Pursuant to a congressional request, GAO examined the Department of Defense's (DOD) use of expired appropriations, focusing on the: (1) growth and size of the M accounts and the merged surplus authority through September 30, 1990; (2) use of such accounts by the Army, Navy, and Air Force to fund upward adjustments of contract costs; and (3) extent to which that use satisfies all legal requirements.

GAO found that: (1) between 1980 and 1990, the services' combined M accounts grew from $2.7 billion to $18.8 billion, and the merged surplus authority grew from $5.2 billion to $27 billion; (2) contract cost overruns, the settlement of contractors' claims, and the funding of contingent liability from expired budget authority accounted for over half of the expired budget authority requested; (3) between fiscal years 1985 and 1989, certain programs made multiple requests for large amounts of expired and lapsed budget authority to fund upward adjustments of previously obligated budget authority; (4) legislation limited the requirement that DOD notify Congress before using expired budget authority to make large upward adjustments to contract costs; (5) of the 18 upward adjustments GAO studied, 9 were proper, 3 were improper, and the remaining 6 were necessitated by poor management practices; (6) new legislation will phase out existing M accounts, eliminate merged surplus authority, and make expired appropriations available to agencies for a finite period; and (7) such actions will increase the need for agencies to improve their management and control over the use of expired appropriations.

Status Legend:

Review Pending-GAO has not yet assessed implementation status.

Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.

Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.

Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.

• Review Pending
• Open
• Closed - implemented
• Closed - not implemented

Recommendation for Executive Action

Recommendation: The Secretary of Defense should direct the service secretaries to revise their procedures for the use of expired budget authority to require, in addition to the information already provided in the request and approval process, a comprehensive statement concerning the reason for the upward adjustment. This information should explain the circumstances, contingencies, or management practices that caused the need for the upward adjustment.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: DOD issued guidance, dated June 13, 1991, that fully implemented the recommendation.