Plant Modernization: DOD's Management of the Asset Capitalization Program Needs Improvement

Highlights

Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) Asset Capitalization Program (ACP), which Congress intended to finance DOD capital investment projects.

Recommendations

Matter for Congressional Consideration

Matter	Status	Comments
Congress may wish to consider amending its ACP exhibit reporting requirement to include having the Secretary of Defense report the total cost of ACP projects over the entire project cycle.	Closed – Implemented	Congress has implemented this recommendation by transferring funding for the ACP program to the other procurement appropriations account. Equipment requests must now be clearly justified by the project.
Congress may wish to consider establishing a ceiling on the amount of ACP funds used to purchase high-dollar, service- and command-directed projects due to their potential short- or long-term impact on activity ACP funding, and allow the services to compete for funds above the ceiling in the procurement appropriations process.	Closed – Implemented	Congress implemented this recommendation by transferring funding for the ACP program to the other procurement appropriations account. It believes that financing equipment this way will lead to better selection of projects that will further productivity and enhance unit cost reduction.

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Department of Defense	The Secretary of Defense should require that ACP funds be used for items that contribute most significantly toward fulfilling the activities' missions.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of Defense	The Secretary of Defense should work with Congress to obtain a clear understanding of its intent to restrict the purchase of general purpose passenger vehicles with program funds.	Closed – Not Implemented DOD believes that it complied with known congressional guidance. According to DOD, Congress should clarify its intent in this area, if necessary. Congress did not do so.
Department of Defense	The Secretary of Defense should place additional management emphasis on ACP. Specifically, the Secretary should require post-investment analyses or other measures to determine if anticipated benefits are being realized and if changes in program management are needed.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of the Air Force	The Secretaries of the Army, Navy, and Air Force should direct their respective commands to comply with existing guidance to ensure that capital investments are consistent with the activities' strategic plans, projects are implemented in a timely manner, and post-investment analyses are being performed.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of the Navy	The Secretaries of the Army, Navy, and Air Force should direct their respective commands to comply with existing guidance to ensure that capital investments are consistent with the activities' strategic plans, projects are implemented in a timely manner, and post-investment analyses are being performed.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of the Army	The Secretaries of the Army, Navy, and Air Force should direct their respective commands to comply with existing guidance to ensure that capital investments are consistent with the activities' strategic plans, projects are implemented in a timely manner, and post-investment analyses are being performed.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of the Air Force	The Secretaries of the Army, Navy, and Air Force should direct their respective commands to assign sufficient personnel to manage and execute the program.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of the Navy	The Secretaries of the Army, Navy, and Air Force should direct their respective commands to assign sufficient personnel to manage and execute the program.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of the Army	The Secretaries of the Army, Navy, and Air Force should direct their respective commands to assign sufficient personnel to manage and execute the program.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of Defense	The Secretary of Defense should develop guidance on the minimum documentation required to be maintained in ACP project files.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of the Air Force	The Secretaries of the Army, Navy, and Air Force should direct their respective commands to: (1) comply with existing internal control procedures; (2) develop procedures to verify that actual costs of equipment are recorded on depreciation and plant property records; and (3) ensure that internal control procedures are being followed.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of the Navy	The Secretaries of the Army, Navy, and Air Force should direct their respective commands to: (1) comply with existing internal control procedures; (2) develop procedures to verify that actual costs of equipment are recorded on depreciation and plant property records; and (3) ensure that internal control procedures are being followed.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.
Department of the Army	The Secretaries of the Army, Navy, and Air Force should direct their respective commands to: (1) comply with existing internal control procedures; (2) develop procedures to verify that actual costs of equipment are recorded on depreciation and plant property records; and (3) ensure that internal control procedures are being followed.	Closed – Implemented Because Congress directed ACP to be no longer funded through the procurement appropriations account rather than industrial funds, DOD regards this recommendation as being no longer germane.

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National Defense

executive relationsDefense cost controlDefense procurementIndustrial fundsLife cycle costsMission budgetingProgram managementReporting requirementsRisk managementUnobligated budget balances