Marine Corps Depot Maintenance:

Budgeting and Management of Carryover Could Be Improved

GAO-12-539: Published: Jun 19, 2012. Publicly Released: Jun 19, 2012.

Additional Materials:

Contact:

Asif A. Khan
(202) 512-3000
khana@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

GAO’s analysis of Marine Corps depot maintenance activity group (DMAG) reports showed that from fiscal years 2004 through 2011, reported actual carryover exceeded the allowable amounts in the most recent 6 years of the 8- year period, ranging from $59 million in fiscal year 2007 to $7 million in fiscal year 2011. GAO’s analysis also showed that the amounts of carryover exceeding the allowable amounts have declined in each of the past 4 years. These reductions could be attributed to DMAG actions, including implementing production efficiencies that reduced the time required to repair weapon systems.

In contrast, DMAG’s budgeted carryover amounts were less than the allowable amounts for all 8 years GAO reviewed. In the most recent 6 years, DMAG’s reported actual carryover amounts exceeded budgeted carryover by at least $50 million. GAO’s analysis showed this occurred because the Marine Corps underestimated DMAG’s new orders every year during this 6-year period from a low of 51 percent to a high of 175 percent.

The reported dollar value of DMAG carryover significantly increased during the initial years of Operation Iraqi Freedom/Operation Enduring Freedom (OIF/OEF) from $49 million in fiscal year 2002 to $271 million in fiscal year 2005. This increase could be primarily attributed to new orders from customers more than tripling over this period. GAO’s analysis found that the increase in new orders was the result of higher depot maintenance requirements supporting OIF/OEF. Since fiscal year 2005, reported actual carryover amounts have remained relatively stable, averaging $296 million or 6.4 months of work.

GAO identified three factors that were key to DMAG’s carryover in fiscal years 2010 and 2011 including: (1) experiencing unanticipated increases in its workload requirements, (2) starting DMAG work on new orders later in the fiscal year because it was already performing work on other orders, and (3) accepting amendments on existing orders in the last quarter of the fiscal year that increased the scope of work.

Why GAO Did This Study

The Marine Corps DMAG repairs and overhauls weapon systems and support equipment to battle-ready condition for deployed and soon-to-be deployed units. To the extent that DMAG does not complete work at year-end, the work and related funding will be carried over into the next fiscal year. Carryover is the reported dollar value of work that has been ordered and funded by customers but not completed by DMAG at the end of the fiscal year. GAO was asked to determine (1) if DMAG’s actual carryover exceeded the allowable amount and actions the Marine Corps is taking to reduce carryover; (2) if budget information on DMAG carryover approximated actual results; (3) if there was growth in carryover during the period of OIF/OEF and the reasons for any such growth; and (4) reasons for recent years’ carryover. To address these objectives, GAO (1) reviewed relevant carryover guidance, (2) obtained and analyzed reported carryover and related data for DMAG against requirements, and (3) interviewed DOD, Navy, and Marine Corps officials.

What GAO Recommends

GAO recommends that DOD improve the budgeting and management of DMAG carryover by comparing budgeted to actual information on carryover and orders and making adjustments to budget estimates as appropriate. DOD concurred with GAO’s recommendations and cited related actions planned.

For more information, contact Asif A. Khan at (202) 512-9869 or khana@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In June 2012, GAO reported that the Marine Corps consistently underestimated the dollar amount of carryover that would exceed the allowable amount in the Marine Corps Depot Maintenance Activity Group budgets for fiscal years 2004 through 2011. The budget information on carryover is critical since decision makers use this information when reviewing budgets. Because of the disparity between Marine Corps budgeted and actual carryover information for the 8-year period, GAO recommended that DOD direct the Marine Corps to augment its budget management and review procedures to compare recent year trends in budgeted carryover amounts that are over or under the allowable amounts to the actual carryover amounts to identify any differences, reasons for any such differences, and make any appropriate adjustments to budget estimates on carryover. DOD concurred with the recommendation, and stated that it will evaluate whether the Marine Corps considered these carryover trends as a factor for the fiscal year 2014 budget review process and hold discussions with the Marine Corps to ascertain how prior year trends were incorporated into the carryover estimates which include documented customer requirements and Overseas Contingency Operations. In response to our recommendation, the Marine Corps considered prior year carryover trends when the Marine Corps developed its fiscal year 2014 budget estimates for carryover. The Marine Corps included $237 million in budgeted carryover for fiscal year 2014 which correlates closely to the fiscal year 2012 actual amount of $221 million. As a result, Congress should have better carryover information when reviewing and making decisions on the fiscal year 2014 Marine Corps budget.

    Recommendation: To improve the budgeting and management of Marine Corps' DMAG carryover, the Secretary of Defense should direct the Secretary of the Navy and Commandant of the Marine Corps to augment DMAG budget development and review procedures to require a comparison of recent years' trends in budgeted carryover amounts that are over or under the allowable amounts to the actual carryover amounts to identify any differences, reasons for any such differences, and make any appropriate adjustments to budget estimates on carryover.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In June 2012, GAO reported that the Marine Corps consistently underestimated the dollar amount of new orders from customers in the Marine Corps Depot Maintenance Activity Group (DMAG) budgets for fiscal years 2004 through 2011. The dollar amount of new orders received in a given year is used to determine the allowable amount of carryover. Decision makers such as Congress use the allowable and actual amounts of carryover when reviewing budgets. One of the key factors for the difference between budgeted and actual new orders was that the Marine Corps formulated its budgets for new orders based on documented customers requirements-that is, for which customers provide DMAG with letters of intent-even though recent trends indicated significantly higher levels. Because of the disparity between Marine Corps budgeted and actual new orders for the 8-year period, GAO recommended that DOD direct the Marine Corps to augment its budget management and review procedures to compare recent year's trends in budgeted orders to actual orders to identify any differences,reasons for any such differences, and make any appropriate adjustments to budget estimates on new orders to be received from customers. DOD concurred with the recommendation, and stated that it will evaluate whether the Marine Corps considered new order trends as a factor for the fiscal year 2014 budget review process and hold discussions with the Marine Corps to ascertain how prior year trends were incorporated into the customer order estimates in relation to documented current and future funded workload. The Marine Corps fiscal year 2014 DMAG budget estimate for new orders included new orders amounts for workload that were not documented in letters of intent from customers such as the anticipated receipt of Marine Corp reset workload and were based on a 5-year history of orders received. The fiscal year 2014 Marine Corps DMAG budget indicated that the change in new orders was consistent with recommendations in GAO's audit of Marine Corps depot maintenance carryover. As a result, Congress should have better carryover information, including information on new orders, when reviewing and making decisions on the fiscal year 2014 Marine Corps DMAG budget.

    Recommendation: To improve the budgeting and management of Marine Corps' DMAG carryover, the Secretary of Defense should direct the Secretary of the Navy and Commandant of the Marine Corps to augment DMAG budget development and review procedures to require a comparison of recent years' trends in budgeted orders to actual orders to identify any differences, reasons for any such differences (including work for which DMAG had not received letters of intent), and make any appropriate adjustments to budget estimates on new orders to be received from customers.

    Agency Affected: Department of Defense

 

Explore the full database of GAO's Open Recommendations »

Sep 30, 2014

Sep 25, 2014

Sep 23, 2014

Sep 19, 2014

Sep 18, 2014

Sep 10, 2014

Sep 9, 2014

Sep 8, 2014

Looking for more? Browse all our products here