-l--__“l--l-lll-.l-l.. ..I---- .I ..I.. --I.._ . ..-.. -_--...-.-..---.-_. ._-_---_.- .._.. ._..__ l-“ll-^“l ___-___.___ -- StyI (wll)t’l’ 1!WO ARMY BUDGET Potential Reductions to . the Operations and Maintenance Budget 142236 -.-- -~-l.~._-.-~- (;AO/‘NSIAl)-!~O-27~lII1: United States GAO General Accounting Office Washington, D.C. 20648 National Security and International Affairs Division B-240676 September 10,lQQO The Honorable Daniel K. Inouye Chairman, Subcommittee on Defense Committee on Appropriations United States Senate The Honorable John P. Murtha Chairman, Subcommittee on Defense Committee on Appropriations House of Representatives The Honorable Earl Hutto Chairman, Subcommittee on Readiness Committee on Armed Services House of Representatives As requested, we reviewed the Army’s justification for its fiscal year 1991 operation and maintenance (O&M) budget. Our objectives were to determine whether the defense programs should be funded in the amounts requested. Our review focused primarily on selected accounts in the Army’s O&M request for two of its major commands-US. Army, Europe (USAREUR) and U.S. Army Forces Command (FORSCOM).We pro- vided you with preliminary results of our analyses between March and July 1990. We identified potential reductions of about $734 million -$326 million at USAREURand $407.8 million at FORscoh+-as shown in table 1. Table 1: Proposed Reductions to the Fiscal Year 1991 O&M Requests for Dollars in millions FORSCOM and USAREUR Account FORSCOM USAREUR General purpose forces mission $194.8 $26.4a Real DroDertv maintenance 176.6 214.0 Base operations 30.5 .O Other programs 5.9 .O Civilian personnelb .O 84.5 Joint exercises .O 1.1 Total $407.8 $326.0 “The general purpose forces mission proposed reductions include $4 million for air operating tempo (OPTEMPO) and $22.4 million for ground OPTEMPO. ‘Civilian personnel funding is not identified as a separate account in the budget. Instead, It is included in each of the O&M accounts. Page 1 GAO/NSIAD-90-276BRArmy Budget B-240675 i The reasons for proposed reductions are that (1) figures included in the budget submission to the Congress exceeded figures in budget planning guidance provided to USAREUR and FORSCOMby the Department of the Army, (2) the costs to repair and maintain facilities at installations to be closed had been included in the budget request, (3) the planned attrition of civilian personnel as a result of the hiring freeze had not been taken into account, (4) documentation was lacking to completely justify planned ground and air OPTEMPOamounts, and (5) training exercises had been canceled. The Army expects that its O&M budget request will be reduced between 5 and 10 percent as a result of the congressional authorization and appro- priation process. As such, the Army has instructed its major commands to begin planning to accept such a reduction. In turn, the major com- mands have instructed their activities to develop budget execution plans in accordance with a reduced amount. For example, FORSCOM,in April 1990, instructed its field activities to begin planning for budget reduc- tions. FORSCOMtold its activities that the amount of O&M funds included in the President’s budget for them was “unrealistically high” and did not take into consideration the changing events in the world such as base closures and force structure changes. The results of our review are dis- cussed in more detail in appendixes I and II. As requested, we did not obtain written agency comments on this report. However, we discussed the report with responsible program officials during the course of our review and have included their comments where appropriate. Our objectives, scope, and methodology are described in appendix III. We are sending copies of this report to the Secretaries of Defense and the Army; the Director, Office of Management and Budget; and inter- ested congressional committees. Copies will be made available to others upon request. Page 2 GAO/NSIAD-90.275BRArmyBudget 5240675 Please call me on (202) 276-4141 if you or your staff have any questions concerning this briefing report. Major contributors to this report are listed in appendix IV. Richard Davis Director, Army Issues Page 2 GAO/NSIAIMO-271BRArmy Budget Contents Letter 1 Appendix I 6 Potential Reductions Real Property Maintenance Activities Civilian Personnel 6 9 to the US. Army, Flying Hour Program 9 Europe Fiscal Year Ground OPTEMPO 11 Joint Training Exercises 12 1991 Operation and Maintenance Budget Appendix II 13 Potential Reductions Background Results of Analysis 13 13 to the U.S. Army Forces Command Fiscal Year 1991 Operation and Maintenance Budget Appendix III 15 Objectives, Scope,and Methodology Appendix IV 16 Major Contributors to This Report Tables Table 1: Proposed Reductions to the Fiscal Year 1991 1 O&M Requests for FORSCOM and USAREUR Table I. 1: Proposed Reductions to USAREUR’s Fiscal Year 6 1991 O&M Budget Table 1.2: USAREUR’s RPMA Funding for Fiscal Years 7 1989 and 1990 and the Amount Requested for Fiscal Year 1991 Table 1.3: Reasons for USAREUR’s Fiscal Year 1991 7 Overstated RPMA Request Page 4 GAO/NSIAD-90-276BRArmy Budget Contents Table 1.4: USAREUR’s Flying Hours for Fiscal Years 1988 10 to 1990 Table II. 1: Proposed Reductions to FORSCOM’s Fiscal 13 Year 1991 O&M Budget Table 11.2:Comparison of Amounts in the January 1990 14 Budget to FORSCOM’s Estimated Amounts Abbreviations I;ORSCOM U.S. Army Forces Command NA'lU North Atlantic Treaty Organization O&M operation and maintenance OPTEMPO operating tempo RPMA Real Property Maintenance Activities USAREUR U.S. Army, Europe Page6 GAO/NSIAD-90-275BRArmyBudget I Appendix I PotentialsReductionsto the U.S.Army, Europe F’iscalYear 1991 Operation and MaintenanceBudget We identified potential budget reductions of $326 million to USAREUR'S fiscal year 1991 budget request for O&M funding. Table I.1 shows the proposed reductions by O&M account. Table 1.1: Proposed Reductions to USAREUR’s Fiscal Year 1991 O&M Dollars in millions Budget Account Proposed reduction Real property maintenance $214.0 Civilian personnela 04.5 General purpose forces missionb 26.4 Joint exercises 1.1 Total $326.0 %ivilian personnel funding is not identified as a separate account in the budget. Instead, it is a part of the other O&M accounts. bThe proposed reductions to the general purpose forces mission account consist of $4 million for air OPTEMPO (flying hours) and $22.4 million for ground OPTEMPO. Real Property Maintenance Activities Background Real Property Maintenance Activities (RPMA) funding is used to pay the day-to-day costs of operating, maintaining, and repairing military facili- ties. For fiscal years 1989 and 1990, approximately 20 percent of USAREUR'S RPMA funding was for variable expenses such as maintenance, repair, and minor construction of the facilities, and 80 percent was for fixed costs such as utilities and engineers’ salaries. Table I.2 shows the funding received for USAREUR'S RPMA in fiscal years 1989 and 1990 and the amount requested for fiscal year 1991. Page 6 GAO/NSIAD-!30-276BR Army Budget . Appendix I Potential Reductions to the U.S. Army, Europe Flrcsl Year 1991 Operation aud Maimmance Budget Table 1.2: USAREUR’s RPMA Fundlng for Flrcal Years 1989 and 1990 and the Amount Requested for Fiscal Year 1991 Dollars in millions .-~_..-_-.- Fiscal year 1989 1990 1991 cost Funded Percent Funded Percent Requested Percent Variable. _-.---.-- $194 19 $191 18 $433 31 Fixed .-- _.____. 824 81 892 82 975 69 Total ‘- $1,018 100 $1,083 100 $1,408 100 Source: Data provided by the Office of the Deputy Chief of Staff, Engineer, USAREUR Results of Analysis USAREURofficials in the Office of the Deputy Chief of Staff, Engineer, estimate that, in fiscal year 1991, $975 million will be needed to cover fixed costs and $433 million will be available for maintenance, repair, and minor construction. The amount available for maintenance, repair, and minor construction in fiscal year 1991 represents a 127-percent increase over the $191 million funded in fiscal year 1990. The official also said that a fiscal year 1991 funding level equal to the fiscal year 1990 funding level, adjusted for inflation ($46 million), should be suffi- cient to cover the fixed costs and the maintenance, repair, and minor construction costs for those projects that cannot be delayed for a year. The official further stated that, in addition to the adjustment for infla- tion, another $66 million would be needed to comply with environmental requirements. Based on the above, an RPMA funding level of $1.194 bil- lion would be required for fiscal year 1991, as compared to USAREUR'S request for $1.408 billion. This would represent a $214 million decrease from the amount included in the President’s fiscal year 1991 budget. Table I.3 shows the reasons we identified for the overstated request. Table 1.3: Reasons for USAAEUR’s Flscal Year 1991 Overstated RPMA Request Dollars in millions Reason Amount Army’s funding guidance to USAREUR was less than amount in the President’s budget $46 USAREUR annually reallocates this amount of RPMA funds to other O&M accounts 35 Costs for maintenance, repair, and minor construction funds for installations due to close were included 42 Funds were included for nonsoecified ourooses 91 Total $214 Page 7 GAO/NSIAD-BO-275BR Army Budget Appendix I Potential Reductions to the U.S. Army, Europe Fiscal Year 1991 Operation aud Maintenauce Budget Funding Guidance Is Less Than The Army’s current budget planning guidance to USAREUR for RPMA in Amount Budgeted fiscal year 1991 is $46 million less than what was included in the Presi- dent’s budget request. In other words, USAREURexpects to receive $1.362 billion, not the $1.408 billion reflected in the President’s budget. USAREUR Does Not Spend All From fiscal years 1987 to 1989, USAREURreallocated a total of $105 mil- Its RPMA Funds for RPMA lion (an annual average of $35 million) from the RPMA account to PllI-pOSeS another O&M account, base operations. USAREURofficials in the Office of the Deputy Chief of Staff for Resource Management told us that the funds were reallocated from RPMA to base operations because the Con- gress has been more willing to authorize increases in RPMA funding than increases in less popular programs such as base operations. Officials also told us that RPM.4 funds are reallocated to other O&M accounts by USAREUR'S community commanders after the RPMA funds are allocated to them. They said that this happens because community com- manders view project funds as discretionary money to be used as the “billpayer” for other unfunded needs. The officials, however, did not have data on the amounts of RPMA funds that the community com- manders moved from their allocation of RPMA to other O&M accounts. Maintenance, Repair, and Minor In August 1988, USAREUR'SOffice of the Deputy Chief of Staff for Opera- Construction Funds for tions began planning for the eventual drawdown of USAREUR'S forces. Installations to Be Closed The planning efforts have focused on reducing UEAREUR'S forces and closing installations to reach the Army’s portion of the 195,000troop ceiling currently being negotiated as part of the Conventional Forces, Europe, negotiations. Review of the list of installations USAREURhas identified for closing showed that 91 maintenance, repair, and minor construction projects, valued at $42 million, had been included in the fiscal year 1991 budget but will not now be performed. Nonspecified Purposes The difference between what USAREURbelieves is needed to meet its fiscal year 1991 RPhfA requirements ($1.194 billion) and the budget request adjusted to reflect funds not needed because of the reasons pre- viously stated ($1.285 billion) represents $91 million of RPMA funds in the budget for other requirements not yet identified. As such, funds for these nonspecified purposes could be reduced from the budget request. Page 8 GAO/NSIAD=90-275BR Anny Budget Appendix I Potential Reductione tu the U.S. Army, Europe Fiscal Year 1991 Operation and Maintenance Budget Civilian Personnel Background USAREUR’S fiscal year 1991 budget request for civilian personnel was based on 63,907 civilian employees (61,460 staff years)’ being paid from O&M funds. At the budgeted rate of $28,000 per staff year, this would amount to $1.721 billion. Results of Analysis In January 1990, DOD imposed a hiring freeze on civilian employees. As a result of the freeze, USAREUR’Scivilian employment has decreased from 66,193 as of January 31,1990, to 63,690 as of May 31,1990-a total decrease of 1,603 employees during the 4-month period-or an average of 376 positions a month. Assuming that the same attrition rate con- tinues during the remainder of the fiscal year, we estimate that as of the beginning of fiscal year 1991, USAREURwill have approximately 62,187 civilian employees on its rolls of which 60,769 will be paid out of O&M funds.’ Converting the number of employees to staff years (using the 96.17 per- cent factor) results in a staff year total of 58,442 at the beginning of fiscal year 1991. The difference between this total and the 61,460 staff years included in the budget is 3,018 staff years. At an average rate of $28,000 per staff year, this equates to $84.5 million that is in the budget that may not be needed. Flying Hour Program Background IJSAREUR'S flying hour program consists of the cost of fuel and repair parts for the approximately 1,000 rotary- and fixed-wing aircraft sta- tioned in Europe. USAREUR’S fiscal year 1991 flying hour program con- sists of 210,000 hours at a cost of $44.2 million. ’ For fiscal year 1991 budgetingpurposes,the Army useda factor of 96.17percentto convert the numberof personnelto staff years. ‘Approximately 9’7.72percentof the USAREURcivilian employeesare paid out of O&Mfunds. Therefore,we applied the samepercentageto the estimatednumberof civilians on the rolls at the beginningof fiscal year 1991to arrive at the numberof employeespaid with O&M funds. Page 9 GAO/NSIAD-90-276BR Army Budget Appendix I PotentiaI Reductions to the U.S.Army, Europe Fiscal Year 1991Operation and Maintenance Budget Results of Analysis The flying hours budgeted for USAREURin fiscal year 1991 is comparable to USAREUR’Slevel of effort for the last 3 fiscal years, as shown in table 1.4. Table 1.4:USAREUR’s Flying Hours for Fiscal Years 1998 to 1990 Bud eted Fiscal year flying 8,ours Percent used 1988 219,000 100 1989 219,000 92 1990 213,000 100 (estimated) According to a USAREUR aviation official, USAREUR’S fiscal year 1989 flying hour program was overfunded by about $4 million. The official stated that the $4 million, plus an additional $2.5 million, was reallo- cated from the flying hour program to other O&M accounts to meet other needs. The official also stated that at the beginning of fiscal year 1990, $6 million in flying hour program funds were moved to fund other requirements. The official further stated that USAREUR’Sfiscal year 1990 flying hour program could absorb $4 million of the reduction without affecting USAREUR'S ability to meet its training requirements. A USAREURofficial in the Office of the Deputy Chief of Staff for Opera- tions told us that the Army plans to deploy three battalions of Apache helicopters to Europe by March 1991 and that this will increase USAREUR'S flying hour requirements for fiscal year 1991. Therefore, funds will not be available to reallocate to other O&M accounts as in prior years. While the Army does plan to deploy three Apache battalions to Europe by March 1991, these battalions will replace existing Cobra battalions. Furthermore, there are fewer aircraft in an Apache battalion than in a Cobra battalion. This factor, plus the probability of troop reductions and reduced tensions in Europe, leads us to believe that the fiscal year 1991 flying hour program can be reduced by at least $4 million-the same amount as in prior years. Page 10 GAO/NSIAD-90-276BRArmy Budget Appendix I Potential Reductions to the U.S. Army, Europe Fiscal Year 1991 Operation and Maintenance Budget Ground OPTEMPO Background Ground OFTEMPOrepresents the fuel and spare parts costs associated with operating tactical vehicles and other military equipment at a speci- fied rate of usage to achieve a certain level of readiness. The costs for operating tactical vehicles and other military equipment are calculated by the Department of the Army using its Training Resource Model, which multiplies the cost per unit of usage by the number of authorized pieces of equipment and the related number of miles or hours and then sums the products. For example, if the fuel and spare parts cost $1.50 per mile and USAREURhas 1,000 vehicles that it plans to operate 500 miles during the year, the estimated ground OPTEMPOfor the vehicle is $750,000. Results of Analysis Our calculation of USAREUR'SOPTEMPOrequirements, using the same methodology as the Training Resource Model, showed an OFTEMPO requirement of $223 million as compared to the $245.4 million that was included in the President’s budget for fiscal year 1991. A USAREURofficial in the Office of the Deputy Chief of Staff for Opera- tions told us that he could not explain the $22.4 million difference between the two amounts ($223 million and $245.4 million). The official said that one possible explanation might be that the Training Resources Model does not calculate OPTEMPOfor small equipment items such as radios and protective masks. Subsequent to our discussion, the official provided us with a computer printout that showed the OFTEMPOwas $22.4 million for the equipment not included in the Training Resources Model. In discussion with Headquarters, Department of the Army officials, we determined that the OFTEMPOfor equipment not included in the model is based on a percentage of the OPTEMPOcosts for equipment that is included in the model. For example, OPTEMPOfor equipment in a combat unit that is not included in the model is 5 percent of the OPTEMPOcost for equipment that is included in the model; 10 percent in a combat support unit, and 15 percent in a headquarters unit. The officials were not able to explain the rationale for the specific percentages or how the esti- mated amounts compare to the actual amounts. Page 11 GAO/NSIALbBO-276BR Army Budget Appendix I Potential Reductions to the U.S. Army, Europe Fiscal Year 1991 Operation and Maintenance Budget In view of the uncertainties concerning the rationale or validity of the OITEMPO amounts associated for nonmodeled equipment, we believe the $22.4 million could be reduced from the USAREURrequest. Joint Training Exercises Background The incremental costs associated with USAREUR'S participation in Corps, Echelons-Above-Corps, and the North Atlantic Treaty Organization (NATO) training exercises are paid from USAREURJoint Chiefs of Staff training exercise funds. Incremental costs would include the cost of installing telephones and communication systems between USAREUR and NAID command units participating in the exercises. For fiscal year 1991, USAREURrequested $23.9 million to fund these exercise-related costs. Results of Analysis One exercise scheduled for fiscal year 1991 (WINTEX~CIMEX) in which USAREURwas a planned participant has been canceled due to the changed political environment in Europe. USAREURhad included $1.1 million in its budget for this exercise. As a result, these funds could be reduced from USAREUR'Sbudget request. Page 12 GAO/NSIAD-BO-275BR Army Budget I Annendix II p’otentialReductionsto the U.S.Army Forces CommandFiscal Year 1991 Operation and MarlntenanceBudget We identified potential budget reductions of about $408 million to the Army’s fiscal year 1991 budget request for O&M funding for FORSCOM. The proposed reductions stem from the Army’s budget guidance to FORSCOMand the other major commands, in which it advised the com- mands to plan on receiving significantly less than what was included in the President’s January 1990 budget submission to the Congress. Table 11.1shows the proposed reductions by O&M account. Table 11.1:Proposed Reductions to FORSCOM’s Fiscal Year 1991 O&M Dollars in millions Budget Account Prooosed reduction General purpose forces mission $194.8 Real property maintenance 176.6 Base operations 30.5 Other rxoarams 5.9 Total $407.8 FORSCOM,the largest U.S. Army major command, is responsible for pro- Background viding combat ready, properly equipped and trained forces to other major commands and theater commanders located throughout the world. FORSCOMoperates 18 major Army installations located in the United States. The Army’s fiscal year 1991 O&M budget request included $2.534 billion Results of Analysis for IWBCOM, an increase of $215 million over the approved fiscal year 1990 funding level of $2.319 billion as of July 1990. In March 1990, FORSCOMnotified its installations that funding levels identified for FORSCOMin the Army’s January 1990 budget submission to the Congress were “unrealistically high” and that the approved fiscal year 1991 O&M budget would probably reflect a 6- to lo-percent reduction as compared to the fiscal year 1990 amount. According to FORSCOM,the changing world environment and lack of firm fiscal year 1991 funding levels for such things as base closures or force reductions make planning difficult. In an attempt to give recognition to these uncertainties, FORSCOMdeveloped an estimate of what it could expect to receive after the congressional authorization and appropria- tion process was completed. FORSCOM'Sestimate was $2.126 billion- about $408 million less than what was included in the President’s budget to the Congress, The reduction represents a 16-percent reduction Page 13 GAO/NSIAD90-276BR Army Budget Appendix II Potential ReductIona to the U.S. Army Forces Command Fhal Year 1991 Operation aud Maintenance Budget from what was requested for fiscal year 1991, but only a 3-percent reduction from the July 1990 authorized funding level for fiscal year 1990. Table II.2 shows the difference between what was included in the Presi- dent’s January 1990 budget and FORSCOM'Sestimate for the base opera- tions, mission, real property maintenance, and other minor accounts. Table 11.2:Comparison of Amounts in the January 1990 Budget to FORSCOM’s Dollars in millions Estimated Amounts (as of April 1990) January 1990 FORSCOM’s best Account budget estimate Difference General purpose forces mission $1,190.3 $995.5 $194.8 Real property maintenance 673.4 496.8 176.6 Base operations 614.0 583.5 30.5 Other programs 56.7 50.8 5.9 Total $2,534.4 $2,128.8 $407.8 As an indication that FORSCOMis planning for the reduction, its March 1990 notification to FORSCOMinstallations instructed the installations to submit a budget execution plan showing how they would allocate the reduced funding levels for fiscal year 1991 in accordance with the pri- orities spelled out by FORSCOM.These priorities centered on maintaining training at specified levels, maintaining equipment to prescribed stan- dards, and maintaining a decent quality of life for soldiers, their depen- dents, and civilian employees. In many cases, the installation commanders expressed concerns about being able to carry out their commitments at the reduced funding levels. However, the commanders have responded to the FURSCOMrequest. In most instances, the budget execution plans showed that the commanders planned to fully fund their training requirements and significantly reduce base operations and real property maintenance to achieve the WRSCOM-proposedfunding levels. Page 14 GAO/NSIAD-90-275BR Army Budget Appbndix III Objectives,Scope,and Methodology This review is one of a series that examines defense budget issues. Our objectives were to assess the adequacy of the justifications for the Army’s fiscal year 1991 O&M budget request to determine whether the programs should be funded in the amounts requested. Our review was performed at the two major Army commands for which the largest amounts of O&M funds were requested in fiscal year lQQl- USAREUR and FORSCOM.At the two commands, our review focused prima- rily on the general purpose forces O&M accounts, which comprised the vast majority of the budget request. These accounts included general purpose forces mission, real property maintenance activities, base oper- ations, and joint training exercises. At USAREUR, our review also included subaccounts within the major accounts. For example, we reviewed civilian personnel and ground and air OPTEMPO. In performing our review, we interviewed budget and program officials and reviewed pertinent program documents and budget support data obtained from the Department of the Army, Washington, D.C., and USAREUR and FORSCOM,Atlanta, Georgia. Our review was performed from January to July 1990 in accordance with generally accepted government auditing standards. Page 15 GAO/NSIAD-90-275BR Army Budget c Annendix IV Major Contributors to This Report Henry L. Hinton, Associate Director National Security and Robert J, Lane, Assistant Director International Affairs Frank A. Papineau, Evaluator-in-Charge Division, Washington, Marjorie L. Adams, Evaluator D.C. Wilbur H. Crawford, Site Senior Atlanta Regional Fred Jimenez, Evaluator Office Donald R. Hunts, Site Senior European Office Robert E. Martin, Evaluator Ann Calvaresi-Barr, Evaluator Patrick E. Gallagher, Evaluator Page 16 GAO/NE&ID-90-275BRArmy Budget Ordering Information l’hch first. five copies of each GAO report are free. Additional copies are $2 t!acBh.Orders should be sent to the following address, accom- panitxl by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. ITS Gthntval Accounting Office P.O. Box 60 15 (&ithersburg, MD 20877 I Orders may also be placed by calling (202) 275-6241. ( $ i,j 1 4- _......“._... - .._.“. .,.__ .-...I . ..__...... I._I . I,.._”.._..- _.._.“. “”,,_ _ ..- __,_..-__-.~~ -.-..---.,- < First,-(hss Mail Post,agt~ XL Fws Paid <;A() I I’tbrtttit No. G 100 / 4)t’l’ic~i;tl Pfrtsirtcw4 ._-.._-__-- ..__
Army Budget: Potential Reductions to the Operations and Maintenance Budget
Published by the Government Accountability Office on 1990-09-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)