Plant Modernization:

DOD's Management of the Asset Capitalization Program Needs Improvement

NSIAD-89-147: Published: Aug 4, 1989. Publicly Released: Aug 10, 1989.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) Asset Capitalization Program (ACP), which Congress intended to finance DOD capital investment projects.

GAO found that: (1) DOD has not provided the services with comprehensive guidance on permissible ACP expenditures, resulting in military activities spending ACP funds on such items as furniture and vehicles; (2) ACP lacked a functional program manager at the department level until July 1989; (3) ACP lacked a systematic approach for identifying investment opportunities, including long-range activity modernization plans; (4) military activities did not follow existing justification, review, or approval procedures, and were slow to acquire and install ACP projects; (5) activities were not adhering to established internal controls; (6) service- and command-directed ACP projects have restricted activities' ability to use ACP for needed plant equipment; (7) many activities bought lower-priority items because they believed they would lose unobligated ACP funds; and (8) the DOD annual report to Congress on ACP did not include all project life-cycle costs.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Congress has implemented this recommendation by transferring funding for the ACP program to the other procurement appropriations account. Equipment requests must now be clearly justified by the project.

    Matter: Congress may wish to consider amending its ACP exhibit reporting requirement to include having the Secretary of Defense report the total cost of ACP projects over the entire project cycle.

  2. Status: Closed - Implemented

    Comments: Congress implemented this recommendation by transferring funding for the ACP program to the other procurement appropriations account. It believes that financing equipment this way will lead to better selection of projects that will further productivity and enhance unit cost reduction.

    Matter: Congress may wish to consider establishing a ceiling on the amount of ACP funds used to purchase high-dollar, service- and command-directed projects due to their potential short- or long-term impact on activity ACP funding, and allow the services to compete for funds above the ceiling in the procurement appropriations process.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretary of Defense should require that ACP funds be used for items that contribute most significantly toward fulfilling the activities' missions.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: DOD believes that it complied with known congressional guidance. According to DOD, Congress should clarify its intent in this area, if necessary. Congress did not do so.

    Recommendation: The Secretary of Defense should work with Congress to obtain a clear understanding of its intent to restrict the purchase of general purpose passenger vehicles with program funds.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretary of Defense should place additional management emphasis on ACP. Specifically, the Secretary should require post-investment analyses or other measures to determine if anticipated benefits are being realized and if changes in program management are needed.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretaries of the Army, Navy, and Air Force should direct their respective commands to comply with existing guidance to ensure that capital investments are consistent with the activities' strategic plans, projects are implemented in a timely manner, and post-investment analyses are being performed.

    Agency Affected: Department of Defense: Department of the Air Force

  5. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretaries of the Army, Navy, and Air Force should direct their respective commands to comply with existing guidance to ensure that capital investments are consistent with the activities' strategic plans, projects are implemented in a timely manner, and post-investment analyses are being performed.

    Agency Affected: Department of Defense: Department of the Navy

  6. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretaries of the Army, Navy, and Air Force should direct their respective commands to comply with existing guidance to ensure that capital investments are consistent with the activities' strategic plans, projects are implemented in a timely manner, and post-investment analyses are being performed.

    Agency Affected: Department of Defense: Department of the Army

  7. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretaries of the Army, Navy, and Air Force should direct their respective commands to assign sufficient personnel to manage and execute the program.

    Agency Affected: Department of Defense: Department of the Air Force

  8. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretaries of the Army, Navy, and Air Force should direct their respective commands to assign sufficient personnel to manage and execute the program.

    Agency Affected: Department of Defense: Department of the Navy

  9. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretaries of the Army, Navy, and Air Force should direct their respective commands to assign sufficient personnel to manage and execute the program.

    Agency Affected: Department of Defense: Department of the Army

  10. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretary of Defense should develop guidance on the minimum documentation required to be maintained in ACP project files.

    Agency Affected: Department of Defense

  11. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretaries of the Army, Navy, and Air Force should direct their respective commands to: (1) comply with existing internal control procedures; (2) develop procedures to verify that actual costs of equipment are recorded on depreciation and plant property records; and (3) ensure that internal control procedures are being followed.

    Agency Affected: Department of Defense: Department of the Air Force

  12. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretaries of the Army, Navy, and Air Force should direct their respective commands to: (1) comply with existing internal control procedures; (2) develop procedures to verify that actual costs of equipment are recorded on depreciation and plant property records; and (3) ensure that internal control procedures are being followed.

    Agency Affected: Department of Defense: Department of the Navy

  13. Status: Closed - Implemented

    Comments: Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

    Recommendation: The Secretaries of the Army, Navy, and Air Force should direct their respective commands to: (1) comply with existing internal control procedures; (2) develop procedures to verify that actual costs of equipment are recorded on depreciation and plant property records; and (3) ensure that internal control procedures are being followed.

    Agency Affected: Department of Defense: Department of the Army

 

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