oversight

Military Base Closures: Potential to Offset Fiscal Year 2000 Budget Request

Published by the Government Accountability Office on 1999-07-23.

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

                   United States General Accounting Office

GAO                Report to Congressional Committees




July 1999
                   MILITARY BASE
                   CLOSURES

                   Potential to Offset
                   Fiscal Year 2000
                   Budget Request




GAO/NSIAD-99-149
United States General Accounting Office                                                 National Security and
Washington, D.C. 20548                                                           International Affairs Division



                                    B-281818                                                                 Letter

                                    July 23, 1999

                                    Congressional Committees

                                    Congress enacted base realignment and closure (BRAC) legislation that
                                    instituted four BRAC rounds between 1988 and 1995 to help the
                                    Department of Defense (DOD) close and realign excess military bases. To
                                    fund investment costs of the BRAC actions, Congress established two base
                                    closure accounts: the first to fund BRAC actions resulting from the 1988
                                    round and the second, referred to as the 1990 account, to fund BRAC
                                    actions resulting from the 1991, 1993, and 1995 rounds. Although DOD’s
                                    authority to obligate 1988 base closure account funds expired on
                                    September 30, 1995, funds in the second account are available for use for
                                    an indefinite period. Congress, recognizing the complexities of realigning
                                    and closing bases and of providing for environmental restoration and
                                    mitigation, allows DOD the flexibility to allocate funds by military service,
                                    budget function, and installation. Also, with congressional approval, DOD
                                    can redistribute unobligated balances as appropriate to avoid delays in
                                    implementing BRAC decisions.

                                    Senate Report 105-213, dated June 11, 1998, on the fiscal year 1999 military
                                    construction appropriation bill requested the continuation of our annual
                                    review of DOD’s base closure accounts and its budget request for base
                                    closure activities. This report discusses opportunities to offset the fiscal
                                    year 2000 budget request and raises questions about some BRAC funding
                                    practices that could make it difficult for Congress to discern DOD’s actual
                                    funding requirements and priorities. Our scope and methodology are
                                    described in appendix I.



Results in Brief                    While the size of DOD’s appropriation requests for BRAC activities has
                                    declined as BRAC actions have been completed, our analysis of the BRAC
                                    accounts and fiscal year 2000 BRAC budget request identifies at least
                                    $66.4 million that could be used to offset DOD’s $1.28 billion BRAC budget
                                    request. Specifically:

                                    • about $11.8 million in proceeds generated by BRAC property
                                      transactions have not been reported to Congress and could be used to
                                      offset the 2000 budget request;




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                     • some prior years’ appropriations associated with the 1990 base closure
                       account are available but not needed ($2 million for BRAC military
                       construction (MILCON) projects, $26.2 million for BRAC operation and
                       maintenance (O&M) activities, and $6.6 million for BRAC environmental
                       projects);
                     • about $13.8 million from fiscal year 1998 and 1999 appropriations
                       withheld from the services because of lower than anticipated inflation
                       could be used to offset the fiscal year 2000 budget request; and
                     • about $6 million is no longer needed because the funds were requested
                       for three MILCON projects that have already been funded or canceled.

                     Some of DOD’s budgeting practices, such as requests for advance
                     appropriations and the accumulation of large unliquidated obligations for
                     environmental activities, may not clearly reflect the full cost of project
                     requirements and the budgetary resources available to meet those
                     requirements. They make it difficult for Congress to discern DOD’s true
                     funding requirements and priorities or the extent to which all previously
                     appropriated funds have been committed to specific projects.

                     We present a matter for consideration by Congress to appropriate at least
                     $66.4 million less than DOD is requesting in its fiscal year 2000 BRAC
                     budget submission.



Background           In the late 1980s, changes in the national security environment resulted in a
                     Defense infrastructure with more bases than DOD needed. To enable DOD
                     to close unneeded bases, Congress enacted BRAC legislation that instituted
                     base closure rounds in 1988, 1991, 1993, and 1995. For the 1988 round,
                     legislation required DOD to complete its closure and realignment actions
                     by September 30, 1995. For the 1991, 1993, and 1995 rounds, legislation
                     required DOD to complete all closures and realignments within 6 years
                     from the date the President sent the BRAC Commission's
                     recommendations and his approval to Congress.

                     DOD's authority to obligate 1988 base closure account funds to close or
                     realign bases expired on September 30, 1995. After that date, funds in the
                     1988 account ceased to be available for new obligations1 and may be used
                     only to adjust and liquidate obligations already charged to the account. Any


                     1
                      DOD financial regulations define obligations as amounts of orders placed, contracts awarded, services
                     received, and similar transactions during an accounting period that will require payment.




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                           unobligated funds in the 1988 account must remain there until Congress
                           transfers them or the account is closed. However, proceeds from 1988
                           BRAC installation property transactions deposited to the 1988 account may
                           be transferred to the 1990 account. According to DOD officials, the 1988
                           account will be closed on September 30, 2000, when the remaining
                           obligated and unobligated balances will be permanently canceled. Any
                           subsequent obligation adjustments or payments incurred against the 1988
                           account will be funded with current appropriations. As of February 1999,
                           the 1988 base closure account contained $50.3 million in unobligated funds.
                           Appendix II describes the status of funds in the 1988 account.

                           A different set of rules applies, however, to the 1990 base closure account.
                           Funds in that account are available until expended. Unobligated and
                           unliquidated funds in the 1990 base closure account totaled $1.5 billion and
                           $2.5 billion, respectively, on February 28, 1999. These amounts included
                           $1.6 billion appropriated in September 1998 for fiscal year 1999. New
                           obligations may be incurred and old obligations liquidated against the
                           account until the funds are expended.2

                           According to the Office of Management and Budget’s (OMB) Circular A-34,
                           Instructions on Budget Execution, recoveries of prior year obligations that
                           have been deobligated are available for new obligations if their period of
                           availability has not expired. Although the DOD Financial Management
                           Regulation provides financial policy and procedures for base closure and
                           realignment actions, the regulation does not specify procedures for
                           reviewing (1) unobligated balances and promptly obligating funds to valid
                           requirements when original requirements no longer exist and
                           (2) unliquidated obligations and promptly deobligating excess obligations
                           when final costs are known.


Appropriations for BRAC    As shown in figure 1, annual appropriation amounts for BRAC activities
Activities Have Declined   peaked at about $4 billion in fiscal year 1996 and declined each year
                           thereafter as more implementation actions were completed. In February
Since 1996
                           1999, DOD requested about $1.28 billion for fiscal year 2000. The request
                           was about $350 million less than the fiscal year 1999 appropriation and
                           about $780 million less than the fiscal year 1998 appropriation.




                           2
                            The Secretary of Defense may close the account under certain circumstances.




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                          Figure 1: BRAC Appropriations for Fiscal Years 1990-99 and Fiscal Year 2000 BRAC
                          Budget Request
                          Dollars in millions

                             4,000



                             3,500



                             3,000



                             2,500



                             2,000



                             1,500



                             1,000



                              500



                                0
                                     1990   1991    1992    1993    1994      1995       1996   1997   1998   1999   2000
                                                                           Fiscal year

                          Source: Appropriations laws and fiscal year 2000 budget request.




Opportunities to Offset   Our analysis of the 1990 base closure account and of the fiscal year 2000
                          BRAC budget request identified at least $66.4 million that could be used to
the Fiscal Year 2000      offset DOD’s budget request. This includes about $11.8 million in
BRAC Budget Request       unreported proceeds that DOD did not report in its fiscal year 2000 budget
                          request. It also includes about $34.8 million in unobligated or unliquidated
                          funds remaining in the 1990 account originally allocated for MILCON
                          projects, O&M activities, and environmental activities that are no longer
                          required. In addition, DOD withheld a total of about $13.8 million in
                          inflation savings from BRAC activities in its 1998 and 1999 programs.
                          Further, the 2000 BRAC budget request contains $6 million that is no longer
                          needed for three MILCON projects.



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Unreported Proceeds From     The military services collected $11.8 million more in proceeds from land
BRAC Activities That Could   sales and leases at closing or realigning bases than DOD reported in its
                             fiscal year 2000 BRAC budget request. Statutory and DOD guidance state
Be Used to Offset the
                             that proceeds from the transfer, lease, or disposal of BRAC property shall
Budget Request               be deposited into the base closure account.3 Proceeds deposited by a
                             particular military service are generally credited to that service’s BRAC
                             program.

                             Of the $11.8 million, about $8 million represent proceeds the Army
                             collected from land transactions related to the 1988 BRAC round and
                             deposited in the 1988 base closure account. Although these proceeds were
                             not reported in the fiscal year 2000 BRAC budget submission, shortly after
                             the budget was submitted, the Army requested that DOD transfer the
                             proceeds from the 1988 BRAC account to the 1990 BRAC account to fund
                             BRAC activities in 1999. As noted previously, proceeds from the 1988 BRAC
                             round deposited into the 1988 account may be transferred to the 1990
                             account and spent on current base closure activities. However, according
                             to a DOD official, the Army has not developed specific plans for the
                             proceeds.

                             The remaining $3.8 million represent proceeds from Navy land sales and
                             leases that were not used to offset the budget request for fiscal year 2000.
                             According to Navy officials, although not reflected in the request for fiscal
                             year 2000, these additional proceeds are reflected in the request for fiscal
                             year 2001. However, because the Navy has already collected the proceeds,
                             the $3.8 million are available now to offset the fiscal year 2000 budget
                             request.


Available BRAC MILCON        In April 1999, the Army reported having $2 million that were no longer
Funding That Could Be        required to support previously valid BRAC MILCON projects. We found no
                             instances in which these funds were initially made available for
Used to Offset the Budget
                             unsupported MILCON requirements. However, the Army has no current
Request                      BRAC requirements for these funds. Although the Army has reprogrammed
                             other unobligated balances to other BRAC requirements, the $2 million
                             represent available funding that was not considered at the time DOD
                             submitted its fiscal year 2000 budget request to Congress.



                             3
                              Section 2906(a) of the Defense Base Closure and Realignment Act of 1990 (P.L. 101-510 as amended)
                             10 U.S.C. 2687 note. See also 10 U.S.C. 2667 on the deposit of lease proceeds from BRAC property.




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Available BRAC O&M          As of April 1999, the military services collectively had identified
Funding That Could Be       $26.2 million from the 1990 base closure account to fund BRAC 1990
                            account O&M requirements that no longer existed (see table 1). As with
Used to Offset the Budget
                            MILCON projects, we found no instances in which funds were initially
Request                     made available for invalid O&M requirements. Although the services
                            reprogrammed some of these funds to other BRAC requirements
                            subsequent to submission of the fiscal year 2000 budget request, the
                            $26.2 million represent additional available funding that DOD did not
                            consider at the time it submitted its fiscal year 2000 budget request to
                            Congress.



                            Table 1: Funding Available From BRAC O&M Activities

                            Military service                                                              Funds available
                            Air Force                                                                         $6,990,574
                            Army                                                                              13,407,775
                            Navy                                                                                5,776,557
                            Total                                                                            $26,174,906
                            Source: Budget documents and interviews with officials from major commands.




Available BRAC              In April 1999, on the basis of our inquiries, the military services identified
Environmental Funding       $6.6 million from the 1990 base closure account for BRAC environmental
                            requirements that no longer existed (see table 2). Although the services
That Could Be Used to
                            may have subsequently reprogrammed some of these funds, this
Offset Budget the Request   $6.6 million represents additional available funding that DOD did not
                            consider at the time it submitted its fiscal year 2000 budget request to
                            Congress.



                            Table 2: Funding Available From BRAC Environmental Activities

                            Military service                                                              Funds available
                            Air Force                                                                         $2,674,272
                            Army                                                                                2,602,308
                            Navy                                                                                1,308,208
                            Total                                                                             $6,584,788
                            Source: Budget documents and interviews with officials from major commands.




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Inflation Savings Withheld        DOD currently retains a total of about $13.8 million in fiscal year 1998 and
From BRAC Activities in           1999 inflation savings that could be used to offset the fiscal year 2000 BRAC
                                  budget request. Because inflation rates in fiscal years 1998 and 1999 were
Fiscal Year 1998
                                  lower than expected, the Office of the Under Secretary of Defense
and 1999 That Could Be            (Comptroller) withheld funds from the military services. DOD withheld
Used to Offset the Budget         $26 million from the fiscal year 1998 BRAC program that could have been
Request                           used to offset its 1999 budget request. Prior to submitting its fiscal year
                                  2000 budget, DOD reprogrammed about $15.8 million of that amount to
                                  support future requirements, leaving a balance of about $10.2 million still
                                  available to offset the 2000 BRAC budget request. In addition, DOD
                                  withheld another $10 million in inflation savings in fiscal year 1999. In May
                                  1999, Congress rescinded $6.4 million from the 1990 BRAC account. A DOD
                                  official told us that DOD plans to use the inflation savings to offset the
                                  rescission, which would leave $3.6 million available.

                                  Although DOD maintains the inflation savings in a holding account for
                                  potential reprogramming for other higher priority programs, as of May 1999
                                  the money had not been used. The $13.8 million in inflation savings that had
                                  not been distributed were not considered as an offset to BRAC budget
                                  requirements at the time DOD submitted its fiscal year 2000 budget request
                                  to Congress. An official from the Office of the Under Secretary of Defense
                                  (Comptroller) said that withholding these funds did not adversely affect the
                                  BRAC program because the services were able to carry out their programs
                                  as budgeted because of lower inflation rates in 1998 and 1999.


The 2000 Budget Request           The fiscal year 2000 BRAC budget request contains $6 million for three
Contains Unneeded Funds           MILCON projects that have already been funded or canceled. One Army
                                  project costing $3.3 million was accelerated and funded with fiscal year
for Three MILCON Projects
                                  1999 funds, while the requirement for a second project for $1.1 million was
                                  canceled. The Navy already received fiscal year 1999 funding for a
                                  $1.6 million building renovation project. Because of these actions, the
                                  requested funding for these projects is not needed.

Army Requested $3.3 Million for   The Army requested $3.3 million for an expanded dining facility that has
a Dining Facility That Has        already been funded. The Army needed funds to provide adequate dining
Already Been Funded               facilities for enlisted personnel and students of the U.S. Army Chemical and
                                  Military Police schools, which are being relocated from Fort McClellan,
                                  Alabama, to Fort Leonard Wood, Missouri. However, the Army accelerated
                                  the project and funded it with fiscal year 1999 funds. Therefore, $3.3 million




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                                  included in the fiscal year 2000 request is no longer needed for this
                                  construction project.

Army Request $1.1 Million for     The Army requested $1.1 million to construct a sanitary sewer line and
Unneeded Sewage Treatment         connection to a local municipal wastewater treatment plant and to upgrade
Project                           an existing pumping station in support of minor site closures at Fort Dix,
                                  New Jersey. However, Army officials told us that the local utility company
                                  and the reuse authority would not agree to the connection unless the Army
                                  paid for compliance with additional state environmental requirements. The
                                  Army did not include the cost of the environmental compliance in its
                                  budget submission. The Army believes the additional expense is not
                                  warranted and now plans to continue using the existing utility plant.
                                  Therefore, the $1.1 million included in the fiscal year 2000 request is not
                                  needed for this construction project.

Navy Requested $1.6 Million for   The Navy included $1.6 million in its fiscal year 2000 budget request for
Building Renovations That Have    building renovations associated with relocating the Naval Management
Already Been Funded               Systems Support Office from Chesapeake, Virginia, to government-owned
                                  space on the Norfolk Naval Base in Norfolk, Virginia. However, in fiscal
                                  year 1999, the Navy requested and received nearly $4 million for the same
                                  building renovations and alterations project. Later, the cost of the project
                                  was reduced to $1.6 million. In March 1999, the Navy reprogrammed
                                  $525,000 of the funds appropriated for the project and is planning to
                                  reprogram all of the remaining funds (about $3.5 million) to cover cost
                                  growth on unrelated projects. Based on its plans to reprogram all of the
                                  $4 million appropriated for the project in fiscal year 1999, DOD included an
                                  additional $1.6 million in its fiscal year 2000 budget to fund this project. As
                                  of July 1999, however, DOD had not notified Congress of any additional
                                  reprogramming of funds beyond the initial $525,000. Therefore, we believe
                                  there is sufficient funding available for this project without new
                                  appropriations for fiscal year 2000.



Some DOD Practices                DOD’s requests for advance appropriations and the accumulation of large
                                  unliquidated obligations for environmental activities can make it difficult
Do Not Clearly                    for Congress to discern the full cost of DOD’s BRAC requirements and
Reflect Funding                   priorities. We are continuing to examine these practices to identify areas
                                  where DOD could improve its fund management and more clearly show
Requirements And                  funding needs in its budget requests.
Priorities


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Fiscal Year 2000 BRAC   DOD’s budget request for fiscal year 2000 includes $1.28 billion for BRAC
Budget Requests Only    funding. However, the Department requested that only $706 million be
                        appropriated for fiscal year 2000, with the remaining $577 million to be
Partial Funding
                        provided as new budget authority in fiscal year 2001. According to DOD
                        and OMB officials, the appropriations requested for fiscal year 2001 are for
                        MILCON and environmental projects that would be started in fiscal year
                        2000 but would not need the additional funding until the second year and
                        beyond.

                        DOD’s request for advance appropriations splits budget authority for fiscal
                        year 2000 projects between fiscal year 2000 and 2001.4 This deviates from
                        DOD’s standard practice of requesting the full funding needed for each
                        project in a single annual appropriation. According to DOD and OMB
                        officials, deferring full funding for the BRAC projects enables DOD to
                        include more modernization funds in its fiscal year 2000 budget within
                        current budget caps and still provide assurance that the remaining funding
                        will be available for BRAC in fiscal year 2001.

                        While the advance funding proposal provides DOD greater flexibility in
                        budgeting, it has consequences for oversight of government obligations.
                        DOD’s prior practice of requesting budget authority for the full cost of
                        projects before an acquisition was made ensured that the full costs of
                        projects were recognized at the time Congress and the President made the
                        commitment to undertake them. According to OMB’s principles,5 full
                        funding in the budget year with regular appropriations is preferred because
                        it leads to tradeoffs with other proposed spending within the budget year.
                        In contrast, funding for a project over several years with regular
                        appropriations for the first year and advance appropriations for subsequent
                        years may bias tradeoffs in the budget year in favor of the proposed project
                        because the full cost of the project is not included in the first budget year.




                        4
                         DOD’s fiscal year 2000 budget requests a total of $3.1 billion in advance appropriations for MILCON
                        and family housing projects for fiscal year 2001. Of this amount, $577 million is related to BRAC
                        activities.
                        5
                          Analytical Perspectives, Budget of the United States Government Fiscal Year 2000, Office of the
                        President of the United States, pp. 158-159.




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DOD Has Large                  As of February 28, 1999, DOD had $455.9 million in unliquidated obligations
Unliquidated Obligations for   for 1991 and 1993 BRAC round environmental activities, some of which
                               could be available to reduce the fiscal year 2000 BRAC budget request.6
BRAC Environmental
                               According to DOD and military service officials, the services use indefinite
Activities                     delivery/indefinite quantity contracts7 for the majority of their BRAC
                               environmental activities. These types of contracts provide the primary
                               method for completing BRAC environmental projects, and we believe that
                               most of the $455.9 million in unliquidated obligations are under indefinite
                               delivery/indefinite quantity contracts.

                               On the basis of our work with other agencies, we know that contracts for
                               environmental projects can result in the accumulation of large unliquidated
                               obligations.8 Although DOD and military service officials told us the
                               services review unliquidated obligations and the environmental
                               requirements for which the funds were obligated, the officials could not
                               provide documentation that showed the results of their reviews. As of
                               May 7, 1999, these officials could not provide us with any data on the status
                               of the contracts with unliquidated obligations.

                               According to Army Corps of Engineers officials, indefinite
                               delivery/indefinite quantity contracts are used because of the uncertainties
                               associated with environmental cleanup activities. However, these officials
                               also acknowledged that the use of these contracts when specific
                               requirements and costs are unknown could also contribute to large
                               unliquidated obligations in environmental subaccounts. According to the
                               officials, analyzing environmental projects and their unliquidated
                               obligations to identify funds that are no longer needed was not a high
                               priority until fiscal year 1999. At the time of our review, the Army Corps of
                               Engineers was developing a structured approach to assess whether there
                               were excess unliquidated obligations for environmental projects.


                               6
                                However, because we could not determine how much of these unliquidated obligations might not be
                               required, we did not include any specific amount related to this area in our calculation of potential
                               offsets to the fiscal year 2000 BRAC budget request.
                               7
                                Under indefinite delivery/indefinite quantity contracts, DOD may obligate funds without designating
                               the funds to a specific task within the overall contract.
                               8
                                 Environmental Protection: EPA’s Progress in Closing Completed Grants and Contracts
                               (GAO/RCED-99-27, Nov. 20, 1998); Environmental Protection: EPA’s Fiscal Year 1999 Budget Request
                               (GAO/RCED-98-259R, Sept. 29, 1998); DOE Management: DOE Needs to Improve Its Analysis of
                               Carryover Balances (GAO/RCED-96-57, Apr. 12, 1996); NASA Budget: Carryover Balances for Selected
                               Programs (GAO/NSIAD-96-206, July 16, 1996); and Energy Management: Additional Uncosted Balances
                               Could Be Used to Meet Future Budget Needs (GAO/RCED-94-26, Oct. 26, 1993).




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                      In commenting on a draft of this report, DOD said that the technological
                      complexities of the environmental activities, coupled with lengthy
                      negotiations with regulators and local communities, have resulted in some
                      schedule delays, which have slowed the liquidation of funds. Nonetheless,
                      this issue is under review and DOD is still collecting data from the military
                      services to make an assessment.



Conclusions           At least $66.4 million of the fiscal year 2000 BRAC budget request could be
                      offset by funds already available. These include unreported proceeds from
                      BRAC land transactions, unused funds allocated to the 1990 base closure
                      account, inflation savings, and funding from three MILCON projects that
                      have already been funded or are no longer needed. These funds are
                      available to DOD without new appropriations. Further, some practices
                      such as requests for advance appropriations and the accumulation of large
                      unliquidated obligations for environmental activities can make oversight of
                      DOD’s BRAC accounts more difficult.



Matters for           Because prior year funds are available to meet requirements and other
                      funds requested are no longer supported by specific requirements,
Congressional         Congress may wish to consider appropriating at least $66.4 million less
Consideration         than DOD is requesting in its fiscal year 2000 BRAC budget submission.



Agency Comments and   In written comments on a draft of this report, DOD partially agreed with
                      our findings that the fiscal year 2000 budget should be offset by available
Our Evaluation        funds. Of the proposed reductions of $79.5 million, DOD concurred with
                      $16.2 million and did not concur with $63.3 million. Specifically, DOD
                      stated that (1) $34.8 million in unobligated balances is unavailable as an
                      offset because it has already been earmarked for valid unfunded BRAC
                      requirements; (2) of a total $20.2 million in inflation savings, $10.2 million
                      from fiscal year 1998 inflation savings is not available as an offset because
                      the savings was returned to the services, and an additional $10 million in
                      fiscal year 1999 inflation savings was fully considered during formulation of
                      the fiscal year 2000 budget; and (3) only $4.4 million for two MILCON
                      projects, of the $12.7 million, is available because one Army project for
                      $6.7 million will not be accelerated as planned and one Navy project for
                      $1.6 million was not previously funded in fiscal year 1999, as we reported.




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DOD also noted that without advanced appropriations, as requested for the
military construction account, the Department would be forced to slow the
pace of cleanup at closing bases. It further stated reductions of the
magnitude suggested in our report would eliminate the management
flexibility envisioned by Congress and adversely impact DOD’s ability to
close installations and speed the economic recovery of affected
communities. Addressing our concern that large unliquidated obligations
are accumulating for environmental activities, DOD responded that the
issue is under review and that it is still collecting data to determine if there
is indeed a problem.

Of the $63.3 million DOD questioned in our draft report, DOD was able to
provide documentation that $13.1 million was needed for valid
requirements. This included $6.7 million for an Army maintenance facility
project that was not accelerated as planned and $6.4 million in inflation
savings that was rescinded by Congress in May 1999. Accordingly, we
revised the $79.5 million estimate that appeared in our draft report by
$13.1 million to reflect these changes leaving total available funds to offset
DOD’s 2000 budget request of $66.4 million.

We continue to believe Congress may wish to consider appropriating at
least $66.4 million less than DOD requested in its fiscal year 2000 BRAC
budget because these prior year funds are available to meet requirements.
While we recognize that the military services have reprogrammed some
previously appropriated funds to other BRAC requirements, the
$34.8 million in unobligated balances represents additional available
funding that was not considered at the time the fiscal year 2000 budget
request was submitted to Congress. After the budget submission, the major
commands and the Army Corps of Engineers found that the requirements
for these funds no longer existed, and they could provide no evidence of
how they would use the unobligated balances. Also, we initially included in
our draft report that $20.2 million in inflation savings previously withheld
by DOD from the services could be used to offset the budget request.
However, Congress rescinded $6.4 million of this amount in May 1999.
Therefore, we revised this estimate to $13.8 million in inflation savings still
available to offset the 2000 budget request. We found no evidence that
these funds were considered during the budget formulation.

Additionally, our draft report included $12.7 million for four MILCON
projects in DOD’s 2000 budget request for which funds are no longer
needed. These include a $3.3 million project to expand an Army dining
facility and a $1.6 million Navy renovation project that have already been



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funded. Also included were a $1.1 million Army utility connection project
that was canceled and a $6.7 million Army maintenance facility project that
was planned to be accelerated. However, the Army provided us with
documentation in June 1999 that indicated the maintenance facility project
would not be accelerated as planned. Therefore, we revised the amount of
funds available from these MILCON projects to a total of $6 million
available to offset the fiscal year 2000 budget.

We disagree that advance funding, as opposed to the general practice of
fully funding DOD’s MILCON budget requirements, would force DOD to
drastically slow the pace of cleanup at closing bases. As we stated in this
report, requesting advanced appropriations for military construction
projects would have a negative impact on congressional oversight and
make it difficult for Congress to get a clear view of DOD’s program
priorities

Finally, regarding DOD’s concern that reductions of the magnitude
suggested in our report would limit the management flexibility envisioned
by Congress and adversely impact the Department’s ability to close
installations, we agree that Congress provided the Department with
flexibility to reprogram funds. At the same time, Congress approves
funding and the Office of the Under Secretary of Defense (Comptroller)
makes funds available to DOD components according to their official,
detailed budget justification and financial plan. At the time we completed
our review, none of the services indicated a specific need associated with
the funds we identified as available to offset DOD’s fiscal year 2000 budget
request. DOD’s comments and our evaluation of them are reprinted in full
in appendix III.


We are sending copies of this report to Senator Ted Stevens, Chairman, and
Senator, Daniel K. Inouye, Ranking Minority Member, Subcommittee on
Defense, Senate Committee on Appropriations; and Representative John
Lewis, Chairman, and Representative John P. Murtha, Ranking Minority
Member, Subcommittee on Defense, House Committee on Appropriations;
the Honorable William S. Cohen, Secretary of Defense; the Honorable
William J. Lynn, Under Secretary of Defense (Comptroller); the Honorable
F. Whitten Peters, Acting Secretary of the Air Force; the Honorable Louis
Caldera, Secretary of the Army; the Honorable Richard Danzig, Secretary of
the Navy; and the Honorable Jacob J. Lew, Director, Office of Management
and Budget. Copies will also be made available to others upon request.




Page 13                                  GAO/NSIAD-99-149 Military Base Closures
B-281818




If you have any questions regarding this report, please contact me at
(202) 512-8412. Other contacts and key contributors to this report are listed
in appendix IV.




David R. Warren, Director
Defense Management Issues




Page 14                                  GAO/NSIAD-99-149 Military Base Closures
B-281818




List of Congressional Committees

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

The Honorable Conrad Burns
Chairman
The Honorable Patty Murray
Ranking Minority Member
Subcommittee on Military Construction
Committee on Appropriations
United States Senate

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

The Honorable David L. Hobson
Chairman
The Honorable John W. Olver
Ranking Minority Member
Subcommittee on Military Construction
Committee on Appropriations
House of Representatives




Page 15                                 GAO/NSIAD-99-149 Military Base Closures
Contents



Letter                                                                                               1


Appendix I                                                                                          18
Scope and
Methodology

Appendix II                                                                                         21
Status of Funds in the
1988 Base Closure
Account

Appendix III                                                                                        23
Comments From the
Department of Defense

Appendix IV                                                                                         27
GAO Contacts and
Staff
Acknowledgments


Tables                   Table 1: Funding Available From BRAC O&M Activities                         6
                         Table 2: Funding Available From BRAC Environmental Activities               6




Figures                  Figure 1: BRAC Appropriations for Fiscal Years 1990-99 and Fiscal
                           Year 2000 BRAC Budget Request                                             4
                         Figure II.1: Unobligated Balances in the 1988 Base Closure Account
                           Since September 30, 1996                                                 21




                         Page 16                                GAO/NSIAD-99-149 Military Base Closures
Contents




Abbreviations

BRAC       base realignment and closure
DOD        Department of Defense
MILCON     military construction
OMB        Office of Management and Budget
O&M        operation and maintenance



Page 17                              GAO/NSIAD-99-149 Military Base Closures
Appendix I

Scope and Methodology                                                                                    Appenx
                                                                                                              Idi




             To identify opportunities to offset the Department of Defense (DOD)
             budget request for fiscal year 2000 base realignment and closure (BRAC)
             activities, we focused on prior fiscal year appropriations that had not been
             obligated or liquidated and that may be available to fund BRAC activities
             during fiscal year 2000. Because BRAC actions for the 1991 and 1993
             rounds were required to be completed by July 1997 and July 1999,
             respectively, we questioned the need for the unobligated funds and
             unliquidated obligations that were still allocated to these rounds. We
             examined a variety of DOD and military service budget and financial
             documents; analyzed implementation legislation for the base closure
             accounts; examined budget execution data for BRAC military construction
             (MILCON), operations and maintenance, environmental, and undistributed
             funds; compared execution data with Office of Management and Budget
             (OMB) and DOD guidance and goals; and reviewed guidance on the use of
             funds in the base closure accounts and recent audits of unobligated
             balances and unliquidated obligations in the accounts.

             Our 1999 audit of the federal government’s fiscal year 1998 consolidated
             financial statements identified billions of dollars in DOD unreconciled cash
             disbursement activity.1 As a result of these accounting problems, in this
             audit we reconciled the reported unliquidated obligations with those
             reported by the major commands to verify that all transactions had been
             recorded for those BRAC projects and activities with balances that could
             be deobligated. Specifically, we discussed the need for the unobligated
             funds and unliquidated obligations in the 1988 base closure account for the
             1988 round with officials from DOD, the military services, and several
             major commands to determine the availability of funds to apply to other
             BRAC requirements. Additionally, we discussed the need for the
             unobligated funds and unliquidated obligations in the 1990 base closure
             account for the 1991 and 1993 rounds with these officials to identify
             previous fiscal years’ funding that may be available during fiscal year 2000
             and that was not anticipated at the time DOD submitted the BRAC budget
             request to Congress. In cases where officials said the unobligated funds
             and unliquidated obligations were no longer needed or could not provide a
             specific requirement for these funds, we considered the balances available
             to fund requirements in the budget request. Additionally, in some cases, the
             services identified unobligated and unliquidated funds from the 1995 base
             closure round that may be available during fiscal year 2000 that was not


             1
               Financial Audit: 1997 Consolidated Financial Statements of the United States Government
             (GAO/AIMD-98-127, Mar. 31, 1998).




             Page 18                                               GAO/NSIAD-99-149 Military Base Closures
Appendix I
Scope and Methodology




considered at the time DOD submitted its budget request. Again, in cases
where officials said the unobligated funds and unliquidated obligations
were no longer needed or could not provide a specific requirement for
these funds, we considered the balances available to fund requirements in
the budget request. We also compared data on proceeds from land sales
and leases with those reported in the fiscal year 2000 budget request to
identify fiscal year BRAC revenues that had not been reported to Congress
and not used to offset DOD's budget requests for fiscal year 2000 and prior
fiscal years. To identify funds withheld from the BRAC program due to
inflation savings and that could be used to offset the 2000 budget request;
we interviewed DOD officials and collected documentation showing the
status of inflation savings withheld during fiscal years 1998 and 1999.

To validate DOD’s budget request for fiscal year 2000, including MILCON
projects, we reviewed fiscal year 2000 and prior fiscal year budget requests
and supporting justifications from DOD, the Defense Logistics Agency, the
Defense Information Systems Agency, and the military services. We
obtained and reviewed data on requirements to support the budget
requests for selected bases and sub-accounts. We reviewed OMB and DOD
guidance on the preparation and justification of budget requests, policy
guidance and submission requirements for the fiscal year 2000 and prior
BRAC budget requests, internal review procedures for validating budget
submissions from major commands, and DOD program budget decision
documents. We also met with OMB officials to discuss DOD’s request for
advanced appropriations, particularly for BRAC funding.

We also compared the amounts requested for operations and maintenance
activities and environmental projects at installations in the fiscal year 2000
budget request with their unobligated balances and unliquidated
obligations. We discussed the results of this comparison with officials from
DOD, the military services, and several major commands to verify that
additional appropriations were needed to fund fiscal year 2000
requirements for these installations. We reviewed recent audits of MILCON
projects in the fiscal year 2000 budget request and prior requests to
determine the magnitude, scope, and results of the audits. To verify
MILCON requirements, we compared the audit results with the MILCON
projects included in the fiscal year 2000 budget request to determine
whether the results were reflected in the budget request. We discussed our
comparison with officials from the Defense Logistics Agency and the
military services to determine whether the MILCON projects and
requirements were still valid.




Page 19                                   GAO/NSIAD-99-149 Military Base Closures
Appendix I
Scope and Methodology




We interviewed and obtained data from DOD officials, including officials
from the Defense Logistics Agency, the Defense Finance and Accounting
Service, the DOD Inspector General, the Air Force, the Army, and the Navy.
Within the Air Force, we met with officials from the Office of the Chief of
Staff, the Office for Financial Management and Comptroller, the Air Force
Base Conversion Agency, the Air Combat Command, the Air Education and
Training Command, the Air Mobility Command, and the 11th Wing. Army
organizations we met with included the Assistant Chief of Staff for
Installation Management, the Office of the Comptroller, the Corps of
Engineers, the Army Forces Command, the Communications-Electronics
Command, the Materiel Command, the Medical Command, the Military
Traffic Management Command, the Training and Doctrine Command, and
the Army Military District of Washington, D.C. Within the Navy, we met
with officials from the Naval Facilities Engineering Command, the Office of
the Comptroller, the Naval Air Systems Command, the Naval Sea Systems
Command, and the Naval Audit Service.

In performing this review, we used the same accounting systems, reports,
and statistics the military services use to monitor their BRAC programs. We
did not independently determine the reliability of this information.

We conducted our review from January to May 1999 in accordance with
generally accepted government auditing standards.




Page 20                                 GAO/NSIAD-99-149 Military Base Closures
Appendix II

Status of Funds in the 1988 Base Closure
Account                                                                                                         AppenIx
                                                                                                                      di




               Unobligated funding balances in the 1988 base closure account continue to
               grow. As of February 28, 1999, the account contained $50.3 million in
               unobligated funds.1 As shown in figure II.1, the unobligated amount rose by
               about $20 million since the end of fiscal year 1996. According to program
               officials, the increase occurred because the military services deobligated
               funds from requirements that no longer existed. Program requirements
               tend to change, and in some cases disappear, as BRAC actions are
               implemented. As the services’ deobligation process continues, the
               unobligated balance in the 1988 account will increase. The unliquidated
               amounts have fallen steadily since 1995 as DOD has implemented and paid
               for BRAC actions.



               Figure II.1: Unobligated Balances in the 1988 Base Closure Account Since
               September 30, 1996
               Dollars in millions


                   60


                   50


                   40


                   30


                   20


                   10


                   0
                            9/30/96              9/30/97              9/30/98              2/28/99
                               Air Force                Army                 Navy                 Unallocated
               Source: Appropriations Status by Fiscal Year Program and Subaccounts, Form (DDCOMP (M)) 1002s,
               as dated above, Defense Finance and Accounting Service.


               1
                On February 28, 1999, unliquidated obligations in the account totaled $71.1 million.




               Page 21                                                 GAO/NSIAD-99-149 Military Base Closures
Appendix II
Status of Funds in the 1988 Base Closure
Account




As we reported in 1998, program officials stated that pursuant to a DOD
Office of General Counsel memorandum, the unobligated funds in the 1988
account are used only to adjust and liquidate obligations that have already
been charged to the account.




Page 22                                    GAO/NSIAD-99-149 Military Base Closures
Appendix III

Comments From the Department of Defense                                     AppeInIx
                                                                                   di




Note: GAO comments
supplementing those in
the report text appear at
the end of this appendix.




Now on p. 4.

See comment 1.



Now on p. 7.



See comment 2.


Now on pp. 7 and 8.


See comment 3.




                            Page 23   GAO/NSIAD-99-149 Military Base Closures
                 Appendix III
                 Comments From the Department of Defense




Now on p. 9.

See comment 4.




Now on p. 10.




                 Page 24                                   GAO/NSIAD-99-149 Military Base Closures
               Appendix III
               Comments From the Department of Defense




               The following are GAO’s comments on the letter from the Under Secretary
               of Defense, Comptroller, dated July 1, 1999.



GAO Comments   1. We believe the $34.8 million in unobligated balances represents
               additional available funding that was not anticipated at the time the fiscal
               year 2000 budget request was submitted to Congress in February 1999. The
               $34.8 million was identified during interviews in March and April with
               officials from the services’ major commands and the Army Corps of
               Engineers. As a result of reviews of their unobligated balances and
               unliquidated obligations during January, February, March, and April 1999,
               the major commands and the Army Corps of Engineers found that
               requirements for these funds no longer existed. At the time of our review,
               DOD and service officials could not provide supporting documentation that
               showed how they would use the unobligated balances, nor did they identify
               plans to redesignate to other BRAC needs those funds we identified as
               potentially available to offset DOD’s fiscal year 2000 budget request.

               2. Documentation initially available to us showed $20.2 million in inflation
               savings being held by DOD--$10.2 million from fiscal year 1998 and $10
               million from fiscal year 1999—that had not been returned to the services.
               DOD provided no documentation to support how these funds were to be
               used or that the funds were returned to the services. Subsequently, P. L.
               106-31, enacted in May 1999, rescinded $6.4 million from the 1999 BRAC
               appropriation. Congress did not specify that this amount should come from
               inflation savings. An official from the DOD Comptroller’s Office stated
               DOD intends to use the inflation savings to offset the rescission. Therefore,
               we reduced our estimate of inflation savings available to offset the 2000
               BRAC budget from $20.2 million to $13.8 million to account for the
               rescission.

               3. We continue to believe that the 2000 BRAC budget request contains $6
               million for three separate military construction projects that are no longer
               required. DOD agreed that $4.4 million for two Army projects were
               accelerated or canceled in fiscal year 1999. Also, on the basis of
               documentation provided by the Navy, we continue to believe that sufficient
               funding is available from the fiscal year 1999 appropriations to pay for the
               Navy’s $1.6 million building renovations project and there is no need to
               appropriate new funds for this project in fiscal year 2000. In June 1999, the
               Army decided its $6.7 million maintenance facility project would not be
               accelerated as planned and provided GAO documentation to support this
               change. As a result, we revised our overall estimate of MILCON project



               Page 25                                   GAO/NSIAD-99-149 Military Base Closures
Appendix III
Comments From the Department of Defense




funding available to offset the fiscal year 2000 budget from $12.7 million in
our draft report to $6 million.

4. We continue to believe that engaging in a process of advance
appropriations for military construction projects as a method for funding
near-term modernization requirements is not consistent with DOD’s general
practice of fully funding for military construction projects and will not
enhance congressional oversight. According to OMB’s principles, and as
our report points out, full funding in the budget year with regular
appropriations is preferred because it leads to tradeoffs with other
proposed spending within the budget year. In contrast, funding for a project
over several years with regular appropriations for the first year and
advance appropriations for subsequent years may bias tradeoffs in the
budget year in favor of the proposed project because the full cost of the
project is not included in the first budget year.




Page 26                                   GAO/NSIAD-99-149 Military Base Closures
Appendix IV

GAO Contacts and Staff Acknowledgments                                                            AppenV
                                                                                                       Ix
                                                                                                        di




GAO Contacts         Barry Holman (202) 512-5581
                     William Crocker (202) 512-4533



Acknowledgments      In addition to those named above, Claudia Dickey, Mark Little, Margaret
                     Morgan, Robert Poetta, Tracy Whitaker, and Bill Woods made key
                     contributions to this report.




(709390)      Lert   Page 27                                GAO/NSIAD-99-149 Military Base Closures
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