DOD Inflation:

Budgeting and Monitoring Inflation Funding in the Department of Defense

NSIAD-88-79: Published: Apr 26, 1988. Publicly Released: May 26, 1988.

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Pursuant to a congressional request, GAO reviewed the Department of Defense (DOD) budgeting procedures to determine the feasibility of: (1) budgeting separately for inflation; (2) restricting the use of inflation funds specifically for inflation costs; (3) requiring that funds appropriated for inflation, but not spent, lapse at the end of the fiscal year; and (4) providing inflation estimates for individual systems in the Selected Acquisition Reports (SAR).

GAO found that DOD could: (1) budget separately for inflation by using information it already prepares routinely; (2) use the inflation indexes it develops after it prepares its budget request; (3) provide inflation estimates for the individual weapon systems in its SAR; and (4) use the gross national product (GNP) implicit price deflator to monitor and update inflation amounts it receives. GAO also found that: (1) Congress may wish to consider requiring that the President's annual budget request show separately DOD estimates for inflation in each appropriation account; and (2) although the changes in DOD inflation funding procedures would not necessarily result in savings, they would provide Congress with needed information to adjust DOD funding levels.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD states that Instruction 7000.3 requires that the GNP deflator be used unless alternate rates are approved by ASD(C), and that DOD will ensure that these policy requirements are followed.

    Recommendation: The Secretary of Defense should ensure that inflation amounts included in SAR are computed and adjusted consistently by using the GNP deflator.

    Agency Affected: Department of Defense


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