Navy Engineering Centers:

Proposal to Change From Industrial Funding to Another Funding Method

NSIAD-89-47: Published: Dec 7, 1988. Publicly Released: Dec 7, 1988.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) proposal to convert two Navy activities from industrial funding to another funding method, focusing on the: (1) rationale and justification for the conversion; (2) the conversion's impacts on employment and operations; and (3) additional costs and savings involved in the conversion.

GAO found that: (1) the DOD proposal offered various alternative funding methods for the Navy research and engineering activities; (2) DOD did not perform an analysis to support its belief that industrial fund systems had higher operational costs, provided only minimal benefits from financing these types of activities, and made congressional oversight of funds difficult; (3) DOD stated that the activities would not meet its revised criteria for industrial funding; (4) the Navy did not agree with the conversion proposal, citing its adverse effects on employment, operations, and costs; (5) the activities estimated that the conversion would cost between $34.9 million and $37.9 million; and (6) the conversion would incur additional costs relating to modifying the Standard Automated Financial System, which the Navy uses for its industrial fund activities.

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