Defense Budget

The Defense Department (DOD) continues to experience major problems in managing its capital asset program and carrying out its capital budget. Capital assets include such items as equipment, minor construction, and management information systems. The activities GAO visited, for example, canceled 86 percent and 65 percent of the projects in their fiscal year 1993 and 1994 capital budgets, respectively. GAO's analysis of 56 fiscal year 1994 projects at six defense activities showed that many cancellations were due to weaknesses in the budget justification and preparation process. The uncertainty caused by base closings and realignments, budget cuts, and other DOD management initiatives also contributed to project cancellations. DOD has developed new guidance that, if properly implemented, will strengthen the Defense Business Operations Fund's capital budgeting process. Developing new procedures, however, is only the first step. These are long-standing problems that have been highlighted repeatedly by GAO, the Inspectors General, and service audit agencies. High-level management attention, training, and appropriate oversight are needed to ensure that key managers fully understand and implement the new guidance. One such mechanism would be to include capital asset program deficiencies in the Federal Managers' Financial Integrity Act report.

GAO found that: (1) DOD continues to have problems managing its capital asset program and carrying out its capital budget; (2) defense activities cancelled or postponed 86 percent and 65 percent of their fiscal year (FY) 1993 and FY 1994 capital budget projects, respectively, due to weaknesses in the budget justification, preparation, and review processes; (3) uncertainties due to base closings and realignments, budget reductions, and DOD management initiatives also contributed to other project cancellations; (4) activity managers usually replace cancelled projects with other projects, so the projects actually carried out bear little resemblance to those in the capital budget submitted to Congress; (5) new DOD guidance for justifying capital projects, if implemented, will strengthen the Defense Business Operations Fund's (DBOF) capital budgeting process; (6) the new guidance could be improved by directly linking capital projects to long-range investment needs and using investment criteria that maximize benefits and a cultural change; (7) proper implementation of the new guidance requires high-level management attention, training, and appropriate oversight mechanisms; and (8) listing capital asset program deficiencies in DOD Federal Managers' Financial Integrity Act reports would provide an added level of management attention.

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.

Director: Team: Phone: