Defense Transportation:

More Reliable Information Key to Managing Airlift Services More Efficiently

NSIAD-00-6: Published: Mar 6, 2000. Publicly Released: Mar 6, 2000.

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Pursuant to a congressional request, GAO reviewed the Air Mobility Command's airlift rates, focusing on the: (1) extent to which the Air Mobility Command has reliable financial information for managing airlift transportation services; and (2) factors affecting efficient cost control of airlift services.

GAO noted that: (1) the Air Mobility Command lacks accurate cost information to set rates and assess the economy and efficiency of its operations; (2) the Command does not have accurate data, reliable records, and effective systems to determine: (a) its operating costs for airlift services; and (b) the amount to charge its customers or to request from direct appropriations (the Air Force Airlift Readiness Account) for training and readiness costs; (3) its efforts to accumulate reliable financial information are hampered by nonintegrated systems and processes that contain numerous errors and inconsistencies; (4) the results of GAO's most recent financial statement audit work at the Department of Defense (DOD) highlight long-standing problems accumulating and reporting the full costs associated with all of DOD's working capital fund operations; (5) without reliable information, customers cannot verify airlift charges; (6) DOD financial management policy and practices create disincentives to control and recover full costs; (7) because the Command receives a payment that is intended to cover any shortfalls between revenue collections and full costs, there is little incentive to either control costs or recover the full costs of its peacetime airlift operations; (8) absent accurate cost data, the Command does not have a sound basis for estimating the amount it needs from direct appropriations for payment; (9) the requirements to use rates that are generally competitive with commercial billing rates shifts the focus from determining full costs of operations; (10) an emphasis is placed on estimating commercial rates rather than developing the full costs of missions; (11) DOD recognizes the need for reforms in the defense-wide working capital funds; and (12) however, the Defense Working Capital Funds Task Force is not addressing the transportation working capital funds issues.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Department agrees with the need to improve the quality of its airlift financial cost information, but disagrees that the Secretary of Defense should direct the Commander, U.S. Transportation Command, to take action as several courses of action are already being pursued. The initiatives the Transportation Command has taken to improve data accuracy and systems integration include: (1) reengineering defense transportation documentation and financial processes, to include transportation working capital fund payments; (2) participating in a pilot project for improving managerial cost accounting systems; and (3) establishing a program office to develop an integrated financial reporting and overview system called the Transportation Financial Management System. This financial information management system is being developed by the Transportation Command in collaboration with the Defense Finance and Accounting Service and is expected to facilitate more informed decision-making by providing greater visibility into the Command's cost, revenue, budgeting, and financial performance date. The financial system was partly operational capability in Sept. 2003, and is planned to be fully operational by Dec. 2005. The Department does not plan to develop annual cost reduction goals as an incentive for improving airlift operations.

    Recommendation: The Secretary of Defense should direct the Commander, U.S. Transportation Command, to take action to improve the Command's airlift financial cost information and develop annual airlift operations cost reduction goals as an incentive for improving airlift operations. In the short term, the Command should form a team to assess and recommend ways to address data accuracy problems within its financial management systems. The team should focus on data input controls and methods for ensuring the accuracy of information accumulated from a variety of sources and locations. In the long term, the Command needs to assess the costs and benefits of developing an architecture that either integrates existing data systems or develops new systems and new methods for capturing the costs of its operations and charging its customers.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: The Department of Defense disagrees with this recommendation. The Department also disagrees with GAO's assessment that its financial management policies and practices create disincentives to control and recover costs, and is planning no action to address this concern. The Defense Working Capital Task Force concluded its work in February 2000, and according to Department officials, the Task Force considered the airlift portion of the transportation working capital fund in its deliberations and recommendations. The Task Force developed 11 recommendations, of which 10 were approved by the Deputy Secretary Defense to improve the delivery of goods and services to its Defense Working Capital Fund customers.

    Recommendation: The Secretary of Defense should direct the Defense Working Capital Funds Task Force to include the airlift portion of the transportation working capital fund in its work. The group should place particular attention to addressing ways to improve airlift cost information and the disincentives to controlling and recovering costs.

    Agency Affected: Department of Defense


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