Defense Budget:

DOD Should Further Improve Visibility and Accountability of O&M Fund Movements

NSIAD-00-18: Published: Feb 9, 2000. Publicly Released: Feb 9, 2000.

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Pursuant to a congressional request, GAO evaluated the military services' and the Department of Defense's (DOD) fiscal year (FY) 1994-1998 operation and maintenance (O&M) budget requests, focusing on: (1) identifying the differences between the amounts Congress initially designated for O&M subactivities, and those DOD reported as obligated for the same subactivities; (2) identifying those O&M subactivities where DOD obligated funds differently than recommended by Congress in each year of the 5-year period GAO examined; and (3) assessing information available to Congress to track DOD's movement of funds among O&M subactivities.

GAO noted that: (1) from FY 1994 through 1998, DOD changed funding amounts for the 245 O&M subactivities by almost $43 billion compared with the amounts Congress originally designated for them; (2) these changes included both decreases and increases to the amounts designated by Congress; (3) DOD moved almost $16 billion out of and $27 billion into O&M subactivities; (4) every year from fiscal year 1994 through 1998 DOD obligated a different amount than Congress designated for the same 63 subactivities; (5) in total, DOD moved about $19 billion out of or into these subactivities; (6) in recent years DOD has improved the information it gives to Congress on the movement of O&M funds; (7) but this budget information is still incomplete and does not provide adequate details of where funds are moved and why; (8) changes in the way DOD presents budget justification materials, as well as congressionally mandated changes in the level of details to be provided by DOD, have improved DOD's budget information available to Congress; (9) in particular, the high-priority readiness-related transfer reports offer the most information available on why DOD moves funds among selected subactivities; (10) however, the statutory requirement for these reports will expire when DOD submits its FY 2000 report; (11) in addition, from fiscal years 1994 through 1998, little information was available to Congress about what DOD terms "fact-of-life" movements, which DOD says are made to reflect changes that occur between the time DOD formulates its budget request and the time Congress passes the appropriation act; (12) DOD reported over $1 billion in fact-of-life adjustments to its FY 1999 O&M appropriations; (13) DOD's financial management regulation does not define these adjustments and provides no guidance on when it is appropriate to make such adjustments, who should approve them, or how much funding can be moved; and (14) without any such guidance governing these movements, DOD and Congress cannot evaluate whether the movements of funds are appropriate.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The National Defense Authorization Act for Fiscal Year 2001 extended and expanded the reporting requirement covering DOD's high priority readiness transfer report.

    Matter: DOD's reported obligations for some readiness-related operation and maintenance subactivities are consistently different from the amounts originally designated by Congress. In view of the information that is presented in the high-priority readiness-related reports, such as the reasons for movement of funds, that is not included in other DOD budget reports provided to Congress for all fund movements, Congress may wish to consider extending the legislative requirement (10 U.S.C. 483) that the Secretary of Defense provide Congress with the high-priority readiness-related transfer reports.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD concurred with the recommendation and has published guidance for fact of life adjustments in the June 2000 DOD FMR and on the internet, www.dtic/comptroller/fmr.

    Recommendation: To improve accountability over the movement of operation and maintenance funds, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to: (1) develop, in consultation with the House and Senate Committees on Appropriations, formal guidance for fact-of-life adjustments of funds designated by Congress; (2) provide the guidance to the services and Defense-wide agencies; and (3) take steps to ensure the guidance is followed. The guidance should also state when it is appropriate to make such adjustments, who should approve them, and how much funding can be moved.

    Agency Affected: Department of Defense


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