Information Technology
Improvements Needed in the Reliability of Defense Budget Submissions Gao ID: GAO-04-115 December 19, 2003The Department of Defense (DOD) spends more on information technology (IT) annually than any other department or agency, accounting for about half of the $59 billion governmentwide IT budget in fiscal year 2004. It is thus important that consistent, accurate, and complete DOD IT budget information is available to the Congress and the Office of Management and Budget (OMB) so that they can make informed decisions among competing demands for funds. Accordingly, GAO reviewed the department's fiscal year 2004 IT budget submission to determine whether it was reliable, including identifying opportunities for future improvement.
DOD's IT budget submission for fiscal year 2004 contains material inconsistencies, inaccuracies, or omissions that limit its reliability. Two primary parts of the submission--the IT budget summary report and the detailed Capital Investment Reports on each IT initiative--are inconsistent. In particular, 15 initiatives that appear in the budget summary do not appear in the Capital Investment Reports, and discrepancies exist between the two types of reports in the amounts requested for 73 major initiatives. These discrepancies total about $1.6 billion. Major initiatives do not consistently use the same type of appropriations to fund the same activities. That is, to fund the same types of activities, some DOD organizations used the Research, Development, Test, and Evaluation appropriations and others used the Operation and Maintenance appropriations. The IT budget summary does not include all the costs of the IT initiatives, which is contrary to federal guidance. For example, the IT budget reports do not always include the costs of military personnel working on the initiatives. These problems are largely attributable to insufficient management attention and limitations in departmental policies and procedures, such as guidance in DOD's Financial Management Regulation, and to shortcomings in systems that support budget-related activities. The result is that OMB and the Congress are constrained in their ability to make informed IT funding decisions and conduct effective oversight and control, which could cause decision makers to approve or deny funding for programs that they might otherwise have treated differently, as well as increasing the chances of funds in an appropriation not being sufficient to cover obligations.
RecommendationsOur 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:GAO-04-115, Information Technology: Improvements Needed in the Reliability of Defense Budget Submissions
This is the accessible text file for GAO report number GAO-04-115
entitled 'Information Technology: Improvements Needed in the
Reliability of Defense Budget Submissions' which was released on
December 19, 2003.
This text file was formatted by the U.S. General Accounting Office
(GAO) to be accessible to users with visual impairments, as part of a
longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to the Subcommittee on Terrorism, Unconventional Threats, and
Capabilities, Committee on Armed Services, House of Representatives:
December 2003:
INFORMATION TECHNOLOGY:
Improvements Needed in the Reliability of Defense Budget Submissions:
GAO-04-115:
GAO Highlights:
Highlights of GAO-04-115, a report to the Subcommittee on Terrorism,
Unconventional Threats, and Capabilities, Committee on Armed
Services, House of Representatives
Why GAO Did This Study:
The Department of Defense (DOD) spends more on information technology
(IT) annually than any other department or agency, accounting for
about half of the $59 billion governmentwide IT budget in fiscal year
2004. It is thus important that consistent, accurate, and complete
DOD IT budget information is available to the Congress and the Office
of Management and Budget (OMB) so that they can make informed
decisions among competing demands for funds. Accordingly, GAO reviewed
the department‘s fiscal year 2004 IT budget submission to determine
whether it was reliable, including identifying opportunities for
future improvement.
What GAO Found:
DOD‘s IT budget submission for fiscal year 2004 contains material
inconsistencies, inaccuracies, or omissions that limit its
reliability. For example:
* Two primary parts of the submission”the IT budget summary report and
the detailed Capital Investment Reports on each IT initiative”are
inconsistent. In particular, 15 initiatives that appear in the budget
summary do not appear in the Capital Investment Reports, and
discrepancies exist between the two types of reports in the amounts
requested for 73 major initiatives. These discrepancies total about
$1.6 billion. (The table below shows the portion of this total
difference that is attributable to various DOD organizations.)
* Major initiatives do not consistently use the same type of
appropriations to fund the same activities. That is, to fund the same
types of activities, some DOD organizations used the Research,
Development, Test, and Evaluation appropriations and others used the
Operation and Maintenance appropriations.
* The IT budget summary does not include all the costs of the IT
initiatives, which is contrary to federal guidance. For example, the
IT budget reports do not always include the costs of military
personnel working on the initiatives.
These problems are largely attributable to insufficient management
attention and limitations in departmental policies and procedures,
such as guidance in DOD‘s Financial Management Regulation, and to
shortcomings in systems that support budget-related activities. The
result is that OMB and the Congress are constrained in their ability
to make informed IT funding decisions and conduct effective oversight
and control, which could cause decision makers to approve or deny
funding for programs that they might otherwise have treated
differently, as well as increasing the chances of funds in an
appropriation not being sufficient to cover obligations.
What GAO Recommends:
To improve the consistency, accuracy, and completeness of future DOD
IT budget submissions, GAO is making recommendations to the Secretary
of Defense that are aimed at establishing appropriate policies,
procedures, and supporting systems to avoid repeating the same
problems that GAO found in the department‘s submission for fiscal
year 2004.
DOD either agreed or partially agreed with GAO‘s recommendations, and
it described actions that it plans to take to improve the reliability
of its IT budget submissions.
www.gao.gov/cgi-bin/getrpt?GAO-04-115.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Randolph C. Hite at
(202) 512-3439 or hiter@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD's Fiscal Year 2004 IT Budget Submission Contains Unreliable
Information:
Conclusions:
Recommendations:
Agency Comments and GAO Evaluation:
Appendix:
Appendix I: Objective, Scope, and Methodology:
Tables:
Table 1: Information Included in Budget Justification Reports:
Table 2: Comparison of Total Funding for Three Groupings of Major
Initiatives:
Table 3: Stratified Funding Differences among 176 Initiatives in Exhibit
300 and IT-1 Reports:
Table 4: Net Differences, Total Differences, and Number of Initiatives
with Differences, by DOD Component:
Table 5: Discrepancies between Sum of Line Items and Total Amount
Reported on Exhibit 300s, by DOD Component:
Abbreviations:
CFO: Chief Financial Officer:
CIO: Chief Information Officer:
DOD: Department of Defense:
FMR: Financial Management Regulation:
IT: information technology:
O&M: Operation and Maintenance:
OMB: Office of Management and Budget:
OSD: Office of the Secretary of Defense:
RDT&E: Research, Development, Test, and Evaluation:
Letter December 19, 2003:
The Honorable Jim Saxton:
Chairman:
The Honorable Martin T. Meehan:
Ranking Minority Member:
Subcommittee on Terrorism, Unconventional Threats, and Capabilities:
Committee on Armed Services:
House of Representatives:
To make informed funding decisions among competing demands for federal
funds, the Congress and the Office of Management and Budget (OMB) need
federal departments and agencies to provide consistent, accurate, and
complete budget information. This is particularly important in the case
of the information technology (IT) budget for the Department of Defense
(DOD), because the department spends more on IT annually than any other
department or agency, accounting for about half of the roughly $59
billion governmentwide IT budget in fiscal year 2004. Among other
things, the department's IT funding is to provide for modernization,
operation, and maintenance of thousands of information systems that
support such important business functions as accounting, acquisition,
logistics, and personnel management. DOD's IT funding is also to
provide for modernization, operation, and maintenance of the
department's technology infrastructure, such as its telecommunication
networks.
Because of the importance of DOD's IT budget information to the
Congress, we evaluated the department's fiscal year 2004 IT budget
submission. Our objective was to determine whether the submission was
reliable, including identifying opportunities for improving the
reliability of future submissions. To do so, we assessed the funding
information in DOD's primary IT budget reports to determine whether the
information reported was consistent between reports, whether the
reports included all information that OMB requires, whether the correct
appropriations and budget categories were used, and whether the reports
included all relevant costs. Our objective, scope, and methodology are
discussed in detail in appendix I.
Results in Brief:
DOD's fiscal year 2004 IT budget submission includes inconsistencies,
inaccuracies, and omissions that limit its reliability. For example,
the Capital Investment Reports, which provide detailed information on
each major IT initiative, are inconsistent with DOD's IT budget summary
report.[Footnote 1] In particular, 15 major initiatives that appear in
the budget summary report do not appear in the Capital Investment
Reports, and discrepancies exist between the amounts that the two types
of reports included for 73 major initiatives. These discrepancies total
about $1.6 billion. The Capital Investment Reports also contain
omissions and errors, such as missing life cycle phase information and
errors in calculations. Also, the Capital Investment Reports' amounts
for planning and acquisition activities for major initiatives are not
always classified as development/modernization, which is the budget
category that OMB requires for such activities, and these reports do
not consistently use the same appropriations to fund the same
activities. Additionally, the IT budget summary does not include all
the costs of the IT initiatives, which is contrary to guidance in
federal accounting standards and the Federal Financial Management
Improvement Act of 1996.[Footnote 2] For example, the budget submission
does not always include the costs of military personnel working on the
initiatives. These inconsistencies, inaccuracies, and omissions are
largely attributable to limitations in departmental regulations and
guidance and to shortcomings in the systems that support the
development of the budget submission, as well as to insufficient
management attention. The result is that OMB and the Congress are
forced to make IT funding decisions on the basis of information whose
reliability is limited, which could cause decision makers to approve or
deny funding for programs that they might otherwise have treated
differently and increases the chances of funds in an appropriation not
being sufficient to cover obligations.
To improve the reliability of DOD's future IT budget submissions, we
are making eight recommendations to the Secretary of Defense aimed at
raising the level of management attention to IT budget submission
reliability and strengthening the associated management processes and
supporting systems. In commenting on a draft of this report, DOD either
agreed or partially agreed with our recommendations and described
actions that it plans to take to improve the reliability of its IT
budget submissions.
Background:
DOD's IT budget submission for fiscal year 2004 totaled about $28
billion. Of this, about $9.1 billion was for what the department termed
national security systems, such as telecommunications networks and
systems that perform command and control functions. The remaining
approximately $18.8 billion was for business initiatives, such as
finance and accounting systems, military and civilian personnel
systems, and logistics systems. The roughly $28 billion included about
$17.4 billion for operating and maintaining existing systems and
infrastructure and about $10.5 billion for modernizing systems and
infrastructure. Examples of major initiatives included in this budget
submission are the following:
* the Global Command and Control System, a joint program intended to
provide the information resources needed by warfighters to accomplish
their command and control missions;
* the Defense Information System Network, a communications
infrastructure initiative that is intended to connect DOD's mission
support and armed forces using a combination of government and private
infrastructure; and:
* the Defense Integrated Military Human Resources System, a military
personnel and pay system that is expected to integrate personnel and
pay functions for all military services.
DOD's IT budget submission consists of three basic reports:[Footnote 3]
* Capital Investment Reports, also called Exhibit 300s, which are used
by OMB to determine whether an IT initiative meets budgetary guidelines
for funding. These reports provide detailed information on major IT
initiatives, including budget information by appropriation type and
life cycle phase. They are required for every major IT initiative,
according to OMB Circular A-11.[Footnote 4] The Exhibit 300 is
submitted to OMB, and a subset of the information contained in it is
submitted to the Congress.
* The IT budget summary, also known as the IT-1 spreadsheet, which is
intended to capture DOD's entire IT budget, including both major and
nonmajor initiatives, as well as information on which of two OMB-
defined budget categories each initiative's funding falls into--
development/modernization or current services. (The Exhibit 300 does
not provide information on budget category.) The IT-1 spreadsheet is
submitted to the Congress.
* The Exhibit 53 provides a high-level summary of information that is
in the IT-1 spreadsheet; thus, it does not include all the information
that is in the IT-1 spreadsheet. This exhibit is provided to OMB.
Table 1 describes the types of budget information provided in these
three reports.
Table 1: Information Included in Budget Justification Reports:
Type of information: System classification; Information subtype: Major;
Description[A]: Among other things, those initiatives that require
special management attention because of their importance to an agency's
mission, or that have significant program or policy implications (OMB
definition); Report in which information appears: Exhibit 300, IT-1
spreadsheet,Exhibit 53.
Information subtype: Nonmajor; Description[A]: Investments or
initiatives that do not meet the criteria for major initiatives (DOD
classification).
Information subtype: All other; Description[A]: An additional DOD
classification for certain initiatives.
Type of information: Appropriation typeused to fund IT [ B];
Information subtype: Procurement; Description[A]: Funds for the
acquisition of such items as hardware, infrastructure, software, and
services; Report in which information appears: Exhibit 300, IT-1
spreadsheet.
Information subtype: Research, Development, Test, and Evaluation;
Description[A]: Funds for research, development, test, and evaluation
activities.
Information subtype: Military Personnel; Description[A]: Funds for
military personnel who are planning, acquiring, developing, or
maintaining IT initiatives.
Information subtype: Operation and Maintenance; Description[A]:
Generally, funds for operating and maintaining IT systems or
infrastructure.
Type of information: Budget category; Information subtype: Development/
modernization; Description[A]: Funds for developing new IT systems or
making major enhancements to existing systems; Report in which
information appears: IT-1 spreadsheet, Exhibit 53.
Information subtype: Steady state (referred to by DOD as "current
services"); Description[A]: Funds for operating and maintaining
systems at current levels (i.e., without major enhancements).
Type of information: Life cycle phase; Information subtype: Planning;
Description[A]: Funds for planning IT initiatives; Report in which
information appears: Exhibit 300.
Information subtype: Acquisition; Description[A]: Funds for acquiring
or developing IT systems.
Information subtype: Information subtype:
Maintenance; Description[A]: Description[A]:
Funds for operating and maintaining IT systems.
Sources: OMB, DOD.
[A] Descriptions of budget information are based on OMB Circular A-11,
DOD's Financial Management Regulation, Exhibit 53, Exhibit 300s, and
IT-1 spreadsheet for fiscal year 2004.
[B] In addition, some IT initiatives are funded through working capital
funds, which may be used for any type of cost by organizations that are
financed in this way. (Working capital fund organizations sell goods or
services--e.g., network services or financial services--to other DOD
organizations and use the income from these sales to fund the
production of their respective goods or services.):
[End of table]
The types of information in these budget justification reports are
interrelated. For example, according to an official from the DOD
Comptroller's office, the life cycle phase in which a cost is to be
incurred is key to determining the proper appropriation type for
funding that cost, as well as to determining the proper budget category
(development/modernization or current services). Similarly, Circular
A-11 states that funding for all activities that occur during the
planning or acquisition phases should be placed in the development/
modernization budget category.
The DOD Chief Information Officer (CIO), who is also the Assistant
Secretary of Defense for Networks and Information Integration, is
responsible for compiling and submitting the department's IT budget
reports to OMB and the Congress. The CIOs and Comptrollers for DOD's
component organizations are responsible for the reliability of the
information about their respective initiatives in the
submission.[Footnote 5] Because of the importance of the budget
submission, these officials are required to certify in writing as to
their reliability. According to a DOD CIO official, the information in
the submission is initially prepared by component program offices and
processed through the CIO and Comptroller chains of command for the
components. The information is then forwarded to the DOD CIO office,
where it is consolidated before being sent to OMB and the Congress.
DOD's Fiscal Year 2004 IT Budget Submission Contains Unreliable
Information:
The House Report[Footnote 6] on the Bob Stump National Defense
Authorization Act for Fiscal Year 2003 emphasized the need for reliable
IT budget information. Specifically, the report stated:
"In the past, the [Armed Services Committee] has received information
technology documents that describe the various information technology
initiatives and provide budget data on these initiatives. These
documents, however, are too often inaccurate, misleading, and
incomplete. The Department must provide the committee accurate and
precise information and data on information technology systems. The
committee will rely on the documents, submitted pursuant to this
provision, when making recommendations.":
Federal agencies also need reliable IT budget information to comply
with the requirements of the Clinger-Cohen Act, which specifies that
agencies should design capital planning and investment control
processes for selecting, controlling, and evaluating IT investments and
should integrate those processes with the agencies' processes for
making budget-related decisions.[Footnote 7] IT investment management
best practices, as well as OMB guidance, recognize the importance of
reliable information, including the correct use of budget categories
and the consistent use of appropriation types, to support these
processes and decisions.[Footnote 8]
DOD's fiscal year 2004 IT budget submission includes inconsistent,
inaccurate, and incomplete information, as follows:
* The Exhibit 300 Capital Investment Reports and the IT-1 spreadsheet
contain different numbers of major initiatives, and the reports'
funding amounts for major initiatives also differ significantly.
* The Exhibit 300s contain omissions and errors, such as missing life
cycle phase information and errors in calculations.
* The Exhibit 300s contain funding amounts for planning and acquisition
activities that do not use the correct budget category--development/
modernization.
* The Exhibit 300s do not consistently use the same appropriation types
to fund the same IT development and modernization activities.
* The IT-1 spreadsheet does not include all the direct and indirect
costs required to fund IT initiatives, such as the direct costs of
military personnel working on the initiatives and the indirect costs of
resources that are jointly used by multiple initiatives or
organizations.
These inconsistencies, inaccuracies, and omissions are attributable in
part to insufficient management attention to the reliability of the
reports as well as ambiguities in DOD's Financial Management Regulation
(FMR)[Footnote 9] and a lack of supporting systems and control
processes for ensuring consistency between reports. Without accurate
and complete IT budget information, OMB and the Congress are not
provided with sufficient information to make informed decisions about
DOD's portfolio of competing IT investment options or to adjust the
level of funding devoted to IT. Without sufficient information,
decision makers could approve or deny funding for programs that might
otherwise have been treated differently. Moreover, inconsistency in how
DOD uses appropriation accounts reduces congressional and departmental
oversight and control of how the department uses the accounts. Further,
this inconsistency increases the risk of violations of the Anti-
deficiency Act, which can occur when funds that have been apportioned
from an appropriation are insufficient to cover obligations.[Footnote
10]
DOD's Exhibit 300s Are Not Consistent with Its IT-1 Budget Spreadsheet:
Information in DOD's Exhibit 300 Capital Investment Reports, reported
for its major IT initiatives as part of the fiscal year 2004 budget
submission, is not consistent with funding information in DOD's fiscal
year 2004 IT budget summary, which DOD submits to the Congress in the
form of the IT-1 spreadsheet and to OMB in the form of the Exhibit 53.
Discrepancies were evident in the number of major initiatives that
appear in these two reports, as well as in the amounts for 41 percent
of the major initiatives that appear on both reports. DOD reported 191
major initiatives in the IT-1 spreadsheet and 179 major initiatives in
the Exhibit 300s. While the two reports have 176 major initiatives in
common, the IT-1 spreadsheet includes 15 initiatives that are not in
the Exhibit 300s, and the Exhibit 300s classify 3 initiatives as major
that the IT-1 spreadsheet classifies as nonmajor.[Footnote 11] Table 2
compares the total amounts reported for these three groupings of major
initiatives.
Table 2: Comparison of Total Funding for Three Groupings of Major
Initiatives:
Dollars in millions.
176 on both Exhibit 300 and IT-1 spreadsheet; Funding: IT-1
spreadsheet: $14,527; Funding: Exhibit 300s: $14,823; Funding:
Difference[A]: - $296.
15 on IT-1 spreadsheet only; Funding: IT-1 spreadsheet: 83; Funding:
Exhibit 300s: -- ; Funding: Difference[A]: 83.
3 classified as nonmajor on IT-1 spreadsheet; Funding: IT-1
spreadsheet: --; Funding: Exhibit 300s: 57; Funding: Difference[A]:
-57.
Total; Funding: IT-1 spreadsheet: $14,610; Funding: Exhibit 300s:
$14,880; Funding: Difference[A]: -$270.
Sources: GAO, DOD.
Note: GAO analysis of DOD's Exhibit 300s and IT-1 spreadsheet.
[A] Difference is the IT-1 spreadsheet total amount minus the Exhibit
300 total amount.
[End of table]
DOD officials cited various reasons why 15 major initiatives on the
IT-1 spreadsheet did not have Exhibit 300s. For example, an official
representing the Department of the Army's CIO office told us that one
of the Exhibit 300s was omitted because responsibility for the
initiative was not assigned to the Army in time to prepare the report.
The same official told us that another was omitted because after
preparing the IT-1 spreadsheet, senior DOD officials decided not to
fund the initiative.[Footnote 12] However, the root cause of these
omissions is that DOD does not provide sufficient management attention
to IT budget submission reliability. Additionally, DOD does not have
the management processes (e.g., policies and procedures) and support
systems needed to ensure that the two reports are consistent.
Significant discrepancies also appear in the total dollar amounts
reported in the Exhibit 300s and the IT-1 spreadsheet for the 176 major
initiatives that were included in both reports. Specifically, DOD's
IT-1 spreadsheet totals about $14.5 billion for these initiatives. For
the same major IT initiatives on DOD's Exhibit 300s, the total dollar
amount is about $14.8 billion, about a $300 million difference. This
discrepancy can be traced to 73 of the 176 initiatives (41 percent), of
which 44 (25 percent) had differences over $1 million, and 4 had
differences of more than $100 million. Table 3 provides a summary of
funding totals for the 176 initiatives stratified by differences
between the initiatives' funding on the IT-1 spreadsheet and Exhibit
300s.
Table 3: Stratified Funding Differences among 176 Initiatives in
Exhibit 300 and IT-1 Reports:
Amount of difference (thousands): More than $100,000; Initiatives:
Number: 4; Initiatives: Percent: 2.
Amount of difference (thousands): $50,001 to $100,000; Initiatives:
Number: 1; Initiatives: Percent: 1.
Amount of difference (thousands): $10,001 to $50,000; Initiatives:
Number: 14; Initiatives: Percent: 8.
Amount of difference (thousands): $1,001 to $10,000; Initiatives:
Number: 25; Initiatives: Percent: 14.
Amount of difference (thousands): Subtotal: differences over $1
million; Initiatives: Number: 44; Initiatives: Percent: 25.
Amount of difference (thousands): $501 to $1,000; Initiatives: Number:
9; Initiatives: Percent: 5.
Amount of difference (thousands): $101 to $500; Initiatives: Number: 9;
Initiatives: Percent: 5.
Amount of difference (thousands): $51 to $100; Initiatives: Number: 5;
Initiatives: Percent: 3.
Amount of difference (thousands): $1 to $50; Initiatives: Number: 6;
Initiatives: Percent: 3.
Amount of difference (thousands): No difference; Initiatives: Number:
103; Initiatives: Percent: 59.
Amount of difference (thousands): Total; Initiatives: Number: 176;
Initiatives: Percent: 100.
Sources: GAO, DOD.
Note: GAO analysis of 176 initiatives that appear both in DOD's Exhibit
300 and in IT-1 spreadsheet budget reports.
[End of table]
The net difference between the total amount reported for all major
initiatives on the IT-1 spreadsheet and that reported on the Exhibit
300s is around $296 million.[Footnote 13] A much greater value results
when we sum the differences for each initiative between the IT-1
spreadsheet and the Exhibit 300s: about $1.6 billion.[Footnote 14] Of
the 73 initiatives that account for these differences, the Army and the
Department of the Air Force each had 12, and the Department of the Navy
had 6. The Navy accounts for the largest share of the total dollar
difference, followed by the Air Force. About 95 percent of Navy's total
dollar difference can be attributed to the Navy Marine Corps Intranet
program.[Footnote 15]
Table 4 breaks down the 73 initiatives by component, showing both the
different amounts on the two reports and the difference between the
total amounts reported.
Table 4: Net Differences, Total Differences, and Number of Initiatives
with Differences, by DOD Component:
DOD component: Air Force; Total number of initiatives: 22; Initiatives
with differences: Number: 12; Initiatives with differences: Percent:
55; Difference (millions): Net[A]: $357.99; Difference (millions):
Total[B]: $362.81.
DOD component: Army; Total number of initiatives: 28; Initiatives
with differences: Number: 12; Initiatives with differences: Percent:
43; Difference (millions): Net[A]: 54.37; Difference (millions):
Total[B]: 55.57.
DOD component: Navy; Total number of initiatives: 32; Initiatives
with differences: Number: 6; Initiatives with differences: Percent:
19; Difference (millions): Net[A]: -559.13; Difference (millions):
Total[B]: 581.89.
DOD component: American Forces Information Service; Total number of
initiatives: 1; Initiatives with differences: Number: 1; Initiatives
with differences: Percent: 100; Difference (millions): Net[A]: 18.01;
Difference (millions): Total[B]: 18.01.
DOD component: Defense Commissary Agency; Total number of initiatives:
1; Initiatives with differences: Number: 0; Initiatives with
differences: Percent: 0; Difference (millions): Net[A]: 0; Difference
(millions): Total[B]: 0.
DOD component: Defense Finance and Accounting Service; Total number
of initiatives: 16; Initiatives with differences: Number: 2;
Initiatives with differences: Percent: 13; Difference (millions):
Net[A]: 1.09; Difference (millions): Total[B]: 1.09.
DOD component: Defense Human Resources Activity; Total number of
initiatives: 3; Initiatives with differences: Number: 0; Initiatives
with differences: Percent: 0; Difference (millions): Net[A]: 0;
Difference (millions): Total[B]: 0.
DOD component: Defense Information Systems Agency; Total number of
initiatives: 14; Initiatives with differences: Number: 4; Initiatives
with differences: Percent: 29; Difference (millions): Net[A]: -0.09;
Difference (millions): Total[B]: 8.37.
DOD component: Defense Logistics Agency; Total number of initiatives:
5; Initiatives with differences: Number: 1; Initiatives with
differences: Percent: 20; Difference (millions): Net[A]: - 0.17;
Difference (millions): Total[B]: 0.17.
DOD component: Defense Security Service; Total number of initiatives:
1; Initiatives with differences: Number: 1; Initiatives with
differences: Percent: 100; Difference (millions): Net[A]: - 12.89;
Difference (millions): Total[B]: 12.89.
DOD component: Office of the Secretary of Defense; Total number of
initiatives: 4; Initiatives with differences: Number: 3; Initiatives
with differences: Percent: 75; Difference (millions): Net[A]: 7.00;
Difference (millions): Total[B]: 11.14.
DOD component: Transportation Command; Total number of initiatives:
9; Initiatives with differences: Number: 0; Initiatives with
differences: Percent: 0; Difference (millions): Net[A]: 0; Difference
(millions): Total[B]: 0.
DOD component: TRICARE [C]; Total number of initiatives: 7;
Initiatives with differences: Number: 3; Initiatives with
differences: Percent: 43; Difference (millions): Net[A]: 37.22;
Difference (millions): Total[B]: 37.22.
DOD component: Washington Headquarters Service; Total number of
initiatives: 3; Initiatives with differences: Number: 1; Initiatives
with differences: Percent: 33; Difference (millions): Net[A]: 0.07;
Difference (millions): Total[B]: 0.07.
DOD component: Multiple-component initiativesd[D]; Total number of
initiatives: 30; Initiatives with differences: Number: 27; Initiatives
with differences: Percent: 90; Difference (millions): Net[A]:
-199.52; Difference (millions): Total[B]: 530.61.
DOD component: Total; Total number of initiatives: 176; Initiatives
with differences: Number: 73; Initiatives with differences: Percent:
41; Difference (millions): Net[A]: -$296.05; Difference (millions):
Total[B]: $1,619.84.
Sources: GAO, DOD.
Note: GAO analysis of Exhibit 300s and IT-1 spreadsheet.
[A] Net is the IT-1 spreadsheet total amount minus the Exhibit 300
total amount.
[B] The total difference was calculated by computing the difference
between the amounts for each of the 176 major initiatives in the two
reports, converting any negative differences to positive values, and
then summing all the differences.
[C] TRICARE is a regionally managed health care program for active duty
and retired members of the uniformed services and their families and
survivors.
[D] Of the 30 cross-service initiatives, 27 had differences, but these
differences could not be attributed to a single component because more
than one component reported funding for each initiative.
[End of table]
These inconsistencies among initiatives on the IT-1 spreadsheet and the
Exhibit 300s occurred in part because DOD's management attention to its
budget submission has not been sufficient, and because it does not have
the management processes (e.g., policies and procedures) and support
systems that are needed to ensure consistency. For example, the DOD CIO
official who is responsible for compiling the IT budget submission said
that the department does not have support systems that allow funding
information to be input once and then used to create both the IT-1
spreadsheet and Exhibit 300s. Rather, DOD's budgeting systems require
that similar, but not identical, information be input into multiple
databases, in different formats. According to program offices, this
practice contributes to inaccuracies and inconsistencies in the budget
submission.
Additionally, DOD does not have management processes to ensure the
accuracy of changes made to the exhibits by component-and department-
level officials after the exhibits are prepared by program offices. For
example, officials from two of the six program offices that provided
information about this matter told us that information that they
reported on the Exhibit 300s was changed when it was incorporated into
the IT-1 spreadsheet by their component CIO offices, and that program
offices were not consulted to ensure that the changes were accurate.
Furthermore, these officials said that the component CIO offices did
not inform program offices of changes made to the IT-1 spreadsheets,
and that they did not have access to the information needed to update
Exhibit 300s to reflect changes.
DOD's Exhibit 300s Contain Omissions and Errors:
DOD's fiscal year 2004 Exhibit 300 Capital Investment Reports contain
three types of omissions or errors. First, the reports do not include
complete information on the life cycle phase of the major initiatives,
as required by Circular A-11. According to this circular, Exhibit 300s
must summarize funding data by life cycle phase: that is, planning,
acquisition, or maintenance. OMB officials stated that this information
is used to determine whether IT initiatives have an appropriate balance
of planning, acquisition, and maintenance activities. However, of the
197 DOD Exhibit 300s for fiscal year 2004 (representing 179
initiatives),[Footnote 16] 20 exhibits did not classify the funds by
life cycle phase.
Second, the total dollar amount reported on 45 Exhibit 300s does not
equal the sum of their respective line items. As shown in table 5, the
Navy accounts for the majority of these cases--about 69 percent of the
45 exhibits and almost all of the total dollar difference. The
discrepancies can be traced to a variety of causes. For example, among
the 31 Navy Exhibit 300s with differences, 13 erroneously treated the
fiscal year (2004) as a value and added $2,004 million to the funding
total. That is, the numeral "2004" was incorrectly treated as a line of
funding in the summary of spending. These 13 errors account for about
$26 billion of the Navy's approximately $39 billion difference.
Table 5: Discrepancies between Sum of Line Items and Total Amount
Reported on Exhibit 300s, by DOD Component:
DOD component: Air Force; Fiscal year 2004 amounts (millions): Sum of
line items: $435.3; Fiscal year 2004 amounts (millions): Total amount
reported: $445.8; Fiscal year 2004 amounts (millions): Total
difference[A]: $10.6; Number of Exhibit 300s with differences:
5.
DOD component: Army; Fiscal year 2004 amounts (millions): Sum of line
items: 336.0; Fiscal year 2004 amounts (millions): Total amount
reported: 214.5; Fiscal year 2004 amounts (millions): Total
difference[A]: 121.5; Number of Exhibit 300s with differences:
6.
DOD component: Navy; Fiscal year 2004 amounts (millions): Sum of line
items: 1,934.6; Fiscal year 2004 amounts (millions): Total amount
reported: 40,791.2; Fiscal year 2004 amounts (millions): Total
difference[A]: 38,856.6; Number of Exhibit 300s with
differences: 31.
DOD component: Defense Finance and Accounting Service; Fiscal year 2004
amounts (millions): Sum of line items: 8.3; Fiscal year 2004 amounts
(millions): Total amount reported: 8.8; Fiscal year 2004 amounts
(millions): Total difference[A]: 0.5; Number of Exhibit 300s
with differences: 1.
DOD component: Defense Logistics Agency; Fiscal year 2004 amounts
(millions): Sum of line items: 8.0; Fiscal year 2004 amounts
(millions): Total amount reported: 7.8; Fiscal year 2004 amounts
(millions): Total difference[A]: 0.2; Number of Exhibit 300s
with differences: 1.
DOD component: Transportation Command; Fiscal year 2004 amounts
(millions): Sum of line items: 44.9; Fiscal year 2004 amounts
(millions): Total amount reported: --; Fiscal year 2004 amounts
(millions): Total difference[A]: 44.9; Number of Exhibit 300s
with differences: 1.
DOD component: Total; Fiscal year 2004 amounts (millions): Sum of line
items: $2,767.1; Fiscal year 2004 amounts (millions): Total amount
reported: $41,468.1; Fiscal year 2004 amounts (millions): Total
difference[A]: $39,034.3; Number of Exhibit 300s with
differences: 45.
Sources: GAO, DOD.
Note: GAO analysis of Exhibit 300s and IT-1 spreadsheet.
[A] We computed the total difference by first calculating the actual
sum of the Exhibit 300 line items, subtracting DOD's reported total for
the Exhibit 300 from it, converting any negative differences to
positive values, and then summing the differences.
[End of table]
Third, although OMB requires an Exhibit 300 for each major initiative
and specifies a defined format to use to present funding information
for each initiative, DOD components did not consistently adhere to this
format. For example, the Defense Information Systems Agency combined
the funding information for seven initiatives in a format that did not
clearly provide OMB and congressional decision makers with the funding
amounts for each initiative. This inconsistency occurred because the
Office of the Secretary of Defense (OSD) does not have clearly defined
and consistently applied management controls to ensure that
organizations adhere to a specified format for displaying funding
information in the Exhibit 300.
Some Development/ Modernization Activities Were Improperly
Categorized:
Circular A-11 requires planning and acquisition activities to be
categorized as development/modernization and activities related to
operation and maintenance of existing systems to be categorized as
steady state, which DOD refers to as current services. Using the
appropriate budget categories is important, according to Circular A-11,
because it permits understanding, and thus informed decision making,
about the relative amounts being spent on developing and modernizing IT
versus operating and maintaining the status quo IT environment.
Moreover, OMB officials stated that using the proper budget category is
also important because it triggers the appropriate OMB review process
for an initiative. If development/modernization activities are
miscategorized as current services, the required OMB review process
will not be invoked.
DOD's fiscal year 2004 IT budget submission incorrectly categorized the
funding reported for some initiatives' planning and acquisition
activities as current services, rather than as development/
modernization. This incorrect categorization affected both DOD's
Operation and Maintenance (O&M) and its Military Personnel
appropriation accounts. For example, the budget submission for the
department's new integrated personnel and pay system included about $14
million to fund program office costs from the O&M appropriation and
categorized these costs as current services. However, because DOD
intends to perform planning and acquisition activities for this program
during fiscal year 2004, a portion of the funding should have been
categorized as development/modernization. This means that the
development/modernization funding amount for this initiative is
understated and the current services amount is overstated. As another
example, the IT-1 spreadsheet shows that every major initiative that
included funding from the Military Personnel appropriation categorized
the amount as current services, regardless of the activities the
military personnel were to perform. The DOD CIO official who is
responsible for compiling the IT budget submission acknowledged that
such miscategorization occurs, but stated that information is not
readily available to determine the total number of initiatives and the
associated amount of funding that is miscategorized departmentwide.
Officials representing the Navy CIO office stated that the Navy
categorizes all IT funding from the O&M appropriation as current
services, even if the funding is to be used for development/
modernization activities. This miscategorization occurs, in part,
because the FMR does not provide clear guidance on categorizing
activities as either development/modernization or current services.
Specifically, the FMR states that budgeted costs funded from the O&M
and Military Personnel appropriations are to be considered expenses,
and it defines expenses similarly to current services, in that both
refer to the costs of operating and maintaining systems. However,
Circular A-11 states that funding for activities that occur during
either the planning or acquisition phases of a new IT initiative must
be classified as development/modernization. This means that costs
budgeted for planning or acquisition activities should be classified as
development/modernization, regardless of whether the O&M, Military
Personnel, or another appropriation is used to fund the activities.
Further, a DOD Comptroller official who is responsible for advising
components on IT budgeting told us that if appropriations are used to
fund the planning or acquisition of a system, the costs should be
classified as development/modernization, rather than current services.
Our analysis of the FMR confirmed that it does not clearly distinguish
between development/modernization and current services costs. More
specifically, it defines the two terms as follows:
* development/modernization costs are those for "new applications and
infrastructure capabilities" and for "any change or modification to an
existing [information system] program, and/or initiative that results
in improved capability or performance of the baseline activity," and
the definition includes "personnel costs for Project Management" and:
* current services costs are those required to maintain "operations at
a current capability and performance level" and include "certain
overhead costs associated with PM [program management] offices.":
The FMR definitions are confusing regarding the classification of
project management costs because current services costs include
"certain overhead costs associated with PM [program management]
offices," and development/modernization includes "personnel costs for
Project Management." Also, the definitions do not clearly state that
for new IT initiatives, all funding for planning or acquisition
activities should be classified as development/modernization.
Furthermore, for modifications of existing systems, the definitions do
not provide sufficient criteria for determining whether modifications
will result in "improved capability or performance" (development/
modernization) or will maintain "operations at a current capability and
performance level" (current services).
OSD and Navy CIO officials stated that decisions regarding the amounts
that should be categorized as development/modernization or current
services for an individual initiative are complicated by the practical
fact that the same personnel and equipment are sometimes used to
perform both development/modernization and current services activities
for the initiative. This occurs because DOD uses a generally accepted
system life cycle management practice that involves sequentially
developing and deploying subsystems, rather than waiting until the
system is completely developed to deploy it. As a result, at various
points in the system's life cycle, some subsystems may be in the
maintenance phase while others are in the planning or acquisition
phases. In these cases, these officials stated that most DOD program
offices do not have process controls and supporting systems to enable
them to accurately estimate the amount that should be budgeted for
development/modernization and current services activities.
IT Budget Submission Does Not Use Appropriation Accounts Consistently:
Appropriations provide the legal authority for federal agencies to
obligate funds and make payments from the Treasury for specified
purposes. In the report of the House Committee on
Appropriations[Footnote 17] accompanying the Department of Defense
Appropriations Bill, 1999, the Congress expressed concern about DOD's
inconsistent use of appropriation accounts to fund IT development/
modernization activities. In response, DOD acknowledged the
inconsistencies and took steps to correct them by transferring funds
from the incorrect appropriation accounts to the correct accounts and
by issuing clarifications to its FMR guidelines. Additionally, DOD's
Office of the Comptroller issued a memorandum on this issue stating
that:
"Cross-Service and Agency consistency is important—. In determining
what appropriation to use, the purpose of the funding must fall
logically within the appropriation's purpose and conform with the
expense and investment criteria.":
However, the inconsistent use of appropriation accounts is continuing
to occur. DOD's fiscal year 2004 IT budget submission does not
consistently use the same appropriations accounts to fund the same
types of activities. That is, defense components used two different
appropriations--the Research, Development, Test, and Evaluation
(RDT&E) and O&M--to fund the same types of activities (the cost of
civilian personnel and other costs for performing or managing
development/modernization activities). According to officials
representing 7 of the 10 major initiatives that provided information on
this topic, their respective budget reports included funding from the
O&M appropriation for civilian personnel costs and other costs for
performing or managing development/modernization activities, while
according to officials representing 3 other initiatives, their budget
reports included funding for these activities from the RDT&E
appropriation. Officials from the DOD Comptroller's office stated that
the O&M appropriation is the correct one to fund these costs, but that
research and development organizations are allowed to use RDT&E
appropriations for these costs, because such organizations do not
receive O&M appropriations. However, according to a representative of
the Army CIO's office, two of the three organizations that used RDT&E
appropriations were not research and development organizations (both
were Army programs) and, according to the DOD Comptroller official,
should have used O&M appropriations.
A representative of the Army CIO's office explained that the reason the
Army program offices used the RDT&E appropriation to fund the cost of
civilian personnel and other costs for performing or managing
development/modernization activities was that his office advised them
to do so. He stated that this advice was based on the Army CIO office's
interpretation of the FMR and on an October 1999 memorandum from the
DOD Comptroller containing the following language:
"The RDT&E funds are typically used for developing new capability.
Expenses--the resources used to operate and maintain organizations and
current services--are generally budgeted in the O&M appropriations.
Investments are costs to acquire capital assets and have a long-term
benefit—.":
This official further stated that FMR sections, as well as the language
in this memorandum, indicate that the costs to develop new IT
capabilities, including the costs of civilian personnel and other costs
for managing and performing IT development and modernization
activities, should be funded with the RDT&E appropriation. However, the
official added that the FMR is ambiguous on this matter because other
sections indicate that the O&M appropriation may be the correct one to
use to fund these costs.
Our analysis of the FMR shows that the FMR is ambiguous regarding the
proper appropriation types for funding the costs for development/
modernization activities--specifically, the cost of civilian personnel
and other costs for managing and performing these activities. The
following excerpts from the FMR illustrate its ambiguity in this area.
The section on "Budgeting for Information Technology and Automated
Information Systems" supports the Army CIO's position that the RDT&E
appropriation should be used to fund these activities:
"In general, all developmental activities involved in bringing a
program to its objective system[[Footnote 18]] are to be budgeted in
RDT&E.":
However, other sections of the regulation support the DOD Comptroller
officials' position that the O&M appropriation is the correct
appropriation for funding the cost of civilian personnel and other
costs for managing and performing development/modernization
activities. For example, the section on funding policies states that:
"Costs budgeted in the Operation and Maintenance (O&M) and Military
Personnel appropriations are considered expenses—.
"The following guidelines shall be used to determine expense costs:
Labor of civilian, military, or contractor personnel—.
"The cost of civilian personnel compensation and other direct expenses
(i.e., travel, office equipment leasing, maintenance, printing and
reproduction) incurred in support of procurement and/or production
programs by departmental headquarters staff, contracting offices,
contract audit offices, system project offices, and acquisition
managers are expenses.":
These FMR sections provide conflicting guidance regarding which
appropriation should be used to fund civilian personnel and other costs
for development/modernization activities, which can result in the
inconsistent use of appropriations. As we have previously
reported,[Footnote 19] use of the wrong appropriation account
constitutes a violation of the Purpose Statute[Footnote 20] and can
lead to a violation of the Anti-deficiency Act.[Footnote 21] For
example, we reported that the Navy incorrectly purchased component
parts for IT systems with the O&M appropriation account rather than
with the Procurement appropriation. Subsequent actions to correct the
improper use of the O&M appropriation account resulted in an
overobligation of the amount that had been apportioned from Procurement
appropriations, thereby violating the Anti-deficiency Act. Further, we
reported that the violations resulted from misunderstanding, confusion,
or misapplication of financial management regulations and guidance
regarding procurement and fund management.
DOD's Submission Does Not Include All Relevant Project Costs:
Contrary to federal accounting guidance, DOD's budget submission does
not include all the costs required to fund IT initiatives. Federal
accounting standards and guidance from the Chief Financial Officers
(CFO) Council both support the preparation of budget submissions that
include the full cost of initiatives--including all direct costs, such
as military personnel costs--and those indirect costs that can be
allocated or traced to an initiative. Further, the Federal Financial
Management Improvement Act of 1996 requires federal agencies to comply
with federal accounting standards,[Footnote 22] including the Statement
of Federal Financial Accounting Standard Number 4, "Managerial Cost
Accounting Concepts and Standards for the Federal Government."
According to this statement, organizations should report full costs in
general purpose financial reports, including the salaries and other
benefits of employees who work directly on producing outputs (such as
IT initiatives), as well as indirect costs that can be allocated to
producing outputs. The statement continues that the cost data in the
organization's budget should be consistent with the full cost data
reported in the financial reports. Also, the CFO Council's Cost
Accounting Implementation Guide states that preferably, the cost of all
significant inputs that can be traced to the achievement of a program's
outputs and intended outcomes should be included in the program's
budget.
DOD's fiscal year 2004 IT-1 spreadsheet, which summarizes the IT budget
and provides information on the budget submission for each major
initiative, does not include all the direct costs of the initiatives.
Specifically, for numerous initiatives, the spreadsheet did not
consistently include IT funding for military personnel who are part of
DOD's IT workforce. On the basis of the average pay and benefits for
military personnel, we estimated that the total amount of these
workers' salary and benefits is about $4 billion annually. In its
fiscal year 2004 budget submission, DOD's IT-1 spreadsheet included
about $1 billion from the Military Personnel appropriation, meaning
that the department's fiscal year 2004 IT budget is potentially
understated by as much as $3 billion. According to the DOD CIO official
responsible for assembling the IT budget submission, a portion of this
$3 billion might have been included in the IT-1 spreadsheet as either
reimbursable costs or working capital funds, and some of the costs
associated with DOD's IT military personnel are not included in the IT
budget submission because these personnel work on embedded or satellite
system programs, which are not in DOD's IT budget. The official also
stated that information is not readily available to determine the
number or cost of IT military personnel erroneously omitted from the IT
budget reports. However, officials from five of the six program offices
that provided information about this matter told us that they planned
to use military personnel during fiscal year 2004, but they did not
include these costs in their respective IT budget reports because the
military services, rather than the initiatives, are responsible for
budgeting and accounting for these personnel.
Further, program offices did not include all indirect costs of the
initiatives--that is, costs that are used jointly with other
initiatives or DOD component organizations--in their fiscal year 2004
IT budget reports.[Footnote 23] Officials of both the Army and Navy CIO
offices stated that program offices generally do not include all
indirect costs in their IT budget reports, because these costs are
budgeted by the other DOD organizations that may be stakeholders in the
respective initiatives, and the program offices are not generally
provided with information on the amount of these shared costs that can
be attributed to their respective initiatives. These officials also
stated that with a few exceptions, department organizations have
neither cost accounting systems nor cost estimating processes in place
to determine the amount of indirect costs that should be allocated to
each IT initiative.
Conclusions:
DOD has not devoted sufficient management attention and it does not
have adequate management controls and supporting systems in place to
ensure that its IT budget submissions provide consistent, accurate, and
complete cost information for major IT initiatives. The result is that
DOD, OMB, and congressional decision makers are forced to make IT
funding decisions for major IT initiatives on the basis of conflicting,
uncertain, and inaccurate information regarding the cost of these
initiatives. Without reliable budget information, decision makers are
unnecessarily impaired in their ability to execute effective
departmental control and oversight by linking budgetary inputs to
outputs and outcomes, to compare full budgeted and actual costs of IT
initiatives, and to make decisions on the relative merits of competing
initiatives.
Recommendations:
To improve the consistency, accuracy, and completeness of future DOD IT
budget submissions, we recommend that the Secretary of Defense direct
the OSD and component CIOs, in consultation with the OSD and component
Comptrollers, to increase management attention and establish the
appropriate management controls and supporting systems to avoid the
weaknesses described in this report, including revising the FMR and
other guidance for preparing the DOD IT budget to clearly reflect these
policies and procedures. At a minimum, we recommend that revisions to
policies, procedures, and supporting systems ensure that:
* Exhibit 300s and IT-1 spreadsheets are consistent in terms of (1) the
major initiatives that are included in each report (unless otherwise
explained) and (2) the funding reported for each of these initiatives;
* Exhibit 300s are complete, accurate, and internally consistent, in
that (1) funding information is provided for each life cycle phase for
each initiative; (2) total amounts reported for each initiative equal
the sum of the individual line items for the initiative; and (3) the
format used to display the funding information clearly shows the total
funding amount for each initiative;
* amounts are properly categorized as development/modernization or
current services in the IT budget submission, so that OMB and
congressional decision makers are provided with accurate information on
the funding required to (1) develop new systems or significantly
improve existing systems and (2) operate and maintain existing systems;
* budget submissions are consistent in the costs that are funded with
the RDT&E appropriation and those that are funded with the O&M
appropriation; and:
* budget submissions fully account for all relevant costs, including
military personnel costs and indirect costs, to the extent that these
costs can be identified and properly allocated to each initiative, so
that OMB and congressional decision makers are provided with complete
budget information for each initiative.
We further recommend that the OSD and component CIO offices, in
consultation with the OSD and component Comptroller offices,
* assess the costs and benefits of alternative approaches for
establishing cost accounting systems or cost estimating processes to
determine the amount of indirect costs attributable to each IT
initiative and the amounts that should be categorized as development/
modernization and current services, and implement the more cost-
effective approach;
* assess approaches to reduce or eliminate requirements for duplicative
manual entry of information by program offices and components into
systems supporting the preparation of the IT budget reports; and:
* review the IT budget submission for fiscal year 2004 and the IT
budget submission for fiscal year 2005 from the O&M and RDT&E
appropriations and transfer, as necessary, the amounts for civilian
personnel and other costs associated with IT planning or acquisition
activities to the proper appropriation account, to ensure consistent
use of these accounts, provide for congressional and departmental
oversight of DOD's use of appropriations accounts, and reduce the risk
of violations of the Anti-deficiency Act.
Agency Comments and GAO Evaluation:
DOD provided what it termed "official oral comments" on a draft of this
report from the CIO, OSD, who is also the Assistant Secretary of
Defense for Networks and Information Integration. In commenting, DOD
either agreed or partially agreed with our recommendations and
described actions that it plans to take to establish the appropriate
controls and systems needed to correct many of the weaknesses described
in this report, including revising the FMR. Examples of DOD's planned
actions include:
* providing the Congress with a list of initiatives for which Exhibit
300s were provided to OMB, but not to the Congress, along with
explanations for differences;
* negotiating with OMB a later submission date for DOD's exhibits, to
provide additional time to ensure that exhibits are reliable;
* establishing a common, consistent data source to use in producing
Exhibit 300s and the IT-1 spreadsheets;
* modifying the process for producing Exhibit 300s to ensure that
correct funding amounts are captured;
* using a standardized format for Exhibit 300s;
* working with OMB to ensure the use of consistent definitions of and
terminology for development/modernization and current services;
* updating the FMR to clarify areas of concern or inconsistencies in
(1) the information presented in Exhibit 300s, (2) the use of
development/modernization and current services categories, and (3) the
categorization of costs as RDT&E or O&M;
* assessing, on a departmentwide basis, the establishment of a cost
accounting system;
* evaluating approaches to reduce or eliminate duplicative data entry;
and:
* considering appropriations realignments during the fiscal year 2006
budget cycle.
Notwithstanding DOD's agreement with our recommendations, as well as
its planned actions to improve its submissions' consistency, accuracy,
and completeness, DOD also provided mitigating reasons for the
discrepancies and problems that we reported. For example, DOD stated
that Exhibit 300s and IT-1 spreadsheets are not consistent in terms of
the major initiatives included in each report because DOD does not
necessarily report all major initiatives in the Exhibit 300s. Instead,
DOD and OMB agree as to which major initiatives are to be reported in
the Exhibit 300s based on a goal of reporting a dollar percentage of
all initiatives. Similarly, DOD stated that its IT-1 spreadsheet does
not include all relevant costs, such as military personnel costs and
indirect costs, because the spreadsheet is an extract of the budget
justification documents and does not include full life cycle costs or
total cost of ownership. Nevertheless, DOD added that it will assess
its guidance on reporting the cost of military personnel and other
relevant costs.
While we do not question the information that DOD provided to explain
the discrepancies and problems discussed in our report, this
information does not eliminate the need to provide congressional
decision makers with reliable information upon which to make informed
decisions. Thus, for DOD to fully respond to our recommendations, it
will need to take additional actions beyond those provided in its
comments. For example, it will need to provide the Congress with a list
of major initiatives included in the IT-1 spreadsheet that are not
included in Exhibit 300 (with an explanation of these differences).
Also, beyond modifying the FMR, it will need to revise related guidance
and implement controls to ensure that costs are correctly categorized
as (1) development/modernization or current services and (2) RDT&E or
O&M.
:
We are sending copies of this report to other interested congressional
committees and the other Members of the Senate and House Committees on
Armed Services; the House and Senate Committees on Appropriations,
Subcommittees on Defense; the Director, Office of Management and
Budget; the Secretary of Defense; the Assistant Secretary of Defense
(Networks and Information Integration)/Chief Information Officer; the
Under Secretary of Defense (Comptroller); and the Under Secretary of
Defense (Acquisition, Technology, and Logistics). We will also provide
copies to others on request. This report will also be available at no
charge on our Web site at [Hyperlink, http://www.gao.gov] http://
www.gao.gov.
If you have any questions concerning this report, please contact me at
(202) 512-3439 or by e-mail at [Hyperlink, hiter@gao.gov]
hiter@gao.gov. Other key contributors to this letter are Barbara
Collier, Alison Jacobs, George L. Jones, Nick Marinos, Daniel Wexler,
and Robert Williams, Jr.
Signed by:
Randolph C. Hite:
Director, Information Technology Architecture and Systems Issues:
[End of section]
Appendixes:
Appendix I: Objective, Scope, and Methodology:
Our objective was to determine whether the fiscal year 2004 information
technology (IT) budget submission for the Department of Defense (DOD)
was reliable, including identifying opportunities to improve its
reliability in the future. To do so, we assessed the funding
information in DOD's primary IT budget reports to determine whether the
information reported was consistent between reports, whether the
reports included all the funding information that the Office of
Management and Budget (OMB) requires, whether the correct budget
categories and consistent appropriation types were used to fund the
initiatives, and whether the submission included all costs of the
initiatives.
We reviewed OMB Circular A-11 to obtain requirements and guidelines for
preparing budget submissions and confirmed our understanding of the
guidelines through interviews with OMB officials. We also assessed
DOD's Financial Management Regulation (FMR) and its budget submission
guidance, and we interviewed DOD departmental and component officials
to determine DOD's criteria for budget submissions. Finally, we
reviewed federal accounting standards to determine additional guidance
for budget preparation.
To identify inconsistencies between the reports, we assessed the
Exhibit 300 Capital Investment Reports and the IT-1 budget summary
spreadsheet. We compared the Exhibit 300s with the IT-1 spreadsheet and
not with the Exhibit 53 because the Exhibit 53 presents essentially the
same information as the IT-1 spreadsheet, but in less detail. We
counted the number of major initiatives that appeared in both reports,
as well as the number appearing in only one of the reports. We also
calculated the differences in the funding amounts between the Exhibit
300s and the IT-1 spreadsheet and made comparisons among the
initiatives and components, as well as between totals, for each report.
We interviewed departmental, component, and program officials to
determine causes for the inconsistencies.
To select which program officials to contact, we chose a cross section
of DOD's organizations, including the Office of the Secretary of
Defense; the Departments of the Air Force, Army, and Navy; and seven
agencies and activities (the American Forces Information Service,
Defense Contract Management Agency, Defense Human Resources Activity,
Defense Information Systems Agency, Defense Security Service, TRICARE,
and Washington Headquarters Service). From each program office, we
obtained explanations of its funding submission related to one or more
of the following issues: inconsistencies between the reports, omissions
and errors in Exhibit 300s, improper categorization of development/
modernization activities, inconsistent use of appropriations, and costs
that were not included in the submission.
To determine whether the reports included all information required by
OMB, we analyzed the Exhibit 300 Capital Investment Reports to identify
omissions and inconsistencies in the information for each initiative.
We tallied the number of initiatives that omitted life cycle
information. We also identified initiatives with total funding amounts
that were not equal to the sum of the amounts reported for individual
line items and calculated the totals by component. To determine causes
for these inconsistencies, we interviewed departmental, component, and
program officials.
To determine whether the correct budget categories were used to fund
the initiatives, we examined programs that included activities for
development and modernization and determined how their funding amounts
were categorized. We interviewed program officials to determine what
activities were planned and then assessed whether the budget categories
were consistent with OMB criteria. We also interviewed component and
departmental officials to determine the guidance they were providing to
program officials, and we assessed DOD's FMR to determine whether its
guidance was clear and consistent with OMB guidelines.
To determine whether consistent appropriation types were used to fund
initiatives, we determined what appropriation types were included for
funding development and modernization activities. We identified three
program offices that were using the Research, Development, Test, and
Evaluation appropriation for these purposes and seven that were using
the Operation and Maintenance appropriation, and contacted them to
determine the reasons that they selected these appropriations. We
reviewed DOD's prior actions to correct similar inconsistencies. We
also analyzed the language in the FMR for its clarity on these issues.
To determine whether the submission included all costs of the
initiatives, we assessed the appropriation activities reflected in the
IT-1 spreadsheet. From this assessment and interviews with program
officials, we determined that many programs did not include funding for
military personnel. To confirm that such costs should be included, we
interviewed officials representing OMB, the DOD Comptroller, and the
DOD Chief Information Officer, and we reviewed the FMR and budgeting
guidance in the Statement of Federal Financial Accounting Standard
Number 4, "Managerial Cost Accounting Concepts and Standards for the
Federal Government." We also interviewed program officials to determine
why they did not include funding for military personnel costs in their
budget reports. We used Defense Manpower Data Center information to
estimate the potential amount that military personnel costs are
understated in the fiscal year 2004 IT budget submission. To do this,
we calculated the difference between the cost of military personnel
performing IT functions and the amount of funding in DOD's IT budget
submission that was to be funded using the Military Personnel
appropriations. To estimate the cost of IT military personnel, we used
Defense Manpower Data Center information on the number of military
personnel performing IT work in each of the four services--Air Force,
Army, Navy, and the U.S. Marine Corps--and multiplied the number at
each rank for each service by the respective average annual pay and
benefits. We included only active military personnel in IT duty
positions in our estimate. We also assessed federal accounting
standards and interviewed program officials to determine the
requirements and practices for including indirect costs in budget
reports.
We conducted our work at GAO and at DOD headquarters during June to
October 2003 in accordance with generally accepted government auditing
standards.
(310252):
FOOTNOTES
[1] According to OMB Circular A-11, Capital Investment Reports, also
known as Exhibit 300s, are required for initiatives that OMB defines as
major: that is, those initiatives that require special management
attention because of their importance to an agency's mission or that
have significant program or policy implications.
[2] Public Law 104-208, section 803(a).
[3] In addition to the three basic reports, the budget submission
includes a report called All Departments Information Technology/
National Security Systems, which presents the budget information by DOD
organization.
[4] OMB Circular A-11, Preparation, Submission, and Execution of the
Budget.
[5] DOD components consist of the military services and DOD agencies
and activities, such as the Defense Information Systems Agency and the
Defense Human Resources Activity.
[6] H.R. Rep. No. 107-436, at 298 (May 3, 2002).
[7] 40 U.S.C. § 11312.
[8] U.S. General Accounting Office, Information Technology Investment
Management: A Framework for Assessing and Improving Process Maturity,
GAO/AIMD-10.1.23 (Washington, D.C.: May 1, 2000).
[9] DOD's Financial Management Regulation includes rules on the use of
appropriations and definitions of development/modernization and
current services.
[10] 31 U.S.C. §§ 1341(a), 1517(a). These sections of the Anti-
deficiency Act prohibit obligations or expenditures in excess of
available funds.
[11] The IT-1 spreadsheet classifies each initiative as major,
nonmajor, or all other. OMB requires that an Exhibit 300 be prepared
for each major initiative, but not for the other categories.
[12] For 5 of the 15 initiatives without Exhibit 300s, no funding was
included for fiscal year 2004. However, for 9 other initiatives,
Exhibit 300s were submitted even though no funding was included for
fiscal year 2004.
[13] We computed the net difference between the total amounts reported
for 176 major initiatives on both reports by subtracting the total
amount reported for all major initiatives on the IT-1 spreadsheet from
the total amount reported for all major initiatives on the Exhibit
300s.
[14] We computed the sum of the differences between the amounts for
each initiative in the two reports by first finding the difference
between the amounts for each of the 176 major initiatives in the two,
converting any negative differences to positive values, and then
summing all the differences. The sum of the differences is larger than
the difference between the IT-1 spreadsheet and Exhibit 300 total
amounts because for this calculation, the positive and negative
differences between the two reports do not cancel each other out.
[15] The Navy Marine Corps Intranet is to provide the Navy with a
single, secure network for all Navy and Marine Corps military and
civilian personnel, including deployed forces.
[16] For major initiatives that involve two or more components, each
component may submit a separate Exhibit 300 for the same initiative. As
a result, components collectively submitted 197 Exhibit 300s for 179
initiatives.
[17] H.R. Rep. No. 105-591, at 173-174 (June 22, 1998).
[18] DOD's FMR states that bringing a program to its objective system
means developing the system to the point that it meets the requirements
defined in the system's requirements documents.
[19] U.S. General Accounting Office, Navy Anti-Deficiency Act Training,
GAO/AIMD-96-53R (Washington, D.C.: Apr. 12, 1996).
[20] 31 U.S.C. § 1301(a) is commonly referred to as the Purpose
Statute.
[21] Anti-deficiency Act (31 U.S.C. § 1517(a)).
[22] Public Law 104-208, section 803(a).
[23] Indirect costs include such shared costs as those for general
administrative services; general research and technical support;
security; employee health and recreation facilities; and operation and
maintenance of buildings, equipment, and utilities.
GAO's Mission:
The General Accounting Office, the investigative arm of Congress,
exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability
of the federal government for the American people. GAO examines the use
of public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO's commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains
abstracts and full-text files of current reports and testimony and an
expanding archive of older products. The Web site features a search
engine to help you locate documents using key words and phrases. You
can print these documents in their entirety, including charts and other
graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its
Web site daily. The list contains links to the full-text document
files. To have GAO e-mail this list to you every afternoon, go to
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order
GAO Products" heading.
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. General Accounting Office
441 G Street NW,
Room LM Washington,
D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.
General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.
20548:
