DOD Budget:

Controls Needed Over Inflation Dividends

NSIAD-93-62BR: Published: Dec 14, 1992. Publicly Released: Dec 14, 1992.

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GAO reviewed the Department of Defense's (DOD) management controls over excess funds caused by overestimates of the inflation rate.

GAO found that: (1) DOD had a $2.8-billion inflation dividend in fiscal year (FY) 1992, and estimated an $837-million dividend for FY 1993; (2) DOD did not plan to return these excess funds to the Treasury because it had no specific accounting of how DOD used, reserved, transferred, or reprogrammed funds at the program level, although unobligated funds at the end of the FY were greater than the dividend amount; (3) DOD did not adjust FY 1993 appropriations, since the inflation rate could change; (4) Congress reduced the FY 1993 DOD appropriation by $611.5 million to adjust inflation estimates; and (5) DOD was capable of producing timely reports on unobligated funds and explanations of possible adjustments between anticipated inflation allocations and current estimates of program funding needs, which would give Congress more oversight information.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOD believes that further reporting requirements are not necessary. The DOD FY 1994 budget request used CBO inflation predictors, and no FY 1994 dividend is anticipated.

    Recommendation: The Secretary of Defense should monitor and report on inflation amounts, changes, and revisions promptly as Congress considers appropriation requests, rescission proposals, and reprogramming plans advanced by the Department.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: DOD states that no inflation dividend exists for 1992. No rescission was proposed. DOD did not have controls in place to identify programs or functions that might not have obligated all dividend funds appropriated for FY 1992.

    Recommendation: The Secretary of Defense should determine the amount of the fiscal year 1992 inflation dividend that should be proposed to Congress for rescission and the amount that can be used to offset funding requirements in subsequent years.

    Agency Affected: Department of Defense


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