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entitled 'Defense Acquisitions: DOD's Research and Development Budget 
Requests to Congress Do Not Provide Consistent, Complete, and Clear 
Information' which was released on September 6, 2007. 

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Report to Congressional Committees: 

United States Government Accountability Office: 

GAO: 

September 2007: 

Defense Acquisitions: 

DOD's Research and Development Budget Requests to Congress Do Not 
Provide Consistent, Complete, and Clear Information: 

Defense Acquisitions: 

GAO-07-1058: 

GAO Highlights: 

Highlights of GAO-07-1058, a report to congressional committees. 

Why GAO Did This Study: 

The Department of Defense (DOD) asked Congress for $73.2 billion in 
fiscal year 2007 for research, development, testing, and evaluation 
(RDT&E). DOD organized this request using program element (PE) codes, 
which are designed to convey key information about the budget request. 
DOD also provides documents called budget exhibits detailing the 
activities for which funds are being requested. The National Defense 
Authorization Act for Fiscal Year 2006 mandated that GAO examine the 
program elements and budget exhibits. GAO assessed (1) whether the 
RDT&E program element code structure and the associated budget exhibits 
provide accurate, consistent, complete, and clear information, and (2) 
what factors contribute to any problems found. In conducting this 
review GAO analyzed all of the fiscal year 2007 program element codes 
and 47 budget exhibits. GAO also interviewed key DOD officials. 

What GAO Found: 

Neither the RDT&E program element code structure nor the budget 
exhibits consistently provide accurate, clear, and complete information 
on the nature of DODís proposed research and development efforts. 
First, one-third of the requested RDT&E funding is for efforts that are 
not identified as research and development in their program element 
codes. In addition, a majority of the remaining funding request 
misidentifies the budget activity (which is a classification of the 
stage of development and ranges from BA 1 for basic research to BA 6 
for management support) as it is stated in program element codes. 
Second, some of the budget exhibits justifying the programsí funding 
requests do not provide consistent, complete, and clear information 
with suitable levels of detail needed to understand DODís research and 
development efforts. GAO found that DOD budget exhibits were difficult 
to understand, frequently lacked information about the accomplishments 
and planned efforts of each project, lacked appropriate cross-
references between efforts, and were frequently missing key schedule 
data. 

Figure: Number of Program Elements that Match Their Assigned Budget 
Activity: 

[See PDF for image] 

Source: GAO analysis of DOD program element code data. 

[End of figure] 

The RDT&E program element codes are not always accurate nor are the 
budget exhibits always accurate, clear, consistent and complete for two 
major reasons. First, DODís regulation does not require identification 
of any RDT&E effort as such in its program element code if it is taking 
place on a weapon system that is approved for production or already 
fielded. This affects over a third of all RDT&E funds. Second, the 
regulation governing the structuring of the coding and the content of 
the exhibits is vague. For example, the regulation does not require the 
coding to be updated from one year to the next to ensure the correct 
stage of development has been accurately identified. The regulation 
also does not provide sufficiently detailed guidance to ensure 
consistency in the format and content of the budget exhibits. This 
results in budget exhibits being insufficient as decision-making tools, 
according to DOD officials. 

What GAO Recommends: 

GAO recommends the Secretary of Defense take several actions aimed at 
providing Congress with more clear and complete information on RDT&E 
funding requests. In addition, Congress may wish to have the DOD 
Comptroller work with relevant committees to determine how best to 
revise these budget materials. DOD partially concurred with these 
recommendations. 

[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1058]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Mike Sullivan at (202) 
512-4841 or sullivanm@gao.gov 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Program Element Codes and Budget Exhibits Do Not Consistently Provide 
Key Information: 

One-Third of the Requested RDT&E Funding Is Not Identified as RDT&E 
Programs: 

Program Element Codes also Misidentified the Specific Nature of R&D 
Efforts: 

Budget Exhibits Were Sometimes Inconsistent, Incomplete, or Unclear: 

DOD Guidance and Practices Contribute to Reduced Visibility: 

Conclusion: 

Recommendations for Executive Action: 

Matter for Congressional Consideration: 

Agency Comments and Our Evaluation: 

Appendix I: Scope & Methodology: 

Appendix II: Comments from the Department of Defense: 

Figures: 

Figure 1: Sample Research and Development PE Code Structure Based on 
the FMR: 

Figure 2: Fiscal Year 2007 Budget Activity 7 Programs Occur in Most 
Phases of Development: 

Figure 3: Number of Fiscal Year 2007 Program Elements That Match Their 
Assigned Budget Activity: 

Figure 4: Total Fiscal Year 2007 RDT&E Requests by Budget Activity: 

Abbreviations: 

AMP: Avionics Modernization Program: 

BA: budget activity: 

DOD: Department of Defense: 

GPS: Global Positioning System: 

FMR: Financial Management Regulation: 

JLENS: Joint Land Attack Cruise Missiles Defense Elevated 

Netted Sensor: 

MFP: Major Force Program: 

PE: program element: 

R&D: research and development: 

RDT&E: research, development, testing, and evaluation: 

UAV: unmanned aerial vehicle: 

United States Government Accountability Office: 

Washington, DC 20548: 

September 5, 2007: 

Congressional Committees: 

In fiscal year 2007, the Department of Defense (DOD) asked Congress for 
$73.2 billion for research, development, testing, and evaluation 
(RDT&E). DOD organized this request for funds for more than 1,000 
projects by using the long-standing program element (PE) code 
structure. This system produces a code that is structured to give 
decision makers key information such as the development stage of the 
project. The PE code, for example, describes whether the effort is for 
basic research in a laboratory on directed energies, integration of 
weapon system prototypes, or upgrades to long-fielded weapon systems 
such as the B-52 bomber. PE codes are the building blocks of the 
defense programming and budgeting system, and can be aggregated to 
display total resources assigned to specific programs, to specific 
military services, or in other ways for analytical purposes. For 
example, decision makers use the reported stages of development to 
assess how much is being invested in fundamental science and 
technology. These efforts determine the future capabilities of U.S. 
military forces. 

Each development effort that is assigned a unique PE code has its 
activities detailed in accompanying documents known as budget exhibits. 
DOD directs that these documents include such information as a 
description of the effort, an assessment of progress, and the expected 
accomplishments. 

Although other sources of information are also available to Congress 
about some of these RDT&E programs, the decision to authorize and 
appropriate funds for many programs is based primarily on budget 
exhibits. Accurate classifications of programs and projects by budget 
activity are needed for decision-makers to readily understand how 
projects are progressing and on what money is being spent. The National 
Defense Authorization Act for Fiscal Year 2006[Footnote 1] required 
that we examine the program element codes and budget exhibits. We 
responded with a briefing to the committees in February 2007. In this 
follow-on report, which summarizes the briefing, we assess: 

1. Whether the RDT&E program element code structure and the associated 
budget exhibits provide accurate, consistent, complete and clear 
information, and: 

2. What factors contribute to any problems found. 

In conducting our evaluation, we reviewed pertinent program element and 
budget justification policies and guidance; analyzed all of the fiscal 
year 2007 program elements and the associated budget exhibits for over 
47 of these programs; and interviewed officials from the offices of the 
Secretary of Defense and each of the military services. We conducted 
our review from June 2006 to July 2007 in accordance with generally 
accepted government auditing standards. Additional information about 
our methodology is contained in appendix I. 

Results in Brief: 

Neither the RDT&E program element code structure nor the budget 
exhibits consistently provide accurate, clear, and complete information 
on the nature of DOD's proposed research and development efforts. 
First, one-third of the requested RDT&E funding is for efforts that are 
not identified as RDT&E in their program element codes. In addition, 65 
percent of the remaining funding request misidentified the stage of 
development as it is stated in program element codes. Second, the 
budget exhibits justifying the programs' funding requests do not 
consistently provide complete, and clear information with suitable 
levels of detail needed to understand DOD's research and development 
efforts. We found that DOD budget exhibits were difficult to 
understand, frequently lacked information about the accomplishments and 
planned efforts of each project, lacked appropriate cross-references 
between efforts, and were frequently missing key schedule data. 

There are two major reasons why the program element codes and budget 
exhibits are not always accurate, clear, consistent, and complete. 
First, once a weapon system is fielded or approved for production, 
DOD's regulation does not require the identification of any RDT&E 
effort as such in its program element code. This affects the visibility 
of more than one-third of all RDT&E funds. Second, the regulation 
governing the structuring of the coding and the content of the exhibits 
is vague. For example, the regulation does not require the coding to be 
updated from one year to the next to ensure the correct stage of 
development has been accurately identified. The regulation also does 
not provide sufficiently detailed guidance to ensure consistency in the 
format and content of the budget exhibits. This results in budget 
exhibits being insufficient as decision-making tools, according to DOD 
officials. 

Taken together, current reporting policies and practices for justifying 
R&D requests to Congress could be improved to provide more useful 
information to decision makers and to strengthen accountability for 
performance. This report makes two recommendations to DOD. First, DOD 
should adjust the current RDT&E program element code structure to 
enhance the visibility that Congress has into the nature of the 
proposed development. Second, DOD should revise the regulation 
governing the budget exhibits to provide more specific direction and 
ensure a more disciplined process is used to provide Congress with 
accurate, clear, consistent, and complete information. 

We have also included a matter for congressional consideration that 
Congress may wish to have the DOD Comptroller work with the relevant 
committees to revise the budget exhibit format and content to meet the 
needs of both Congress and DOD. 

In written comments on a draft of this report, DOD partially concurred 
with our recommendations. However, it is unclear from DOD's response 
what specific actions the department will take in response to our 
recommendations other than to put additional emphasis on properly 
reporting program progress and planned efforts. DOD's comments are 
reproduced in their entirety in appendix II. 

Background: 

Under the DOD Financial Management Regulation (FMR),[Footnote 2] all 
major new systems are to be identified with a unique PE code. PE codes 
have 10 positions. In general, each position conveys information, as 
seen in figure 1. 

Figure 1: Sample Research and Development PE Code Structure Based on 
the FMR: 

[See PDF for image] 

Source: GAO. 

Note: Budget activity codes are required only if the major force 
program is 06. The seventh budget activity--systems approved for 
production or already fielded--is not identified in the code. 

[End of figure] 

The first and second positions of the PE code illustrated above define 
the Major Force Program (MFP), which contain the resources necessary to 
achieve a broad objective or plan. In figure 1, for example, the "06" 
in the first positions indicate this is a research and development 
effort. Because it is a research and development effort beginning with 
"06," under the FMR, the third and fourth positions must define the 
budget activity. In general, the budget activity codes that fill 
positions three and four are intended to describe the current nature of 
the research and development effort for each PE code. For example, 
budget activities 1 through 3 cover initial development efforts and 
should describe activities that take place in what is often called the 
science and technology realm. Research and development efforts in these 
first three budget activities may produce scientific studies and 
experimentation, develop paper studies of alternative concepts, or test 
integration of subsystems and components. Budget activities 4 and 5 
cover efforts used to fully develop and acquire integrated weapon 
systems respectively. Programs in these budget activities may perform 
efforts necessary to further mature a technology or conduct engineering 
and manufacturing development tasks. Budget activity 6 funds efforts to 
sustain or modernize the installations or operations required for 
general RDT&E. Test ranges, military construction, maintenance support 
of laboratories, studies and analysis, and operations and maintenance 
of test aircraft and ships are funded with this budget activity. 

Budget activity 7 is used to designate R&D efforts for systems that 
have already been approved for production or those that have already 
been fielded. Unlike budget activities 1 through 6, budget activity 7 
is not indicated in a PE code. This information is seen in the 
accompanying budget exhibits. Despite the fact that these are research 
and development efforts, their program element code does not contain 
any indication that they are for research and development. 

The FMR also requires that DOD justify the annual RDT&E budgets 
requests in budget exhibit documents. These accompanying budget 
exhibits are the primary information source for Congress and analysts 
throughout the government. Generally, there are six sections in each 
budget exhibit that are used to justify each funding request made using 
an RDT&E PE code. These include a mission description and budget item 
justification section; an accomplishments and planned program section; 
a program change summary section showing total funding, schedule, and 
technical changes to the program element that have occurred since the 
previous budget submission; a performance measures section to justify 
100 percent of resources requested; a section that shows connections 
and dependencies among projects, which should also include information 
such as the appropriation, budget activity, line item, and program 
element number of the related efforts; and, a section providing a 
schematic display of major program milestones that reflect engineering 
milestones, acquisition approvals, test and evaluation events, and 
other key milestones for the program events. 

Program Element Codes and Budget Exhibits Do Not Consistently Provide 
Key Information: 

The program element code structure and budget exhibits do not 
consistently provide accurate, clear, and complete information 
regarding RDT&E budget requests. The PE codes given for many programs 
do not indicate that they are for an R&D effort at all or do not 
accurately reflect the reported nature of the development. Budget 
exhibits sometimes omit required information about programs and their 
links to other programs, and may provide only minimal information. 

One-Third of the Requested RDT&E Funding Is Not Identified as RDT&E 
Programs: 

Programs that were requested in budget activity 7--RDT&E efforts for 
fielded systems and programs approved for production--presented the 
greatest visibility problem. Under DOD's current regulation, programs 
in this budget activity are not required to report in the code itself 
that the funds are for research and development, nor are they required 
to report the nature of the development effort. This budget activity 
was used to request $23.5 billion in fiscal year 2007, or about a third 
of DOD's entire RDT&E funding request. Instead, the information 
available about these funding requests is contained in their budget 
exhibits. 

Programs classified as budget activity 7 do not begin their PE code 
with 06, which would identify them as RDT&E requests. Instead, budget 
activity 7 RDT&E efforts use PE codes that begin with the major force 
program code established for the system being modified. For example, PE 
0102419A, the Joint Land Attack Cruise Missiles Defense Elevated Netted 
Sensor System (JLENS) program, provides no indication that the effort 
uses RDT&E funds, nor does it identify the nature of the development. 
It begins with 01, indicating it is for strategic forces and ends with 
A, indicating that it is an Army request. 

In addition, we found that nature of the efforts funded in budget 
activity 7 overlap with the nature of the efforts undertaken in other 
budget activities, making it difficult to determine the amounts 
requested for the different stages of development across the entire 
RDT&E budget. While the definition for budget activity 7 describes 
efforts that are fielded or approved for production, several defense 
acquisition efforts covered under budget activity 7 are involved in 
phases ranging from technology development to production, as shown in 
figure 2. The JLENS program, for example, is currently developing an 
aerostat for cruise missile defense, but its code does not indicate 
that it is in system development and demonstration. There is a separate 
code, budget activity 5, which also funds efforts in system development 
and demonstration. 

Figure 2: Fiscal Year 2007 Budget Activity 7 Programs Occur in Most 
Phases of Development: 

[See PDF for image] 

Source: GAO analysis of DOD data. 

Note: The programs represented above are the Aerial Common Sensor 
(ACS), the Warrior Unmanned Aircraft System, Mobile User Objective 
System (MUOS), Joint Land Attack Cruise Missile Defense Elevated Netted 
Sensor System (JLENS), Global Hawk Unmanned Aircraft System, and 
Navstar Global Positioning System II. 

[End of figure] 

Program Element Codes also Misidentified the Specific Nature of R&D 
Efforts: 

We found that 65 percent of the RDT&E PE codes for budget activities 1 
through 6 misidentified the nature or stage of the development in 
fiscal year 2007. While the early development efforts described by 
budget activities 1 through 3 generally properly identified the nature 
of the effort in their codes, budget activities 4 through 6 generally 
did not, as seen in figure 3. Programs reported in budget activities 4 
through 6 requested more than half of the total RDT&E funding. 

Figure 3: Number of Fiscal Year 2007 Program Elements That Match Their 
Assigned Budget Activity: 

[See PDF for image] 

Source: GAO analysis of DOD program element code data. 

Note: A total of 207 program element codes funded under BA7 are 
excluded from the figure because they are not required by the FMR to 
identify the budget activity in the program element code. 

[End of figure] 

The challenge of clearly identifying the nature of the development 
efforts is actually much worse when the budget activity 7 programs are 
considered along with the misidentified programs in budget activities 1 
through 6. As a result of these combined problems, the PE code provides 
only limited visibility into 85 percent of the requested funding, as 
seen in figure 4. 

Figure 4: Total Fiscal Year 2007 RDT&E Requests by Budget Activity: 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

Budget Exhibits Were Sometimes Inconsistent, Incomplete, or Unclear: 

While reviewing a set of 47 RDT&E budget exhibits from fiscal years 
2006 and 2007, we observed that some of the exhibits omitted key 
information. While DOD presents some valuable information in these 
exhibits, we found in many cases that the justification narratives were 
not clear or provided little or no additional information from the 
previous year's justification. In a number of cases the narratives 
appeared to be "copy and paste" descriptions of activities from prior 
years, making it difficult to determine recent changes or program 
progress. We also observed that information on accomplishments from the 
past year was provided for few programs. In addition, few programs 
provided detailed narratives of planned activities for the current 
budget year. For the few exhibits that did contain narratives on 
planned activities, the level of detail was minimal. For example, the 
Air Force Global Positioning System (GPS) Block III program requested 
$315 million for fiscal year 2007 and had requested $119 million 
combined in the previous 2 fiscal years. In this section, the 
accomplishments were described as "Continue Program Support and 
Modernization Development for GPS III," and the planned program was 
described as "Begin Modernization Segment." 

Furthermore, funding changes from year to year were inconsistently 
reported. In some cases they were provided at the PE code level and in 
other cases at the project level, when the PE code involved multiple 
projects. These funding change summaries also routinely provide limited 
detail on the reasons for the changes. For example, the Navy's EA-18G 
and DD(X) programs had funding changes of millions of dollars to their 
previous and current budgets but failed to provide details of why these 
changes had occurred. 

Additionally, the budget exhibits did not always identify the 
connections and dependencies among related projects consistently as 
required by the FMR. In general, these connections can be vital to the 
successful development of some programs. In some instances, key 
components to a system under development are being developed in other 
programs. A delay or failure in one program can mean delay and failure 
in the related program. For example: 

* C-130 Avionics Modernization Program (AMP) exhibit did not identify 
all of the required information for related programs in the Navy and 
Special Forces nor did it identify C-130 Talon II procurement, which 
included C-130 AMP upgrades. 

* DDG-1000 (formerly the DD(X)) destroyer program is developing dual- 
band radar that will be used on the CVN-21 aircraft carrier. No 
reference is made to this link/dependency in the exhibit. 

* Expeditionary Fire Support System is being developed to be 
transported by the V-22 aircraft, but makes no reference to the V-22 
program. 

* Warrior UAV (unmanned aerial vehicle) is being developed in two PEs-
-one for the system and one to weaponize. Only one program references 
the other. 

Our review found the schedule profiles in the budget exhibits were 
generally provided but sometimes did not provide a detailed display of 
major program milestones such as engineering milestones, acquisition 
approvals, or test and evaluation events. Also, we could not find the 
standard program milestones in a number of the schedule profiles we 
reviewed. In some cases we found it difficult to determine the 
program's phase of development. For example, in two cases the 
development schedule showed "continue development" across all fiscal 
years displayed. In another example, a program simply reported "S/W 
Development" with a bar covering all fiscal years. 

DOD Guidance and Practices Contribute to Reduced Visibility: 

We found the RDT&E program element code and the budget exhibits are not 
always accurate, clear, consistent, and complete for two major reasons. 
First, DOD's own regulation for constructing program element codes does 
not require a large part of the RDT&E effort to be reflected in program 
element codes. Second, the regulation governing the structuring of the 
coding and the content of the exhibits is vague. For example, it does 
not require the coding to be updated from one year to the next to 
ensure the correct stage of development has been accurately identified. 
The regulation also does not provide sufficiently detailed guidance to 
ensure consistency in the format and content of the budget exhibits. 
This leads to inconsistencies in how it is applied by different 
organizations and officials within DOD. 

The FMR requires that once a weapon system is fielded or approved for 
production that it be identified not as R&D efforts in the program 
element code, but rather under a different code. These PE codes are 
required to carry the Major Force Program code of the fielded systems. 
As a result, these PE codes, accounting for one-third of the requested 
RDT&E budget, do not identify the efforts as R&D activities and do not 
indicate the nature of the R&D effort. 

In addition, the regulation is unclear on how or when program element 
coding should change over time as the development progresses into a 
different stage. As a result, even if the program element code is 
accurate when a program is assigned a code, without updating the code, 
the programs that successfully mature will automatically develop 
inaccurate coding over time. 

Several DOD officials said that one of the reasons that the budget 
exhibits are insufficient as decision-making tools is the lack of clear 
and consistent guidance for the budget exhibits in the FMR. For 
example, while the FMR requires a "Program Schedule Profile" exhibit, 
it is not standardized. The FMR provides examples of the budget 
exhibits that include an "Accomplishment/Planned Program" section. 
However, it is unclear whether this section has to contain specific 
information about both the accomplishments achieved from previous funds 
and the activities to be achieved with requested funds. 

Conclusion: 

Congress has the difficult task of choosing which RDT&E efforts to fund 
from the many competing demands. These RDT&E efforts are critical to 
the national interest. However, they must be balanced within the other 
fiscal pressures facing the government, including the large and growing 
structural deficit. These factors make it especially important that 
Congress get the justifications for these R&D efforts in a clear, 
consistent, and readily useable form. 

However, the department's policies and practices are not providing this 
key information to congressional decision makers. The RDT&E 
justification material often obscures rather than reveals the nature of 
the efforts under way and prevents a determination of the specifics 
regarding why the money is needed. 

A number of opportunities exist for DOD to provide Congress with 
clearer justifications for the funds requested for these efforts. 
Congress needs a structure that will (1) properly identify the 
development status of projects for which funds are requested, (2) bring 
complete visibility to all of the activities for which funds are 
requested, and (3) provide consistent information about how well these 
projects are progressing in order to make efficient decisions. 

More specific guidance could improve the ability of the program element 
codes and budget exhibits to aid Congress in focusing oversight where 
it is needed, facilitate early corrective action, and improve 
accountability. 

Recommendations for Executive Action: 

This report makes two recommendations. To provide Congress with greater 
understanding of the nature of developmental activities proposed, as 
well as to improve the consistency and completeness of the 
justification material provided for the RDT&E funds requested, the 
Secretary of Defense should ensure that the DOD Comptroller: 

* Revises the Financial Management Regulation to, (1) in the case of 
programs approved for production or fielded, ensure that the code or 
the budget exhibit indicates which stage of development--from basic 
research through system development and demonstration--the effort is 
undertaking, and (2) ensure that the program element codes reflect the 
stage of development--that is from basic research through system 
development and demonstration--of the requested research and 
development effort. 

* Develops more specific guidance for budget exhibits to ensure that 
they are accurate, consistent, clear, and complete, and enforce a 
disciplined process for ensuring proper reporting of program progress 
and planned efforts. 

Matter for Congressional Consideration: 

Congress may wish to have DOD's Comptroller work with relevant 
committees to reach agreement on how to revise budget exhibits and the 
program element code structure to meet congressional oversight needs as 
well as serve the needs of DOD. In these discussions, consideration 
could be given to: 

* The value and cost of modifying or replacing the current PE code 
structure so that it more readily informs Congress as to the nature of 
the R&D effort for systems in development as well as fielded systems 
and systems approved for production. 

* The best means to inform Congress of the state of development of the 
requested effort as it progresses toward production. 

* The changes needed to the format and content of the budget exhibits 
to more effectively communicate the purpose for which funding is 
sought, the progress made with prior funding, and other key funding 
justification information. 

* The time frames and funding needed to develop and implement any 
changes. 

Agency Comments and Our Evaluation: 

DOD partially concurred with both of our recommendations. However, it 
is unclear from DOD's response what specific actions the department 
will take in response to our recommendations other than to put 
additional emphasis on properly reporting program progress and planned 
efforts. 

In partially concurring with our first recommendation, DOD commented 
that in the case of systems that have been approved for production and 
fielded, specifically capturing RDT&E funding would be 
counterproductive to how the departmental leadership makes decisions. 
We recognize the importance to the department of enabling the 
department's leadership to make decisions on the full scope of a 
program; however, we note that program element codes also have the 
purpose of providing important oversight information to Congress and 
the current practice significantly lacks the clarity of the RDT&E 
funding justifications to Congress. As we reported, RDT&E funds for 
programs approved for production and fielded systems currently 
represents one-third of the total RDT&E budget. As a result, we believe 
this level of investment warrants improved clarity. We have modified 
the wording in the recommendation to focus on providing clearer 
information to Congress either through the program element code 
structure or the budget exhibits. 

DOD fully concurred with the second part of that recommendation to 
ensure that the program element codes reflect the state of development 
of the requested effort as it progresses toward production. DOD noted 
that the program element structure accommodates this progression. 
However, our analysis found that a significant amount of funding is 
misidentified in the coding. DOD has not identified any proposed 
actions to correct this misidentification. 

DOD partially concurred with our second recommendation and will place 
greater emphasis on proper reporting of program progress and planned 
efforts as reported in its budget exhibits. However, DOD took issue 
with developing a template, stating that it is doubtful any single 
template would be feasible or desirable given the complexity of the 
RDT&E activity. We believe more specific guidance is needed to ensure 
that DOD is more effectively communicating the purpose for which 
funding is sought, the progress made with prior funding, as well as the 
other key funding justification information. We have modified the 
wording of the recommendation to remove the term "template." We still 
believe that greater standardization is called for, but recognize that 
templates are but one means among many to achieve that end. 

We are sending copies of this report to interested congressional 
committees; the Secretary of Defense; the Secretaries of the Air Force, 
Navy, Army, and the Commandant of the Marine Corps; and the Director, 
Office of Management and Budget. We will provide copies to others on 
request. This report will also be available at no charge on GAO's Web 
site at [hyperlink, http://www.gao.gov]. 

Should you or any of your staff have any questions on matters discussed 
in this report, please contact me on (202)512-4841 or by e-mail at 
sullivanm@gao.gov. Contact points for our offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. Principal contributors to this report were David Best 
(Assistant Director), Jerry Clark, Chris Deperro, Greg Campell, Anna 
Russell, Julie Hadley, and Noah Bleicher. 

Michael Sullivan: 

Director, Acquisition and Sourcing Management: 

List of Congressional Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Ted Stevens: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Ike Skelton: 
Chairman: 
The Honorable Duncan Hunter: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable John P. Murtha, Jr.: 
Chairman: 
The Honorable C.W. Bill Young: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Scope & Methodology: 

To assess whether DOD's RDT&E program element code structure provides 
Congress consistent, complete and clear information, we reviewed 
relevant guidance while analyzing all 696 program elements contained in 
the fiscal year 2007 RDT&E budget request. We assessed program elements 
by budget activity, dollar value, number of projects, and phase of 
development. We also determined the number of program elements that 
properly matched their assigned budget activity to determine if 
guidance contained in the Financial Management Regulation was properly 
followed. To determine the actual phase of development for programs 
requesting funding in budget activity 07, we reviewed both their budget 
exhibits and other documents, such as their Selected Acquisition 
Reports. For this analysis, we reviewed the Global Hawk Unmanned 
Aircraft System, Aerial Common Sensor, Warrior Unmanned Aircraft 
System, Mobile User Objective System, Joint Land Attack Cruise Missile 
Defense Elevated Netted Sensor System, and Navstar Global Positioning 
System. 

We assessed the information contained the RDT&E budget justification 
documents by reviewing the content, structure, clarity, and 
completeness of all components of the budget exhibits, including 
sections related to the program's description and budget item 
justification, schedule profile, and funding summaries. We reviewed 
multiple budget justification documents from 47 program element codes 
reported in February 2005 and 2006. We ensured that this review 
encompassed all military services and covered multiple fiscal years. 
This review focused on budget exhibits for programs in budget 
activities 4, 5, and 7 to identify any differences in the consistency, 
completeness and clarity of information presented. To assess 
connections and dependency information, we included additional programs 
that GAO has recently reported on because a more detailed understanding 
of the programs involved is required to identify these connections. To 
assess consistency, we compared the level of detail reported from year 
to year and compared the treatment of funding changes from program to 
program. To assess completeness, we compared the information in the 
budget exhibits to the requirements of the FMR. To assess the clarity 
of the information, we reviewed the details provided in the narrative 
language in the exhibits. 

To determine the factors that contribute to any problems found, we also 
reviewed the Department of Defense Financial Management Regulation and 
the Future Years Defense Planning Handbook policies and guidance 
related to developing program elements and budget justification 
documents. To better understand the processes involved with developing 
program elements and budget justification documents, we interviewed 
officials from the offices of the Under Secretary of Defense for 
Acquisition, Technology, and Logistics Director, Defense Research and 
Engineering; Under Secretary of Defense (Comptroller); Principal Deputy 
Under Secretary of Defense (Comptroller); Director, Program Analysis 
and Evaluation; Assistant Secretary of the Army for Financial 
Management and Comptroller; Office of the Assistant Secretary of the 
Navy Financial Management and Comptroller; Office of the Secretary of 
the Air Force; and the Air Force Office for the Deputy Chief of Staff 
for Strategic Plans and Programs. 

We conducted our review from June 2006 to January 2007 in accordance 
with generally accepted government auditing standards. 

[End of section] 

Appendix II: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 

3000 Defense Pentagon: 
Washington, DC 20301-3000: 

Acquisition, Technology And Logistics: 

August, 31 2007: 

Mr. Michael Sullivan: 
Director, Acquisition and Sourcing Management: 
U.S. Government Accountability Office: 
441 G Street, N.W.: 
Washington, DC 20548: 

Dear Mr. Sullivan:

This is the Department of Defense (DoD) response to the GAO draft 
report 07- 1058, "Defense Acquisitions: DoD's Research and Development 
Budget Requests to Congress Do Not Provide Consistent, Complete, and 
Clear Information," dated August 2, 2007, (GAO Code 120630). The 
Department partially concurs with both recommendations. The Department 
has a disciplined review process in place and will put additional 
emphasis on proper reporting of program progress and planned efforts. 

Sincerely, 

Signed by: 

Nancy L. Spruill:

Director, Acquisition Resources and Analysis: 

Enclosure: 

GAO Draft Report Dated August 2, 2007 GAO-07-1058 (GAO Code 120630): 

"Defense Acquisitions: DOD's Research And Development Budget Requests 
To Congress Do Not Provide Consistent, Complete; And Clear 
Information": 

Department Of Defense Comments To The Gao Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
should ensure that the DoD Comptroller revises the Financial Management 
Regulation to: (1) require all programs receiving Research, 
Development, Test and Evaluation funds to identify themselves as 
research and development efforts in their program element codes; and 
(2) ensure that the program element codes reflect the stage of 
development Ė that is from basic research through system development 
and demonstration Ė of the requested research and development effort. 

DOD Response: Partially concurs: Since we budget by line item, tying 
resources to our capabilities is an important consideration. All new 
start RDT&E Programs should have a unique designation as long as we 
clearly delineate the differences between new RDT&E programs from new 
projects that fall under the scope and umbrella of existing RDT&E 
programs. However, in the case of approved for production and fielded 
weapon systems, creating programs to specifically capture RDT&E would 
be counter-productive with respect to how department leadership makes 
decisions about programs. Keeping all appropriations in one program for 
fielded systems enables leadership to make decisions on the full scope 
of a program. 

As for recommendation (2), we concur with it. The program element 
structure accommodates this progression. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
should ensure that the DoD Comptroller develops a template and more 
specific guidance for budget exhibits to ensure that they are accurate, 
consistent, clear, and complete, and enforce a disciplined process for 
ensuring proper reporting of program progress and planned efforts. 

DOD Response: Partially concurs: The written guidance in the Financial 
Management Regulation (FMR) for the preparation of RDTE budget exhibits 
supports this recommendation. However, it is doubtful any single 
"template" would be feasible or desirable for this specific 
recommendation given the scope and complexity of RDT&E activity. The 
Department has a disciplined review process in place and will put 
additional emphasis on proper reporting of program progress and planned 
efforts.

[End of section] 

Footnotes: 

[1] Pub. L. No. 109-163, section 251. 

[2] DOD's Financial Management Regulation (FMR), DoD 7000.14-R, Volume 
2B, Chapter 5, details what information is to be included in the 
individual PE code budget exhibits or R-docs. This regulation is 
maintained and updated by the Office of the Under Secretary of Defense 
(Comptroller). 

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