Defense Modernization Account

The Defense Department (DOD) may transfer unexpired funds from its appropriations to the Defense Modernization Account, which was established in 1996. These funds must come from savings realized from the efficient management of procurement or support of installations and facilities. Congress' intent was to encourage the military to use these savings to meet shortfalls in funding for modernization. GAO found that neither DOD nor the military services have ever transferred money into the Defense Modernization Account. The services attribute the inactivity in the account to a lack of funds. In fact, the legislation prohibits the transfer of funds if DOD determines that there are more important uses for the money. The Air Force said that it uses funds for other purposes, such as reprogramming or as offsets to congressionally directed rescissions. The Marine Corps said that it does not have excess funds in support of installations, facilities, or procurement. The Navy stressed the lack of funds to use for the account. The Army said that it has been unable to afford transfers to the account because of tight budgets, readiness priorities, and support for contingency operations. GAO also found that DOD has never submitted to Congress any of the required quarterly reports on the activities of the account.

GAO noted that: (1) neither DOD nor the services have ever transferred funds into the Defense Modernization Account, and hence it has never been used; (2) the services maintained that the reason for the inactivity in the account is that funds have not been available; (3) in fact, the legislation prohibits the transfer of funds to the account if the secretary of a military department or the Secretary of Defense determines that there are greater priorities for the use of funds; (4) according to the Air Force, it uses available funds for other purposes such as reprogrammings or as offsets to congressionally directed rescissions; (5) the Marine Corps stated that it does not have excess funds in support of installations, facilities, or procurement; (6) the Navy emphasized the lack of availability of funds to use for the account; (7) the Army stated that it has not been able to afford transfers to the account because of tight budgets, readiness priorities, and support for contingency operations not always completely reimbursed by supplemental appropriations; (8) GAO also found that DOD has never submitted any of the required quarterly reports on the activities of the account to the specified congressional committees; (9) according to DOD, the reason reports have not been submitted is that the account has been inactive; and (10) nevertheless, had DOD submitted reports, the committees would have been informed that the account has been inactive.