DOD Budget

This briefing report discusses the Defense Department's (DOD) key management controls over excess funds that have become available because actual inflation has been less than estimated. DOD has overestimated the funds needed for inflation in fiscal years 1992 and 1993 by more than $3.6 billion. On the basis of the Office of Management and Budget's latest economic assumption, DOD now projects inflation dividends of $2.8 billion from fiscal year 1992 appropriations and $837 million from the funds it requested for fiscal year 1993. GAO believes that if DOD were to improve monitoring of funding needs and periodically report on the impact of changing inflation rates, Congress would have the information needed to adjust for inflation dividends such as those projected for fiscal years 1992 and 1993.

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

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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