DOD's Management of the Asset Capitalization Program Needs Improvement

GAO discussed its review of the Department of Defense's (DOD) management of its Asset Capitalization Program (ACP). GAO found that: (1) although the program offered great potential for financing projects needed to modernize industrial fund activities' operations, some projects had not achieved benefits because of management weaknesses; (2) DOD provided either limited guidance or unclear and conflicting guidance on what program funds could purchase, resulting in a wide-range of projects, including some that appeared inconsistent with the program's intent; (3) even when DOD issued specific guidance, the activities did not always follow it; (4) the services had not adequately implemented program elements, including providing adequate management support, well-defined criteria for justifying, reviewing, and approving projects, and post-investment analysis; (5) the services lacked or failed to follow internal control procedures to accurately account for and protect capital equipment; (6) the increasing value of nondiscretionary purchases such as management information systems, coupled with funding reductions, restricted the activities' ability to buy needed plant equipment; (7) because the activities had to obligate program funds by the end of the budget execution year or lose them, some activities bought lower priority items that were readily available from commercial sources; and (8) the current means of reporting program purchases to Congress did not provide sufficient visibility over the use of program funds.