oversight

DOD Budget: Budgeting for Operation and Maintenance Activities

Published by the Government Accountability Office on 1997-07-22.

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

                          United States General Accounting Office

GAO                       Testimony
                          Before the Subcommittee on Military Readiness,
                          Committee on National Security, House of Representatives




For Release on Delivery
Expected at
2:00 p.m., EDT
                          DOD BUDGET
Tuesday,
July 22, 1997

                          Budgeting for Operation
                          and Maintenance Activities
                          Statement of Sharon A. Cekala, Associate Director,
                          Military Operations and Capabilities Issues, National
                          Security and International Affairs Division




GAO/T-NSIAD-97-222
              Mr. Chairman and Members of the Subcommittee:

              I appreciate the opportunity to be here today to discuss our work on the
              military services’ budgeting for operation and maintenance (O&M)
              activities.1 The O&M appropriation provides the services with funds to carry
              out day-to-day activities such as the recruitment and fielding of a trained
              and ready force, equipment maintenance and repair, child care and family
              centers, transportation services, civilian personnel management and pay,
              and maintenance of the infrastructure to support the forces. The
              Department of Defense’s (DOD) budget request of over $250 billion for
              fiscal year 1998 includes almost $94 billion, or 37 percent of the total, for
              O&M activities. The examples of budgeting issues I will describe may be
              symptomatic of a pattern in the way the services estimate their budgets for
              O&M activities. That is, DOD submits budget estimates that are often
              different from what the services ultimately obligate for various O&M
              activities.

              My statement focuses on

          •   examples of differences in the services’ budget estimates and obligations
              for some activities within the services’ O&M accounts and
          •   flexibility the services have in obligating O&M funds and congressional
              visibility over the movement of those funds between various O&M
              activities.


              We recognize that the amounts the services obligate for O&M activities
Summary       rarely agree with the estimates reflected in the budget request and that
              unplanned events often occur. However, our analysis of certain O&M
              activities shows a pattern of differences between budget estimates for
              some of the services’ O&M activities and what the services obligate for
              those O&M activities. When such patterns consistently appear, we question
              whether the budget estimates accurately portray the services’ true needs.

              The services have a great deal of flexibility as to how they obligate O&M
              funds, and we recognize the need for flexibility. However, Congress may
              wish to have greater visibility over DOD appropriations to identify and fully
              understand variations—and recurring patterns among
              variations—between the services’ budget estimates and actual obligations.
              Greater visibility could enhance and facilitate Congress’ budget

              1
               The words “activity” and “activities” are generally used in this statement to refer to “items of
              expense,” which is the term used in appropriations law.



              Page 1                                                             GAO/T-NSIAD-97-222 DOD Budget
                           decision-making. Whether Congress decides to direct changes in the
                           budget execution process depends on the type of information that
                           Congress believes it needs to make its budget authorization and
                           appropriation decisions.


                           In several reports, we identified patterns of differences between estimates
Differences in Budget      in the services’ budget submissions and the services’ obligations for
Estimates and              particular O&M activities.
Obligations
Services Consistently      In our April 1995 report on Army training,2 we point out that about
Request More or Less       $1.2 billion, or one-third, of the $3.6 billion budgeted for operating tempo3
Funds Than They Obligate   for U.S. Forces Command and U.S. Army, Europe, in fiscal years 1993-94
                           was used to fund other O&M activities. These other activities included base
for Some O&M Activities    operations, real property maintenance, and contingency operations in
                           Somalia and Haiti. According to Army officials, funds were moved from
                           operating tempo to the other O&M activities because the activities were
                           either unfunded (contingency operations) or underfunded (base
                           operations and real property maintenance).

                           The use of operating tempo funds for other O&M activities is an issue that
                           we have repeatedly pointed out in our annual O&M budget reviews. For
                           example, the Army requests and receives funds to operate its combat
                           vehicles at 800 miles per vehicle per year to achieve a prescribed readiness
                           level. However, since fiscal year 1992, the Army has consistently operated
                           at a reduced rate—about 642 miles per vehicle per year in fiscal
                           year 1996—and obligated the remaining operating tempo funds for other
                           O&M activities.


                           Similarly, in our July 1995 report on depot maintenance,4 we describe how
                           for fiscal years 1993-94, the services obligated about $485 million less than
                           the amount requested and about $832 million less than the amount
                           received for depot maintenance. The funds requested but not obligated for
                           depot maintenance were obligated for military contingencies and other

                           2
                            Army Training: One-Third of 1993 and 1994 Budgeted Funds Were Used for Other Purposes
                           (GAO/NSIAD-95-71, Apr. 7, 1995).
                           3
                            Operating tempo is the pace of unit training that the Army believes it needs to conduct to maintain its
                           fleet of tracked and wheeled vehicles at a prescribed readiness level. Operating tempo funds cover the
                           cost of fuel, reparable spare parts, and consumable spare parts.
                           4
                            Depot Maintenance: Some Funds Intended for Maintenance Are Used for Other Purposes
                           (GAO/NSIAD-95-124, July 6, 1995).



                           Page 2                                                           GAO/T-NSIAD-97-222 DOD Budget
O&M activities such as real property maintenance and base operations. This
pattern continues. According to the conference report accompanying the
fiscal year 1996 DOD appropriations act, Congress intended that the Army
have $950.7 million for depot maintenance. Nevertheless, the Army
obligated only $764.7 million. Furthermore, the Army acknowledged that it
will obligate $91 million less than it received for depot maintenance for
fiscal year 1997.

In addition, in our report on the fiscal year 1996 O&M budget,5 we note that
the Air Force requested an increase of $470 million over the fiscal
year 1995 funding level for real property maintenance. According to Air
Force officials, the additional funds were needed to compensate for prior
years’ underfunding. However, real property maintenance obligations in
prior years were actually greater than the amount appropriated because
funds from other O&M activities had been diverted to the real property
maintenance account.

We found similar examples of the services consistently obligating more or
less than they budgeted for certain O&M activities when we analyzed
groups of O&M activities. In our June 1996 report,6 we show that the
estimated needs reflected in the Army’s and the Air Force’s budget
requests for groups of O&M activities for fiscal years 1993-95 were often
greater than the amounts they obligated for those activities. This pattern
was particularly true for the Army, which obligated less funds for its
combat units than it estimated it would need and less than the amount
suggested for this activity in the conference reports to the appropriations
acts. For fiscal years 1993-95, the amount of funds the Army obligated for
O&M activities related to combat forces and support of the forces was
$900 million less than the $11.9 billion estimated requirements reflected in
its budget request. When training and recruiting funds are also considered,
the Army obligated about $1.3 billion less than the budget estimates.
Conversely, the Army obligated more than it estimated it would need for
infrastructure and management activities, again obligating more than the




5
 1996 DOD Budget: Potential Reductions to Operation and Maintenance Program
(GAO/NSIAD-95-200BR, Sept. 26, 1995).
6
 Operation and Maintenance Funding: Trends in Army and Air Force Use of Funds for Combat Forces
and Infrastructure (GAO/NSIAD-96-141, June 4, 1996).



Page 3                                                      GAO/T-NSIAD-97-222 DOD Budget
                           amounts suggested in the conference reports.7 Of the Army’s fiscal years
                           1993-95 O&M budget requests, about 64 percent was for infrastructure-type
                           functions like base support and management activities. However, about
                           70 percent of the Army’s O&M funds were obligated for these purposes.


Services Request Budget    For some O&M activities, the services have alternated between requesting
Amounts That Differ in     more funds than they obligated for those activities and obligating more
General From the Amounts   than they requested. During our recent review of defense infrastructure
                           and demolition activities,8 we analyzed the services’ budget estimates and
They Obligate for Other    subsequent obligations for real property maintenance and base operations
O&M Activities             activities.9 We found that for fiscal years 1987 through 1996, the Army
                           requested more than it obligated for real property maintenance in 5 of the
                           10 fiscal years. The greatest variance occurred in fiscal year 1993, when
                           the Army obligated more than it requested by about 38 percent. The Army
                           requested more than it obligated for base operations in only 3 fiscal years,
                           and the greatest variance occurred in fiscal year 1995, when it obligated
                           more than it requested by about 15 percent.


                           The services have a great deal of flexibility as to how they use their O&M
Visibility Over the        funds, which is evident from the O&M obligation patterns I have just
Services’ Movement         described. However, that flexibility is limited somewhat by actions taken
of Funds for O&M           by various congressional committees.

Activities                 The services’ annual O&M budget requests to Congress are presented in
                           four broad categories referred to as budget activities: operating forces,
                           mobilization, training and recruiting, and administrative and servicewide
                           activities. Each budget activity is further broken down into activity groups
                           that, in turn, are broken down into subactivity groups. The subactivity
                           groups are further broken down into program element codes. Although the

                           7
                            In our analysis, we categorized O&M activities as being related to combat forces and support of
                           forces; training and recruiting; base support; or management, command, and servicewide activities.
                           These categories were based on criteria developed by the Institute for Defense Analyses, the Joint
                           Chiefs of Staff, and the Office of Program Analysis and Evaluation. However, these categories do not
                           always agree with those the services used in their budget requests. We compared the amount obligated
                           to DOD’s budget estimates but were unable to compare the obligated amounts to the amounts
                           appropriated for the O&M activities because that information was not available at the DOD or services’
                           headquarters level.
                           8
                            Defense Infrastructure: Demolition of Unneeded Buildings Can Help Avoid Operating Costs
                           (GAO/NSIAD-97-125, May 13, 1997).
                           9
                            Real property maintenance includes, for example, buildings, railroads, surfaced areas, non-building
                           facilities, and utility systems. For purposes of our analysis, base operations include activities related to
                           installation support, such as real estate leases, transportation services, and laundry and dry cleaning
                           services.



                           Page 4                                                              GAO/T-NSIAD-97-222 DOD Budget
program element codes are not part of the budget presentation to
Congress, they provide more details about how the services plan to spend
funds appropriated. However, the services do not allocate appropriated
funds to the program element level.

For several years, including fiscal year 1997, congressional committee
reports have provided that if a service moves more than $20 million from
one budget activity to another, for example, from operating forces to
mobilization, the move is subject to normal reprogramming procedures.10
Similarly, if a service moves $20 million or more from certain
readiness-related subactivity groups within the operating forces’ budget
activity, for example, from combat units to depot maintenance, it is
required to provide prior notification to the congressional defense
committees.

Because the services do not allocate appropriated funds to the program
element level, Congress and the services’ headquarters do not have
visibility over the amounts requested, appropriated, and obligated at that
level for O&M activities. Congress and the services have less visibility once
funds are allocated to the base commander. Base commanders have
discretion to use the funds as they deem appropriate for mission needs.
However, base commanders do not always fund the most critical needs.
For example, we reported that base commanders with the Air Force
Materiel Command and the Air Mobility Command planned to spend over
30 percent of their real property maintenance funds on facilities and
projects that were not the most critical mission needs of the base
commanders.11 Examples include renovating an Air Force band recording
studio, repairing a baseball field that flooded when it rained, repairing a
heating and air conditioning system in a golf course clubhouse, and
landscaping an area surrounding visiting officers’ quarters instead of other
projects deemed as higher priorities.

In an effort to gain greater visibility over the costs of contingency
operations, much of which are financed with the services’ O&M funds,
Congress established the Overseas Contingency Operations Transfer Fund
in the fiscal year 1997 defense appropriations act. Congress appropriates
money to the fund, which DOD can transfer to the services’ O&M accounts as
operations unfold. DOD must report quarterly to the defense appropriations

10
 Normal reprogramming procedures include, for example, advance notification to congressional
committees, and are outlined in Department of Defense Financial Management Regulation 7000.14-R,
vol. 3, section 0604, dated December 1996.
11
  1996 DOD Budget (GAO/NSIAD-95-200BR, Sept. 26, 1995).



Page 5                                                       GAO/T-NSIAD-97-222 DOD Budget
           subcommittees, detailing amounts transferred from the fund and
           requirements funded. In a report that we will issue this month, we describe
           how the Department has improved its process for estimating costs for
           contingency operations like Bosnia and increased its visibility over those
           costs at high levels within the Department.

           As an additional means through which Congress can have more visibility
           over the services’ movement of funds between O&M activities, the defense
           authorization act for fiscal year 1998, H.R. 1119, broadened notification
           and reporting requirements for transfers of funds between subactivity
           group categories.


           Mr. Chairman, this concludes my prepared statement. I would be pleased
           to answer any questions that you or Members of the Subcommittee may
           have.




(703216)   Page 6                                         GAO/T-NSIAD-97-222 DOD Budget
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