                           The Coast Guard maintains information, on a mission-by-mission basis, about how cutters,
                          patrol boats, and aircraft are used. Each hour that these resources are used in a mission is
                          called a resource hour. Resource hours do not include such things as the time that the
                          resource stands idle or the time that is spent maintaining it.
                           Linear regression estimates the coefficients of the linear equation, involving one or more
                          independent variables, that best predict the value of the dependent variable.
                           Sea marshals are armed Coast Guard personnel who board selected vessels operating in
                          and around U.S. ports and harbors and take position on the ship’s bridge and other areas
                          determined to be necessary to vessel safety. These teams provide additional security to
                          ensure that only authorized personnel maintain control of the vessel at all times.

                          Page 6                                                                        GAO-03-544T
                         actions5 have risen by 85 percent since the fourth quarter of fiscal year

                         Figure 2: Number of Resource Hours Spent on Ports, Waterways, and Coastal
                         Security, by Quarter, October 1998 – December 2002

                         Note: GAO analysis of data from the Coast Guard’s Abstract of Operations includes resource hours
                         for cutters, boats, and aircraft. Figures shown are for the first quarter of fiscal year 1999 and 2003,
                         respectively. The dotted line shows actual quarter-by-quarter totals; the thicker line is a regression
                         line showing the general trend.

                         Given the emphasis on homeland security, it is not surprising that efforts
                         to interdict illegal immigrants have also increased. For example, during
                         the first quarter of 2003, the level of effort in this area was 28 percent
                         higher than it was for the comparable period in 1998.

Missions with a Steady   Some of the Coast Guard’s traditional missions, such as aids to navigation
State of Resources       and search and rescue, have been the least affected by the increased
                         emphasis on security. While resource hours for both of these missions

                          Vessel operational control actions are efforts to control vessels and can include captain of
                         the port orders, administration orders, letters of deviation, and safety and the designation
                         of security zones.

                         Page 7                                                                                   GAO-03-544T
have declined somewhat since the first quarter of fiscal year 1998, the
overall pattern of resource use over the past 5 years has remained
consistent. Although search and rescue boats and buoy tenders were used
to perform homeland security functions immediately after September 11th,
their doing so did not materially affect the Coast Guard’s ability to carry
out its search and rescue or aids to navigation missions. Search and rescue
boats were initially redeployed for harbor patrols after the terrorist
attacks, but the impact on the mission was minimal because the
deployments occurred during the off-season with respect to recreational
boating.6 Similarly, some boats that normally serve as buoy tenders—an
aids to navigation function—were used for security purposes instead, but
they were among the first to be returned to their former missions. For the
first quarter of fiscal year 2003, the number of resource hours spent on
these missions was very close to the number spent during the comparable
quarter of fiscal year 1998.

 Search and rescue resources are subject to seasonal cycles, with more resources being
used during the summer months when boating is at its peak.

Page 8                                                                     GAO-03-544T
Figure 3: Number of Resource Hours Spent on Search and Rescue and Aids to
Navigation, by Quarter, October 1997-December 2002

Note: GAO analysis of data from the Coast Guard’s Abstract of Operations includes resource hours
for cutters, boats, and aircraft. Figures shown are for the first quarter of fiscal year 1998 and 2003,
respectively. The dotted line shows actual quarter-by-quarter totals; the thicker line is a regression
line showing the general trend.

Performance measurement data further demonstrates the relatively
minimal impact on these missions resulting from the Coast Guard’s

Page 9                                                                                   GAO-03-544T
                             emphasis on homeland security. For example, for search and rescue, the
                             Coast Guard was within about half a percentage point of meeting its target
                             for saving mariners in distress in 2002 (84.4 percent actual, 85 percent
                             goal). Likewise, data show that with respect to its aid to navigation
                             mission, in 2002 the Coast Guard was about 1 percent from its goal of
                             navigational aid availability (98.4 percent actual, 99.7 percent goal).

Missions with a Decline in   A number of missions have experienced declines in resource hours from
Resource Hours               pre-September 11th levels, including drug interdiction, fisheries
                             enforcement (domestic and foreign), marine environmental protection,
                             and marine safety. In particular, drug enforcement and fisheries
                             enforcement have experienced significant declines. Compared with the
                             first quarter of 1998, resource hours for the first quarter of fiscal year 2003
                             represent declines of 60 percent for drug interdiction and 38 percent for
                             fisheries enforcement. (See fig. 4.) In fact, resource hours for these areas
                             were declining even before the events of September 11th, and while they
                             briefly rebounded in early 2002, they have since continued to decline. A
                             Coast Guard official said the recent decline in both drug enforcement and
                             fisheries can be attributed to the heightened security around July 4, 2002,
                             and the anniversary of the September 11th terrorist attacks, as well as the
                             deployment of resources for military operations. They said the decline will
                             likely not be reversed during the second quarter of 2003 because of the
                             diversion of Coast Guard cutters to the Middle East and the heightened
                             security alert that occurred in February 2003.

                             Page 10                                                           GAO-03-544T
Figure 4: Number of Resource Hours Spent on Drug Interdiction and Fisheries
Enforcement, by Quarter, October 1997-December 2002

Note: GAO analysis of data from the Coast Guard’s Abstract of Operations includes resource hours
for cutters, boats, and aircraft. Figures shown are for the first quarter of fiscal year 1998 and 2003,
respectively. The dotted line shows actual quarter-by-quarter totals; the thicker line is a regression
line showing the general trend.

The reduction in resource hours over the last several years in drug
enforcement is particularly telling. In the first quarter of 1998, the Coast

Page 11                                                                                  GAO-03-544T
Guard was expending nearly 34,000 resource hours on drug enforcement,
and as of first quarter of 2003, the resource hours had declined to almost
14,000 hours—a reduction of nearly two-thirds. Also, both the number of
boardings to identify illegal drugs and the amount of illegal drugs seized
declined from the first quarter of fiscal year 2000. The Coast Guard’s goal
of reducing the flow of illegal drugs based on the seizure rate for cocaine
has not been met since 1999. During our conversations with Coast Guard
officials, they explained that the Office of National Drug Control Policy
(ONDCP) set this performance goal in 1997, and although they recognize
they are obligated to meet these goals, they believe the goals should be

Our review of the Coast Guard’s activity levels in domestic fishing shows
U.S. fishing vessel boardings and significant violations7 identified are both
down since 2000. The Coast Guard interdicted only 19 percent as many
foreign vessels as it did in 2000.8 The reduced level of effort dedicated to
these two missions is likely linked to the Coast Guard’s inability to meet
its performance goals in these two areas. For instance, in 2002 the Coast
Guard did not meet its goal of detecting foreign fishing vessel incursions,9
and while there is no target for domestic fishing violations, there were
fewer boardings and fewer violations in 2002 than in 2000.

Recently, the Coast Guard Commandant stated that the Coast Guard
intends to return law enforcement missions (drug interdiction, migrant
interdiction, and fisheries enforcement) to 93 percent of pre-September
11th levels by the end of 2003 and 95 percent by the end of 2004. However,
in the environment of heightened security and the continued deployment
of resources to the Middle East, these goals will likely not be achieved,
especially for drug interdiction and fisheries enforcement, which are
currently far below previous activity levels.

 The Coast Guard defines significant violations as any or all of the following: (1) significant
damage or impact to the resource or the fisheries management plan, (2) significant
monetary advantage to the violator over the competition, or (3) a high regional interest of
emotional or political nature as determined by regional fisheries councils.
 Activity data for foreign fishing vessels is a comparison of fourth quarters in 2000 and
 In fiscal year 2002, the Coast Guard’s goal was to detect 250 foreign fishing vessel
incursions into U.S. fishing waters. Only 202 were detected that year.

Page 12                                                                         GAO-03-544T
                           The Coast Guard’s budget request for fiscal year 2004 does not contain
Fiscal Year 2004           initiatives or proposals that would substantially alter the current
Budget Request Will        distribution of levels of effort among mission areas. The request for $6.8
                           billion represents an increase of about $592 million, or about 9.6 percent in
Not Substantially          nominal dollars, over the enacted budget for fiscal year 2003. The majority
Alter Current Levels       of the increase covers pay increases for current or retired employees or
                           continues certain programs already under way, such as upgrades to
of Effort                  information technology. About $168.5 million of the increase would fund
                           new initiatives, most of which relate either to homeland security or to
                           search and rescue. Another $20.8 million of the increase is for the capital
                           acquisitions request,10 which totals $797 million. The capital acquisition
                           request focuses mainly on two projects—the Deepwater Project for
                           replacing or upgrading cutters, patrol boats, and aircraft, and the
                           congressionally mandated modernization of the maritime distress and
                           response system.

Operating Expenses Would   About $440 million of the $592 million requested increase is for operating
Increase by $440 Million   expenses11 for the Coast Guard’s mission areas. This requested increase in
                           operating expenses is 10 percent higher than the amount for operating
                           expenses in the enacted budget for fiscal year 2003. The requested
                           increase is made up of the following:

                       •   pay increases and military personnel entitlements: $162.5 million;12
                       •   funding of continuing programs and technical adjustments: $81 million;
                           (These are multiyear programs that the Coast Guard began in previous
                           years. Examples include continuing development of information
                           technology projects and operating new shore facilities started with funds
                           from previous budgets. Technical adjustments provide for the

                             For fiscal year 2004, the Capital Acquisition account includes funding previously
                           requested in the Coast Guard Acquisition, Construction, and Improvement account, and
                           Research, Development, Test and Evaluation accounts, as well as the Alteration to Bridges
                           account. We have reflected this change when making comparisons to the fiscal year 2003
                           enacted budget.
                            For fiscal year 2004, the Operating Expense account consolidates funding previously
                           requested in the Coast Guard Operating Expenses, Environmental Compliance and
                           Restoration, and Reserve Training accounts. We have reflected this change when making
                           comparisons to the fiscal year 2003 enacted budget.
                            This does not include an increase of $131 million in pay for retired personnel. Because
                           retirees are not part of ongoing operations, their pay is not considered to be an operating
                           expense. However, the $131 million increase for retired pay is included in the overall
                           requested increase of $592 million.

                           Page 13                                                                        GAO-03-544T
                              annualization of expenditures that received only partial-year funding in the
                              prior fiscal year.)
                          •   Reserve training: $28 million; and
                          •   new initiatives: $168.5 million. (These initiatives are described in more
                              detail below.)

New Initiatives Relate        The Coast Guard’s budget request includes three new initiatives—one for
Primarily to Search and       search and rescue and two for homeland security. (See table 2.) As such,
Rescue and Homeland           these initiatives do not represent substantial shifts in current levels of
                              effort among missions. The search and rescue initiative is part of a
Security                      multiyear effort to address shortcomings in search and rescue stations and
                              command centers. In September 2001, the Department of Transportation
                              Office of the Inspector General reported that readiness at search and
                              rescue stations was deteriorating.13 For example, staff shortages at most
                              stations required crews to work an average of 84 hours per week, well
                              above the standard (68 hours) established to limit fatigue and stress
                              among personnel. The initiative seeks to provide appropriate staffing and
                              training to meet the standards of a 12-hour watch and a 68-hour work
                              week. The Congress appropriated $14.5 million in fiscal year 2002 and
                              $21.7 million in fiscal year 2003 for this initiative. The amount requested
                              for fiscal year 2004 ($26.3 million) would pay for an additional 390 full-
                              time search and rescue station personnel and for 28 additional instructors
                              at the Coast Guard’s motor lifeboat and boatswain’s mate schools.

                               Audit of the Small Boat Station Search and Rescue Program. MH-2001-94 (Washington,
                              D.C.: Sept 14, 2001).

                              Page 14                                                                GAO-03-544T
                             Table 2: New Initiatives in the Fiscal Year 2004 Budget Request for Operational

                              New Initiative                                                 Amount (in millions)
                              Maritime Search and Rescue/Personnel Safety
                                390 new full time personnel for search and rescue stations
                                and command centers
                                Additional Instructors and Training Enhancements                           $26.3
                              Maritime Domain Awareness
                                Intelligence program
                                Information sharing and systems                                            $33.5
                              Homeland Security Operations
                                6 new marine safety and security teams
                                51 sea marshals
                                43 small response boats
                                2 port security units
                                Establish stations at Washington, D.C. and Boston                         $108.7
                              Total fiscal year 2004 new initiatives                                      $168.5
                             Source: U.S. Coast Guard.

                             Coast Guard officials said the two initiatives designed mainly for
                             homeland security purposes would help the Coast Guard in other mission
                             areas as well. For example, the information-sharing effort under maritime
                             domain awareness is designed to improve communications between
                             cutters and land stations. It also pays for equipping cutters with the
                             universal automated identification system, which allows the Coast Guard
                             to monitor traffic in its vicinity, including the vessel name, cargo, and
                             speed. These capabilities are important not only for homeland security
                             missions, but also for law enforcement and search and rescue, according
                             to Coast Guard officials. Likewise, the units being added as part of the
                             homeland security operations initiative will focus primarily on security
                             issues but will also serve other missions, according to Coast Guard
                             officials. For example, the new stations that would be established in
                             Washington and Boston would be involved in search and rescue, law
                             enforcement, and marine environmental protection.

Capital Acquisition Budget   The capital acquisition budget request for fiscal year 2004 is $797 million,
Focuses on Two Main          an increase of $20.8 million in nominal dollars over fiscal year 2003. The
Projects                     majority of the request will go to fund two projects—the Integrated
                             Deepwater System and the Coast Guard’s maritime distress and response
                             system, called Rescue 21. Other acquisitions include new response boats
                             to replace 41-foot utility boats which serve multiple missions, more coastal
                             patrol boats, as well as a replacement icebreaker for the Great Lakes. (See
                             table 3.)

                             Page 15                                                                GAO-03-544T
Table 3: Fiscal Year 2004 Capital Acquisition Budget Request

 Item                                                           Amount (in millions)
 Integrated Deepwater System                                                  $ 500.0
 Other systems
    Rescue 21                                                                 $ 134.0
    Defense Message System implementation                                       $ 4.5
 Vessels and critical infrastructure projects
    Great Lakes icebreaker replacement                                          $ 2.0
    41’ utility boat replacement                                               $ 12.0
    Additional coastal patrol boats to enforce security zones                  $ 52.5
 Personnel and related support costs                                           $ 70.0
 Research, development, testing, and evaluation                                $ 22.0
 Total                                                                        $ 797.0
Source: U.S. Coast Guard.

At $500 million, the Deepwater Project accounts for about 63 percent of
the amount requested for capital acquisitions. This project is a long-term
(20 to 30 years) integrated approach to upgrading cutters, patrol boats,
and aircraft as well as providing better links between air, shore, and
surface assets. When the system is fully operational, it will make the Coast
Guard more effective in all of its missions, particularly law enforcement
where deepwater cutters and aircraft are key to carrying out critical
functions such as drug and migrant interdiction and fisheries enforcement.

Rescue 21, the second major program, provides for the modernization of
the command, control, and communication infrastructure of the national
distress and response system. The current system suffers from aging
equipment, limited spare parts, and limited interoperability with other
agencies. Of particular concern to the Coast Guard and the maritime
community are the current system’s coverage gaps, which can result in
missed maritime distress calls. The Congress has mandated that this
system be completed by the end of fiscal year 2006. The $134 million
request for fiscal year 2004 would keep the project on schedule, according
to Coast Guard officials.

Page 16                                                                 GAO-03-544T
                         Despite the billion-dollar (19 percent) budget increase it has received over
Significant Challenges   the past 2 years, the Coast Guard faces fundamental challenges in
Raise Concerns About     attempting to accomplish everything that has come to be expected of it.
                         We have already described how the Coast Guard has not been able, in its
Coast Guard’s Ability    current environment, to both assimilate its new homeland security
to Accomplish Its        responsibilities and restore other missions, such as enforcement of laws
                         and treaties, to levels that are more reflective of past years. The fiscal year
Diverse Missions         2004 budget request does not provide substantial new funding to change
                         these capabilities, except for homeland security and search and rescue. In
                         addition, several other challenges further threaten the Coast Guard’s
                         ability to balance these many missions. The first is directly tied to funding
                         for the Deepwater Project. The project has already experienced delays in
                         delivery of key assets and could face additional delays if future funding
                         falls behind what the Coast Guard had planned. Such delays could also
                         seriously jeopardize the Coast Guard’s ability to carry out a number of
                         security and nonsecurity missions. Similarly, for the foreseeable future,
                         the Coast Guard must absorb a variety of new mandated homeland
                         security tasks by taking resources from existing activities. To the extent
                         that these responsibilities consume resources that would normally go
                         elsewhere, other missions will be affected. Finally, in its new environment,
                         the Coast Guard faces the constant possibility that terror alerts, terrorist
                         attacks, or military actions would require it to shift additional resources to
                         homeland security missions.

                         Such challenges raise serious concerns about the Coast Guard’s ability to
                         be “all things to all people” to the degree that the Coast Guard, the
                         Congress, and the public desire. In past work, we have pointed to several
                         steps that the Coast Guard needs to take in such an environment. These
                         include continuing to address opportunities for operational efficiency,
                         especially through more partnering; developing a comprehensive strategy
                         for balancing resource use across all of its missions; and developing a
                         framework for monitoring levels of effort and measuring performance in
                         achieving mission goals. The Coast Guard has begun some work in these
                         areas; however, addressing these challenges is likely to be a longer-term
                         endeavor, and the success of the outcome is not clear.

                         Page 17                                                           GAO-03-544T
Continued Funding            Under current funding plans, the Coast Guard faces significant potential
Shortfalls Could Delay the   delays and cost increases in its $17 billion Integrated Deepwater Project.
Deepwater Project and        This project is designed to modernize the Coast Guard’s entire fleet of
                             cutters, patrol boats, and aircraft over a 20-year period. Given the way the
Adversely Affect the Coast   Coast Guard elected to carry out this project, its success is heavily
Guard’s Mission              dependent on receiving full funding every year. So far, that funding has not
Capabilities                 materialized as planned. Delays in the project, which have already
                             occurred, could jeopardize the Coast Guard’s future ability to effectively
                             and efficiently carry out its missions, and its law enforcement activities—
                             that is, drug and migrant interdiction and fisheries enforcement—would
                             likely be affected the most, since they involve extensive use of deepwater
                             cutters and aircraft.

                             Under the project’s contracting approach, the responsibility for
                             Deepwater’s success lies with a single systems integrator and its
                             contractors for a period of 20 years or more. Under this approach, the
                             Coast Guard has started on a course potentially expensive to alter. It is
                             based on having a steady, predictable funding stream of $500 million in
                             1998 dollars over the next 2 to 3 decades. Already the funding provided for
                             the project is less than the amount the Coast Guard planned for. The fiscal
                             year 2002 appropriation for the project was about $28 million below the
                             planned level, and the fiscal year 2003 appropriated level was about $90
                             million below the planning estimate. And even the President’s fiscal year
                             2004 budget request for the Coast Guard is not consistent with the Coast
                             Guard’s deepwater funding plan. If the requested amount of $500 million
                             for fiscal year 2004 is appropriated, this would represent another shortfall
                             of $83 million, making the cumulative shortfall about $202 million in the
                             project’s first 3 years, according to Coast Guard data. If appropriations
                             hold steady at $500 million (in nominal dollars) through fiscal year 2008,
                             the Coast Guard estimates that the cumulative shortfall will reach $626

                             The shortfalls in the last 2 fiscal years (2002 and 2003) and their potential
                             persistence could have serious consequences. The main impact is that it
                             would take longer and cost more in the long run to fully implement the
                             deepwater system. For example, due to funding shortfalls experienced to
                             date, the Coast Guard has delayed the introduction of the Maritime Patrol

                              The $28 million shortfall is expressed in 2002 dollars, the $90 million shortfall in 2003
                             dollars, and the $202 million shortfall in 2004 dollars. The $626 million dollar shortfall is
                             expressed in 2008 dollars.

                             Page 18                                                                           GAO-03-544T
                             Aircraft by 19 months and slowed the conversion and upgrade program for
                             the 110-foot Patrol Boats. According to the Coast Guard, if the agency
                             continues to receive funding at levels less than planned, new asset
                             introductions—and the associated retirement of costly, less capable Coast
                             Guard legacy assets—will continue to be deferred.

                             The cost of these delays will be exacerbated by the accompanying need to
                             invest additional funds in maintaining current assets beyond their planned
                             retirement date because of the delayed introduction of replacement
                             capabilities and assets, according to the Coast Guard. For example,
                             delaying the Maritime Patrol Aircraft will likely require some level of
                             incremental investment to continue safe operation of the current HU-25 jet
                             aircraft. Similarly, a significant delay in the scheduled replacement for the
                             270-foot Medium Endurance Cutter fleet could require an unplanned and
                             expensive renovation for this fleet.

                             System performance—and the Coast Guard’s capability to effectively carry
                             out its mission responsibilities—would also likely be impacted if funding
                             does not keep pace with planning estimates. For example, Coast Guard
                             officials told us that conversions and upgrades for the 110-foot Patrol Boat
                             would extend its operating hours from about 1,800 to 2,500 per year. Once
                             accomplished, this would extend the time these boats could devote to
                             both security and nonsecurity missions. Given the funding levels for the
                             project, these conversions and upgrades have been slowed. Coast Guard
                             officials also said that with significant, continuing funding shortfalls
                             delaying new asset introductions, at some point, the Coast Guard would be
                             forced to retire some cutters and aircraft—even as demand for those
                             assets continues to grow. For example, in 2002, two major cutters and
                             several aircraft were decommissioned ahead of schedule due to their
                             deteriorated condition and high maintenance costs.

Some New Homeland            A second challenge is that the Coast Guard has been tasked with a myriad
Security Duties Are Not      of new homeland security requirements since the fiscal year 2004 budget
Fully Factored into the      request was formulated and will have to meet many of these requirements
                             by pulling resources from other activities. Under the Maritime
Coast Guard’s Distribution   Transportation Security Act (MTSA),15 signed into law in November 2002,
of Resources                 the Coast Guard must accomplish a number of security-related tasks
                             within a matter of months and sustain them over the long term. MTSA

                              Pub. L. 107-295, Nov. 25, 2002.

                             Page 19                                                          GAO-03-544T
                             requires the Coast Guard to be the lead agency in conducting security
                             assessments, developing plans, and enforcing specific security measures
                             for ports, vessels, and facilities. In the near term, the Coast Guard must
                             prepare detailed vulnerability assessments of vessels and facilities it
                             identifies to be at high risk of terrorist attack. It must also prepare a
                             National Maritime Transportation Security Plan that assigns duties among
                             federal departments and agencies and specifies coordination with state
                             and local officials—an activity that will require substantial work by Coast
                             Guard officials at the port level. The Coast Guard must also establish plans
                             for responding to security incidents, including notifying and coordinating
                             with local, state, and federal authorities.

                             Because the fiscal year 2004 budget request was prepared before MTSA
                             was enacted, it does not specifically devote funding to most of these port
                             security responsibilities. Coast Guard officials said that they will have to
                             absorb costs related to developing, reviewing, and approving plans,
                             including the costs of training staff to monitor compliance, within their
                             general budget.16 Coast Guard officials expect that the fiscal year 2005
                             budget request will contain funding to address all MTSA requirements; in
                             the meantime, officials said that the Coast Guard would have to perform
                             most of its new port security duties without additional appropriation, and
                             that the funds for these duties would come from its current operations
                             budget. The costs of these new responsibilities, as well as the extent to
                             which they will affect resources for other missions, are not known.

External Uncertainties       Security alerts, as well as actions needed in the event of an actual terrorist
Place Additional Strain on   attack, can also affect the extent to which the Coast Guard can devote
Resources                    resources to missions not directly related to homeland security. Coast
                             Guard officials told us that in the days around September 11, 2002, when
                             the Office of Homeland Security raised the national threat level from
                             “elevated” to “high” risk, the Coast Guard reassigned cutters and patrol
                             boats in response. In February 2003, when the Office of Homeland
                             Security again raised the national threat level to “high risk,” the Coast
                             Guard repositioned some of its assets involved in offshore law
                             enforcement missions, using aircraft patrols in place of some cutters that
                             were redeployed to respond to security-related needs elsewhere. While

                               The Coast Guard had already begun work on two aspects of the legislation; these aspects
                             are accounted for in the fiscal year 2004 budget request. These two items are requirements
                             to (1) create marine safety and security teams and (2) to dispatch armed officers as sea
                             marshals for some port security duties.

                             Page 20                                                                     GAO-03-544T
                               these responses testify to the tremendous flexibility of a multi-mission
                               agency, they also highlight what we found in our analysis of activity-level
                               trends—when the Coast Guard responds to immediate security needs,
                               fewer resources are available for other missions.

                               The Coast Guard’s involvement in the military buildup for Operation
                               Enduring Freedom in the Middle East further illustrates how such
                               contingencies can affect the availability of resources for other missions.
                               As part of the buildup, the Coast Guard has deployed eight 110-foot boats,
                               two high-endurance cutters, four port security units, and one buoy tender
                               to the Persian Gulf. These resources have come from seven different Coast
                               Guard Districts. For example, officials from the First District told us they
                               sent four 110-foot patrol boats and three crews to the Middle East. These
                               boats are multi-mission assets used for fisheries and law enforcement,
                               search and rescue, and homeland security operations. In their absence,
                               officials reported, the First District is more flexibly using other boats
                               previously devoted to other tasks. For instance, buoy tenders have taken
                               on some search and rescue functions, and buoy tenders and harbor
                               tug/icebreakers are escorting high-interest vessels. Officials told us that
                               these assets do not have capabilities equivalent to the patrol boats but
                               have been able to perform the assigned mission responsibilities to date.

Several Types of Actions       In previous work, we have examined some of the implications of the Coast
Needed to Address              Guard’s new operating environment on the agency’s ability to fulfill its
Challenges                     various missions.17 This work, like our testimony today, has pointed to the
                               difficulty the Coast Guard faces in devoting additional resources to
                               nonsecurity missions, despite the additional funding and personnel the
                               agency has received. In particular, we have suggested that the following
                               actions need to be taken as a more candid acknowledgement of the
                               difficulty involved:

                           •   Opportunities for increased operational efficiency need to be explored.
                               Over the past decade, we and other outside organizations, along with the
                               Coast Guard itself, have studied Coast Guard operations to determine
                               where greater efficiencies might be found. These studies have produced a
                               number of recommendations, such as shifting some responsibilities to

                                Coast Guard: Budget and Management Challenges for 2003 and Beyond GAO-02-588T
                               (Washington, D.C.: Mar. 19, 2002), and Coast Guard: Strategy Needed for Setting and
                               Monitoring Levels of Effort for All Missions GAO-03-155 (Washington, D.C.: Nov. 12,

                               Page 21                                                                 GAO-03-544T
    other agencies. One particular area that has come to the forefront since
    September 11th is the Coast Guard’s potential ability to partner with other
    port stakeholders to help accomplish various security and nonsecurity
    activities involved in port operations. Some effective partnerships have
    been established, but the overall effort has been affected by variations in
    local stakeholder networks and limited information-sharing among ports.

•   A comprehensive blueprint is needed for setting and assessing levels of
    effort and mission performance. One important effort that has received
    relatively little attention, in the understandable need to first put increased
    homeland security responsibilities in place, is the development of a plan
    that proactively addresses how the Coast Guard should manage its various
    missions in light of its new operating reality. The Coast Guard’s
    adjustment to its new post-September 11th environment is still largely in
    process, and sorting out how traditional missions will be fully carried out
    alongside new security responsibilities will likely take several years. But it
    is important to complete this plan and address in it key elements and
    issues so that it is both comprehensive and useful to decision makers who
    must make difficult policy and budget choices. Without such a blueprint,
    the Coast Guard also runs the risk of continuing to communicate that it
    will try to be “all things to all people” when, in fact, it has little chance of
    actually being able to do so.

    The Coast Guard has acknowledged the need to pursue such a planning
    effort, and the Congress has directed it to do so. Coast Guard officials told
    us that as part of the agency’s transition to the Department of Homeland
    Security, they are updating the agency’s strategic plan, including plans to
    distribute all resources in a way that can sustain a return to previous levels
    of effort for traditional missions. In addition, the Congress placed a
    requirement in MTSA for the Coast Guard to submit a report identifying
    mission targets, and steps to achieve them, for all Coast Guard missions
    for fiscal years 2003-2005. However, this mandate is not specific about the
    elements that the Coast Guard should address in the report.

    To be meaningful, this mandate should be addressed with thoroughness
    and rigor and in a manner consistent with our recent recommendations—
    it requires a comprehensive blueprint that embodies the key steps and
    critical practices of performance management. Specifically, in our
    November 2002 report on the progress made by the Coast Guard in
    restoring activity levels for its key missions, we recommended an
    approach consisting of a long-term strategy outlining how the Coast Guard
    sees its resources—cutters, boats, aircraft, and personnel—being
    distributed across its various missions, a time frame for achieving this

    Page 22                                                            GAO-03-544T
                                                     desired balance, and reports with sufficient information to keep the
                                                     Congress apprised not only of how resources were being used, but what
                                                     was being accomplished. The Coast Guard agreed that a comprehensive
                                                     strategy was needed, and believes that they are beginning the process to
                                                     develop one. Table 4 provides greater explanation of what this approach
                                                     or blueprint would entail.

Table 4: Elements of an Approach for Setting and Assessing Levels of Effort and Mission Effectiveness

 Element                                                   Explanation
 Setting realistic targets for levels of effort in         Targets need to take into account the finite Deepwater and other resources
 each mission area                                         available in the near to medium term and the likely homeland security scenarios
                                                           based on resource requirements needed to respond to various potential terrorist
                                                           threats and attacks
 Developing an action plan for achieving                   Action plan needs to include:
 targets                                                   • an analysis of the mix of resources needed and timetables required to achieve
                                                              level-of-effort targets;
                                                           • strategies for partnering with other public and private sector organizations to
                                                              accomplish mission activities;
                                                           • contingency plans for addressing responsibilities for all of its missions during
                                                              prolonged “high alert” periods;
                                                           • new approaches and techniques, including the use of new technology, for
                                                              achieving mission responsibilities; and
                                                           • identifying operational efficiencies that would free up funds for more mission-
                                                              enhancing needs, such as keeping the Deepwater Project on schedule.
 Establishing realistic performance measures               Includes two steps:
 for all missions                                          • completing performance measures for homeland security, and
                                                           • evaluating and revising, where necessary, performance measures, such as
                                                              those for drug interdiction, for all missions.
 Collecting sufficiently complete, accurate, and           Includes data on:
 consistent performance data to measure                    • resources being applied to each mission (money, personnel, and capital
 effectiveness in meeting performance targets                 assets),
                                                           • output measures that describe what is being done with these resources (e.g.,
                                                              numbers of patrols and inspections conducted), and
                                                           • outcome data on the extent that program goals are being achieved.
Source: GAO.

                                                     The events of recent months heighten the need for such an approach.
                                                     During this time, the budgetary outlook has continued to worsen,
                                                     emphasizing the need to look carefully at the results being produced by
                                                     the nation’s large investment in homeland security. The Coast Guard must
                                                     be fully accountable for investments in its homeland security missions and
                                                     able to demonstrate what these security expenditures are buying and their
                                                     value to the nation. At the same time, recent events also demonstrate the
                                                     extent to which highly unpredictable homeland security events, such as
                                                     heightened security alerts, continue to influence the amount of resources
                                                     available for performing other missions. The Coast Guard needs a plan
                                                     that will help the agency, the Congress, and the public understand and

                                                     Page 23                                                                     GAO-03-544T
                  effectively deal with trade-offs and their potential impacts in such

                  Madame Chair, this concludes my testimony today. I would be pleased to
                  respond to any questions that you or Members of the Subcommittee may
                  have at this time.

                  For information about this testimony, please contact JayEtta Z. Hecker,
Contacts and      Director, Physical Infrastructure, at (202) 512-2834, or heckerj@gao.gov, or
Acknowledgments   Margaret T. Wrightson, at (415) 904-2200, or wrightsonm@gao.gov.
                  Individuals making key contributions to this testimony include Steven
                  Calvo, Christopher M. Jones, Sharon Silas, Stan Stenersen, Eric Wenner,
                  and Randall Williamson.

                  Page 24                                                          GAO-03-544T

              To determine the most recent levels of effort for the Coast Guard’s various
Scope and     missions and how these levels compare to those in the past, we reviewed
Methodology   the data from the Coast Guard’s Abstract of Operations. These data,
              reported by crews of cutters, boats, and aircraft, represent the hours that
              these resources spent in each of the Coast Guard’s mission areas. We
              reviewed these data to identify how resources were utilized across
              missions both before and after September 11th, and to identify any trends
              in resource utilization. In addition, we spoke with Coast Guard officials at
              headquarters about the use of Coast Guard resources both before and
              after September 11th.

              To determine the implications of the proposed fiscal year 2004 budget
              request for these various levels of effort, we reviewed the President’s fiscal
              year 2004 budget request for the Coast Guard, as well as the enacted
              budget for the Coast Guard for fiscal year 2003. We used the Department
              of Commerce’s chain-weighted price index for gross domestic product to
              adjust nominal dollare figures for the effect of inflation. In addition, we
              spoke with Coast Guard officials within the Coast Guard’s Office of
              Programs and Operations Directorate, the Marine Safety Directorate, and
              the Integrated Deepwater Systems Program Office.

              To identify the challenges the Coast Guard faces in balancing its resources
              among its missions and ensuring and maximizing its effectiveness in each
              of its missions, we reviewed our previous reports on performance
              management and developing performance measures. We also reviewed
              Coast Guard strategic documents and discussed these with staff in the
              Coast Guard’s Program Management and Evaluation Division. In addition,
              we met with officials from the Coast Guard’s Department of Homeland
              Security Transition team to discuss strategic planning and transition

              Page 25                                                          GAO-03-544T