Defense Modernization Account: Operations and Benefits

Published by the Government Accountability Office on 1999-06-11.

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

                   United States General Accounting Office

GAO                Report to Congressional Committees

June 1999

                   Operations and

United States General Accounting Office                                                                      National Security and
Washington, D.C. 20548                                                                                International Affairs Division

                                    B-282491                                                                                               Letter

                                    June 11, 1999

                                    Congressional Committees

                                    The Secretary of Defense or the secretary of a military department may
                                    transfer certain unexpired funds from their appropriations 1 to the Defense
                                    Modernization Account, established by law in 1996.2 Funds must come
                                    from savings achieved through efficient management of procurement or
                                    support of installations and facilities.3 Account funds may be used only for
                                    increasing procurement or for modernizing an existing system or a system
                                    being procured under an ongoing procurement program. Congressional
                                    intent in establishing the account was to encourage savings by the
                                    Department of Defense (DOD) and its military departments and to make
                                    those savings available for meeting shortfalls in funding for modernization.
                                    DOD is required to submit quarterly reports on the activities of the account
                                    to the six committees specified in the legislation.4

                                    The legislation establishing the account requires us to review operations
                                    and benefits by March 1, 2000, and again by March 1, 2003. To satisfy the
                                    first review requirement, we determined the status of the funding and uses
                                    of the account, and whether DOD has reported to the six committees on
                                    the activities of the account.

                                    Neither DOD nor the services have ever transferred funds into the Defense
                                    Modernization Account, and hence it has never been used. The services
                                    maintained that the reason for the inactivity in the account is that funds
                                    have not been available. In fact, the legislation prohibits the transfer of
                                    funds to the account if the secretary of a military department or the

                                     At the end of the period of availability of a fixed-year appropriation, the appropriation “expires” and is
                                    available only for recording, adjusting, and liquidating obligations chargeable to that appropriation.
                                        Section 912 of the National Defense Authorization Act for Fiscal Year 1996(P.L.104-106).

                                    3The statute provides that the Secretary of Defense and the secretaries of military departments may
                                    transfer unexpired funds in appropriation accounts available for procurement and unexpired funds
                                    available in the last 30 days of a fiscal year for support of installations and facilities, which are excess to
                                    requirements, to the Defense Modernization Account.

                                      The Senate Committees on Armed Services, on Appropriations, and on Governmental Affairs and the
                                    House Committees on National Security (now the Committee on Armed Services), on Appropriations,
                                    and on Government Reform and Oversight.

                                    Page 1                                                     GAO/NSIAD-99-134 Defense Modernization

Secretary of Defense determines that there are greater priorities for the use
of funds. According to the Air Force, it uses available funds for other
purposes such as reprogrammings or as offsets to congressionally directed
rescissions. The Marine Corps stated that it does not have excess funds in
support of installations, facilities, or procurement. The Navy emphasized
the lack of availability of funds to use for the account. The Army stated
that it has not been able to afford transfers to the account because of tight
budgets, readiness priorities, and support for contingency operations not
always completely reimbursed by supplemental appropriations.

We also found that DOD has never submitted any of the required quarterly
reports on the activities of the account to the specified congressional
committees. According to DOD, the reason reports have not been
submitted is that the account has been inactive. Nevertheless, had DOD
submitted reports, the committees would have been informed that the
account has been inactive.

DOD concurred with our findings. DOD also noted that considerable work
had been done to formulate policies and procedures for operation of the

To satisfy our final review requirement, we plan to look at the account and
report on its status before March 1, 2003. Please call me on (202) 512-5140 if
you or your staff have any questions about this report.

Mark E. Gebicke
Director, National Security Preparedness Issues

Page 2                                   GAO/NSIAD-99-134 Defense Modernization

List of Congressional Committees

The Honorable John W. Warner
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Ted Stevens
The Honorable David K. Inouye
Ranking Minority Member
Subcommittee of Defense
Committee on Appropriations
United States Senate

The Honorable Floyd Spence
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives

The Honorable Jerry Lewis
The Honorable John P. Murtha
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
House of Representatives

The Honorable Fred Thompson
The Honorable Joseph I. Lieberman
Ranking Minority Member
Committee on Governmental Affairs
United States Senate

Page 3                              GAO/NSIAD-99-134 Defense Modernization

                   The Honorable Dan Burton
                   The Honorable Henry A. Waxman
                   Ranking Minority Member
                   Committee on Government Reform
                   House of Representatives

(701152)   Leter   Page 4                           GAO/NSIAD-99-134 Defense Modernization
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