Military Housing
Opportunities Exist to Better Explain Family Housing O&M Budget Requests and Increase Visibility Over Reprogramming of Funds Gao ID: GAO-04-583 May 27, 2004The military services have owned and operated much housing on their installations but increasingly are privatizing housing, relying on the private sector to manage the renovation, construction, and maintenance of existing and new homes for military families. Funding to operate and maintain existing government-owned housing is provided through the family housing operation and maintenance (O&M) appropriations. The amount of funding required varies based on a number of factors, including how quickly privatization occurs to reduce requirements for government-owned housing. As requested, this report discusses the (1) services' assumptions and methods used to develop budget requests and how well their budget justifications explain the impact of privatization on family housing O&M funds and (2) the extent to which Congress has visibility over the services' reprogramming of family housing O&M funds.
Budget justification materials submitted to Congress for family housing O&M funding do not clearly and consistently explain funding requirements and how the housing privatization program impacts the services' budget requests, frustrating congressional oversight. Various factors have contributed to this situation. The services use similar assumptions and methods to develop budget requests for family housing O&M, but they often rely on assumptions established up to a year and a half before the budgets are executed. While the services have the ability to revise and update their budget requests, they typically choose not to because of the difficulty of doing so related in part to other competing defense priorities and the relatively small size of the family housing O&M budget. Given these considerations, defense officials said that they are more likely to make the needed funding adjustments through reprogrammings. In addition, changes in the pace of expected privatization can affect funding required for the nine family housing O&M accounts and subaccounts--although not uniformly--but the effects of these changes are not well explained in budget justifications submissions to Congress. Although, in many cases, the services may have data that could result in better informed decision making, they do not always include such information in budget justifications. Congress has limited visibility of the services' reprogramming of family housing O&M funds. For example, Congress is not notified when reprogrammings are below 10 percent of the initial funding amount or result in a decrease. On the other hand, DOD provides congressional decision makers with more information on reprogrammings for other appropriations, such as regular O&M. In addition, compared with the other services, the Navy and the Marine Corps' reporting of reprogrammings provides even less visibility. For example, they did not report to Congress reprogrammings for the four subaccounts--management, services, furnishings, and miscellaneous--within the operations account. In addition, the Defense Finance and Accounting Service's obligation reports for the Navy and Marine Corps do not separate the four operations subaccounts, as they do for the other services. Navy and Marine Corps officials were not aware of the usefulness to separate the four operations subaccounts. Also, the Navy and the Marine Corps obligation data reflecting reprogramming actions do not always match comparable official obligation data produced by the Defense Finance and Accounting Service. Even though the two services have been working with the Defense Finance and Accounting Service, officials told GAO that this has been a long-standing issue and difficult to resolve. Collectively, this lack of visibility over the reprogramming of funds and data inconsistencies hinder the ability of congressional and DOD decision makers to evaluate family housing O&M budget requests and obligations.
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Director: Team: Phone:GAO-04-583, Military Housing: Opportunities Exist to Better Explain Family Housing O&M Budget Requests and Increase Visibility Over Reprogramming of Funds
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Family Housing O&M Budget Requests and Increase Visibility Over
Reprogramming of Funds' which was released on May 27, 2004.
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Report to Congressional Committees:
United States General Accounting Office:
GAO:
May 2004:
MILITARY HOUSING:
Opportunities Exist to Better Explain Family Housing O&M Budget
Requests and Increase Visibility Over Reprogramming of Funds:
GAO-04-583:
GAO Highlights:
Highlights of GAO-04-583, a report to congressional committees
Why GAO Did This Study:
The military services have owned and operated much housing on their
installations but increasingly are privatizing housing, relying on the
private sector to manage the renovation, construction, and maintenance
of existing and new homes for military families. Funding to operate and
maintain existing government-owned housing is provided through the
family housing operation and maintenance (O&M) appropriations. The
amount of funding required varies based on a number of factors,
including how quickly privatization occurs to reduce requirements for
government-owned housing. As requested, this report discusses the (1)
services‘ assumptions and methods used to develop budget requests and
how well their budget justifications explain the impact of
privatization on family housing O&M funds and (2) the extent to which
Congress has visibility over the services‘ reprogramming of family
housing O&M funds.
What GAO Found:
Budget justification materials submitted to Congress for family housing
O&M funding do not clearly and consistently explain funding
requirements and how the housing privatization program impacts the
services‘ budget requests, frustrating congressional oversight. Various
factors have contributed to this situation. The services use similar
assumptions and methods to develop budget requests for family housing
O&M, but they often rely on assumptions established up to a year and a
half before the budgets are executed. While the services have the
ability to revise and update their budget requests, they typically
choose not to because of the difficulty of doing so related in part to
other competing defense priorities and the relatively small size of the
family housing O&M budget. Given these considerations, defense
officials said that they are more likely to make the needed funding
adjustments through reprogrammings. In addition, changes in the pace of
expected privatization can affect funding required for the nine family
housing O&M accounts and subaccounts”although not uniformly”but the
effects of these changes are not well explained in budget
justifications submissions to Congress. Although, in many cases, the
services may have data that could result in better informed decision
making, they do not always include such information in budget
justifications.
Congress has limited visibility of the services‘ reprogramming of
family housing O&M funds. For example, Congress is not notified when
reprogrammings are below 10 percent of the initial funding amount or
result in a decrease. On the other hand, DOD provides congressional
decision makers with more information on reprogrammings for other
appropriations, such as regular O&M. In addition, compared with the
other services, the Navy and the Marine Corps‘ reporting of
reprogrammings provides even less visibility. For example, they did not
report to Congress reprogrammings for the four subaccounts”management,
services, furnishings, and miscellaneous”within the operations account.
In addition, the Defense Finance and Accounting Service‘s obligation
reports for the Navy and Marine Corps do not separate the four
operations subaccounts, as they do for the other services. Navy and
Marine Corps officials were not aware of the usefulness to separate the
four operations subaccounts. Also, the Navy and the Marine Corps
obligation data reflecting reprogramming actions do not always match
comparable official obligation data produced by the Defense Finance and
Accounting Service. Even though the two services have been working with
the Defense Finance and Accounting Service, officials told GAO that
this has been a long-standing issue and difficult to resolve.
Collectively, this lack of visibility over the reprogramming of funds
and data inconsistencies hinder the ability of congressional and DOD
decision makers to evaluate family housing O&M budget requests and
obligations.
What GAO Recommends:
GAO is making several recommendations to better explain the budget
requests for family housing O&M and increase visibility over service
reprogramming of funds between the accounts and a matter for
congressional consideration related to visibility of fund movements.
In written comments on a draft of this report, DOD agreed with the
recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-583.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Barry W. Holman at (202)
512-8412 or holmanb@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Services Do Not Clearly and Consistently Explain the Impact of
Privatization in Their Budget Justifications to Congress:
Congress Has Limited Visibility Over the Reprogramming of Family
Housing O&M Funds:
Conclusions:
Recommendations for Executive Action:
Matter for Congressional Consideration:
Agency Comments:
Scope and Methodology:
Appendix I: GAO Briefing Slides:
Appendix II: Family Housing Operation and Maintenance Budget
Definitions:
Appendix III: Comments from the Department of Defense:
Table:
Table 1: Services' Reprogramming Amounts and Percentages Reprogrammed,
Fiscal Year 2003:
Figure:
Figure 1: Percentage of Funding for the Family Housing O&M
Appropriations by Account and Subaccount, Fiscal Year 2004:
Abbreviations:
DOD: Department of Defense:
OSD: Office of the Secretary of Defense:
O&M: operation and maintenance:
United States General Accounting Office:
Washington, DC 20548:
May 27, 2004:
Congressional Committees:
The military services own and operate much housing on their military
bases while at the same time they are increasingly moving to privatize
their housing. In doing so, they rely on the private sector to renovate
and operate privatized housing as well as build and maintain many new
housing units. Some funding to support both military-owned housing and
privatization is provided for in the family housing operation and
maintenance (O&M) portion of the military construction appropriation
act. The services' family housing O&M budget requests and resulting
congressional appropriations use a budget structure consisting of nine
accounts and subaccounts. Congress appropriated about $2.7 billion to
operate and maintain about 230,000 housing units for servicemembers and
their families in fiscal year 2004. The services use these funds to
meet a range of family housing requirements, such as managing property,
providing utilities, and maintaining and leasing housing units.
In 1998, the Department of Defense (DOD) estimated that 60 percent of
its family housing inventory in the United States was inadequate and in
need of renovation or replacement. In its Defense Planning Guidance for
fiscal years 2004 through 2009, DOD set a deadline of fiscal year 2007
to eliminate inadequate family housing across DOD. Recognizing this
situation, Congress gave DOD new authorities to use private sector
investment capital and housing construction expertise to finance, own,
operate, and maintain military housing known as the Military Housing
Privatization Initiative.[Footnote 1] As the services privatize their
housing, reductions in their housing inventory will occur. A portion of
family housing O&M appropriation supports the privatization initiative,
such as funding environmental assessments and consultant fees.
The conference report[Footnote 2] accompanying the fiscal year 2004
military construction appropriation bill directed us to conduct a study
on the assumptions and methods used by the services to develop their
respective budget requests for the nine accounts and
subaccounts[Footnote 3] that comprise the family housing O&M
appropriations and review the reprogramming of funds between these
accounts.[Footnote 4] We recently provided your offices with
information summarizing our preliminary findings in a briefing format
(see app. I). This report summarizes and updates our findings contained
in the briefing materials in the following two areas: (1) the services'
assumptions and methods used to develop individual budget requests and
how well their budget justifications explain the impact of
privatization on family housing O&M funds and (2) the extent to which
Congress has visibility over the services' reprogramming of family
housing O&M funds.
To address these objectives, we interviewed Army, Navy, Marine Corps,
and Air Force family housing officials to obtain information on the
assumptions and methods used to develop the family housing O&M budget
requests, the impact of privatization on family housing O&M funds, and
the reprogramming of these funds. In addition, we reviewed the
services' budget justification submissions to assess how well the
services explained their assumptions, methodology, and the impact of
privatization. We assessed the reliability of the services' data and
found some inconsistencies between Navy and Marine Corps data and
Defense Finance and Accounting Service data. We believe the data
gathered are sufficiently reliable for the purposes of this report. We
also discussed the results of our work with officials from the Office
of the Under Secretary of Defense (Comptroller); the Housing and
Competitive Sourcing Office within the Office of the Under Secretary of
Defense for Acquisition, Technology, and Logistics; the Defense Finance
and Accounting Service; and the military services. We conducted our
work from December 2003 through March 2004 in accordance with generally
accepted government auditing standards. Details about our scope and
methodology appear at the end of this letter.
Results in Brief:
Budget justification materials that the services submit to Congress for
family housing O&M funding do not clearly and consistently explain the
services' funding requirements and how the housing privatization
program impacts their budget requests, frustrating congressional
oversight. Various factors have contributed to this situation. The
services often rely on assumptions established up to a year and a half
before the budgets are executed to develop budget requests for family
housing O&M. For example, these budget requests are largely based on
historical obligations adjusted for pricing and program assumptions.
While the services have the ability to revise and update their budget
requests, they typically choose not to because of the difficulty of
doing so related in part to other competing defense priorities and the
relatively small size of the family housing O&M budget. For example, if
a service anticipated a slippage in the privatization initiative after
the family housing O&M budget amounts are programmed, service officials
told us that the budget request may not be revised to reflect the
slippage. Defense officials said that they are more likely to make the
needed funding adjustments through reprogrammings. In addition, changes
in the pace of expected privatization can affect funding required for
individual accounts and subaccounts--although not uniformly---but the
effects of the changed pace are not well explained in the services'
budget justifications. Although in many cases the services may have
data that could better explain how the housing privatization program
impacts their budget requests, they do not always include such
information in budget justification submissions to Congress.
Congress has limited visibility of the services' reprogramming of
family housing O&M funds. While all services reprogram family housing
O&M funds, they are required to notify Congress of only those
reprogrammings that are 10 percent or more of the initial funding
levels for the nine accounts and subaccounts. Congress is not notified
when reprogrammings are below 10 percent or result in a decrease. For
example, in fiscal year 2003, the Air Force was not required to notify
Congress of a $3.7 million increase in the leasing account because it
was below 10 percent or a $75 million decrease in the maintenance
account. Also, compared with the other services, the Navy and the
Marine Corps' reporting of reprogramming actions provides even less
visibility. For example, the Navy and the Marine Corps did not report
to Congress reprogrammings of 10 percent or more for the four
subaccounts--management, services, furnishings, and miscellaneous--
within the operations account. Furthermore, the Defense Finance and
Accounting Service's obligation reports for the Navy and the Marine
Corps do not separate the four operations subaccounts, as the reports
do for the other services. In addition, unlike the Army and the Air
Force, the Navy and the Marine Corps obligation data reflecting
reprogramming actions throughout the year do not always match
comparable official obligation data produced by the Defense Finance and
Accounting Service. DOD provides congressional decision makers with
more information on reprogrammings for other appropriations, such as
regular O&M,[Footnote 5] i.e., it provides a semiannual summary of the
initial funding levels, the amount of funds reprogrammed, and the total
funds obligated. Collectively, this lack of visibility over the
reprogramming of funds and data inconsistencies between the Navy and
the Marine Corps and the Defense Finance and Accounting Service hinder
the ability of congressional and DOD decision makers to evaluate family
housing O&M budget requests and obligations.
To provide Congress with sufficient data in the services' budget
justification submissions, we are making a recommendation that the
services better explain the data provided to Congress regarding the
impact of privatization on family housing O&M budget requests. We are
also making recommendations to improve congressional visibility of the
Navy and Marine Corps' reprogrammings of family housing O&M accounts
and subaccounts and to improve the consistency of the Navy and Marine
Corps obligation data. We also suggest that Congress may wish to
consider further improving the visibility of the services'
reprogrammings by requiring DOD to provide information covering the net
movement of funds for each of the nine family housing O&M accounts and
subaccounts at the end of the fiscal year, similar to what DOD now
provides to Congress on other appropriations. In written comments on a
draft of this report, the Deputy Comptroller (Program/Budget) within
the Office of the Under Secretary of Defense (Comptroller) agreed with
our recommendations and commented favorably about our matter for
congressional consideration. The Deputy Comptroller also stated that
the department is taking steps to implement our recommendations. DOD's
comments are included in this report in appendix III.
Background:
In fiscal year 2004, DOD owns and manages about 230,000 housing units
for military families. At the same time, DOD is increasingly moving to
privatize its housing, relying on the private sector to renovate and
operate privatized housing as well as build and maintain many new
housing units. As of February 2004, DOD had privatized about 55,100
housing units and expected to privatize about 160,000 housing units by
the end of fiscal year 2007, including construction of many new units.
To operate and maintain the government-owned infrastructure, the
services use family housing O&M funds to perform maintenance, pay
utilities, provide services, manage the family housing program, and
fund various other family housing requirements. Also, funding for
military-owned and privatization support costs[Footnote 6] is provided
for in the family housing O&M portion of the annual military
construction appropriation. For fiscal year 2004, Congress appropriated
about $2.7 billion for family housing O&M in the military construction
appropriation. The services request these funds using a budget
structure comprised of nine accounts and subaccounts (see fig.
1).[Footnote 7] In turn, Congress, in its conference report
accompanying the bill, uses the same nine accounts and subaccounts to
designate its understanding of how the funds are to be used. As shown
in figure 1, DOD groups the four subaccounts--management, services,
furnishings, miscellaneous--under the operations account.[Footnote 8]
Figure 1: Percentage of Funding for the Family Housing O&M
Appropriations by Account and Subaccount, Fiscal Year 2004:
[See PDF for image]
Note: May not add to 100 percent due to rounding.
[End of figure]
Congressional conferees expressed several concerns about the services'
family housing O&M budget requests in the conference report
accompanying the 2004 military construction appropriation
bill.[Footnote 9] Conferees stated concerns about the services not
adequately explaining the assumptions and methods used to develop the
family housing O&M budget requests and about the services'
reprogramming actions. Furthermore, conferees reduced each of the
services' fiscal year 2004 family housing O&M budget requests by $10
million due to the way the services calculated their family housing O&M
requirements. Conferees further reduced the Navy's request by another
$7.7 million due to concerns about how the Navy accounted for its
housing privatization effort in its family housing O&M budget request
for fiscal year 2004.
Family Housing O&M Budget Process:
As part of the President's budget request to Congress, the services
develop budget requests and justification submissions to fund family
housing O&M programs and activities. The process begins with the family
housing master plans, which provide a consolidated strategy for
planning, programming, and executing the family housing program and
include funding plans for maintaining government-owned housing and
plans indicating a time frame for privatization. The services' budget
formulation process translates the strategy from the family housing
master plans into their respective budget requests. In that process,
assumptions about the future requirements for family housing, including
assumptions related to housing privatization, are established and
refined. The budget requests are based largely on historical
obligations adjusted for pricing and program assumptions. The Office of
the Secretary of Defense (OSD) provides inputs on key pricing
assumptions such as inflation, foreign currency rates, and pay
adjustments. OSD and the services determine program assumptions
including expected reductions in inventory due to housing
privatization. For example, when the services are developing the budget
request for the utilities account, they typically look at prior year
costs per unit and adjust the costs for anticipated inflation and
expected changes in housing unit inventory.
The family housing O&M budget requests are developed through a series
of scheduled steps as part of DOD's Planning, Programming, and
Budgeting System. The planning stage begins about one year before the
budget request is sent to Congress, as the family housing O&M
requirements are defined based on the family housing master plans (see
app. I, slides 10 and 11). Around the same time, OSD issues its Defense
Planning Guidance, which may provide broad planning assumptions for the
services. For example, DOD's requirement to eliminate inadequate
housing by 2007 is derived from the Defense Planning Guidance. In the
programming phase, the services develop their Program Objectives
Memorandums, which are 6-year plans that define service requirements.
Program Objectives Memorandum budget targets, including family housing
O&M budget targets, are then matched against the services' available
resources. The programming phase concludes with decisions that are
documented in OSD's Program Decision Memorandums issued about 3 to 4
months before the President submits the budget to Congress. At the same
time, the services are developing the family housing O&M budget
request. This request is included in the budget submission the services
send to OSD for consideration. As the budgeting phase begins, changes
to the budget estimation submission are issued as Program Budget
Decisions, the last of which is generally issued 2 months before the
President submits the budget to Congress in February.
When submitting the budget requests to Congress, the services include
justification submissions to summarize the process by which the budget
request was derived. Typically, the justification submissions for
family housing O&M accounts include a definition of what the account
funds, a description of the prior fiscal year's appropriation, and
expected pricing and program changes to that account. The estimate for
the budget year is then developed based on those changes. In addition,
the justification submissions provide a brief statement about pricing
and program changes.
Reprogrammings of Family Housing O&M Funds:
During the budget execution year, reprogrammings may be necessary if
obligations for each account and subaccount do not match the initial
funding amount as specified in the conference report. Historically, the
services have reprogrammed family housing O&M funds to pay for
unexpected events such as natural disasters, utility rate increases,
and foreign currency differences. Delays in housing privatization have
also caused some of the services to reprogram funds to pay for expenses
associated with housing units they had expected to privatize, according
to service officials. Also, OSD and the services consider all family
housing O&M accounts, except maintenance, as "must-pay" accounts,
meaning that such programs and activities funded in these accounts must
be paid even if the obligations differ from the initial funding amount.
According to DOD's Financial Management Regulation, the services are
required to notify Congress of any reprogramming of family housing O&M
funds that are 10 percent or more of the initial funding
level.[Footnote 10] The conference report accompanying the 2004
Military Construction Appropriations Act further states that the
services are to notify Congress when reprogrammings reach 10 percent in
the family housing O&M accounts and subaccounts.
Housing Privatization Affects the Family Housing O&M Budgets:
Congress authorized DOD to establish the Military Housing Privatization
Initiative,[Footnote 11] to use private sector investment capital and
housing construction expertise to finance, own, operate, and maintain
military housing in an effort to help eliminate inadequate housing from
DOD's inventory. In 2002, OSD accelerated the goal of eliminating
inadequate military family housing from fiscal year 2010 to 2007, which
has impacted the services' ability to budget for family housing O&M. As
the services privatize their housing, reductions in their housing
inventory will occur. As such, funding levels for the family housing
O&M accounts and subaccounts are affected differently by privatization
(see app. I, slide 15). Some accounts are more directly related to the
inventory of military-owned housing and will therefore be expected to
decrease generally in proportion to the decrease in inventory due to
privatization. These accounts include costs for utilities, furnishings,
and services (e.g., trash removal, snow clearing, and fire and police
protection). Other accounts, such as leasing, are based on specific
anticipated requirements independent from the housing inventory and
pace of privatization. Some accounts, primarily the management
subaccount and maintenance of real property account, are partially
influenced by privatization-related factors. The management
subaccount, for example, covers mostly salary costs for activities such
as housing referrals, waiting lists, tenant and landlord complaints,
and basic housing allowance surveys in addition to the administrative
costs directly related to managing military-owned housing. As a result,
many of these costs remain regardless of privatization since they are
not related to the housing inventory.
Services Do Not Clearly and Consistently Explain the Impact of
Privatization in Their Budget Justifications to Congress:
Budget justification materials submitted to Congress for family housing
O&M funding do not clearly and consistently explain how the housing
privatization program impacts the services' budget requests. The
services use similar assumptions and methods to develop budget requests
for family housing O&M, but they often rely on assumptions established
up to a year and a half before the budgets are executed. While the
services have the ability to revise and update their budget requests,
they typically choose not to because of the difficulty of doing so when
faced, in part, with other competing defense priorities, and the
relatively small size of the family housing O&M budget. Furthermore,
changes in the pace of expected privatization can affect funding
required for individual accounts and subaccounts, although not
uniformly, but the impact of privatization is not well explained in the
services' budget justifications.
Services Often Rely on Assumptions Established up to a Year and a Half
Before Budget Execution:
The services use similar pricing and program assumptions and methods to
develop their family housing O&M budget requests and base their budget
requests largely on historical obligations adjusted for assumptions
about pricing (e.g., inflation, foreign currency rates, and pay
adjustments) and the housing program (e.g., expected reductions in
inventory due to housing privatization). For example, when the services
are developing the budget requests for the utilities account, they
typically look at prior year costs per unit and adjust the costs for
anticipated inflation and expected changes in housing unit inventory.
Further, many of the pricing and program assumptions for family housing
O&M are established up to a year and a half before the budget is
executed. For example, service officials told us that the fiscal year
2004 budget requests were largely determined when the services' Program
Objectives Memorandums were completed in May 2002. Similarly, many of
the assumptions, such as the privatization rate, used in preparing the
fiscal year 2004 budget request were largely based on the services'
2002 family housing master plans. Once these assumptions are
established, service officials told us that the budget requests are
less likely to be changed, even if newer information becomes available.
While the services have the ability to revise and update their budget
requests, service officials told us they typically do not revise the
requests because competing defense priorities and the relatively small
size of the family housing O&M budget request make revisions difficult.
For example, if a service anticipates a slippage in privatization after
the family housing O&M budget request is programmed, officials said
that revising the request becomes more complicated because previous
assumptions have already been reflected in funding shifts to the
military personnel appropriation budget request to pay for the expected
increase in the housing allowance for those servicemembers intended to
be in privatized housing. Rather, service officials said that they are
more likely to make the needed funding adjustments for family housing
O&M during budget execution through reprogrammings.
Services Are Unclear and Inconsistent in Explaining the Impact of
Privatization in Their Budget Justifications to Congress:
The services' budget justification submissions to Congress are unclear
and inconsistent in explaining the impact of privatization on the
family housing O&M budget requests. More specifically, the submissions
are not clear in explaining how housing inventory reductions due to
privatization affect each of the nine family housing O&M accounts and
subaccounts or the extent to which a previously established
privatization schedule is on track or slipping. Service officials told
us that slippage in the privatization schedule can cause an increase in
the cost for some accounts, such as the utilities and maintenance of
real property accounts that primarily are influenced by the number of
housing units still in DOD's housing inventory and not yet privatized.
While some decreases in family housing O&M requests were credited to
inventory reductions in military-owned housing, the justification
submissions accompanying the requests did not fully explain how
privatization led to those decreased requests. For example:
* The Navy indicated a decrease in funds for most of the family housing
O&M accounts and subaccounts because of privatization in fiscal year
2004, but it provided no additional information explaining how
privatization affected the request for each account.
* The Army indicated a decrease in funds for the management subaccount
because of privatization in fiscal year 2004, but it did not explain
what management activities the Army adjusted due to privatization.
In addition, the services did not consistently address the impact of
privatization for each of the family housing accounts and subaccounts
within a fiscal year, nor did they consistently address the impact of
privatization on a specific account from fiscal year to fiscal year.
For example:
* The Army indicated decreases in funds for most of the family housing
O&M accounts because of privatization in fiscal year 2003, but it did
not decrease funding in the management subaccount for privatization, as
would be expected. In contrast, the Army did indicate decreases in
funds for the management subaccount in fiscal years 2002 and 2004 due
to privatization.
* The Air Force indicated decreases in funds for inventory reductions
due to privatization in its management subaccount request in fiscal
years 2002 and 2003. In contrast, in fiscal year 2004, the Air Force's
budget request for the same subaccount had no discussion of the impact
of privatization. Nor did the request include a reduction in the
funding for the management subaccount in fiscal year 2004, as would be
expected.
Although the services' budget justification submissions to Congress are
unclear in explaining the impact that housing privatization is having
on the family housing O&M budget at the time the budget is prepared,
all the services have information that could help clarify how
privatization affects the family housing O&M accounts and subaccounts.
For example, Army officials recognized that clear information
explaining the impact of privatization is not always presented to
Congress and, consequently, added additional information explaining
privatization impacts in its fiscal year 2005 family housing O&M budget
justification submission. Also, the Army and the Navy are currently
conducting studies to better determine the impact of housing
privatization on their management costs. OSD officials said that more
experience with housing privatization is needed to properly assess its
impact on funding levels for the management subaccount. The dynamics of
trying to maintain government-owned housing while increasingly moving
to privatization means that early assumptions about when privatization
will actually occur for individual projects can change over time and
require changes in funding for selected accounts and subaccounts.
Congress Has Limited Visibility Over the Reprogramming of Family
Housing O&M Funds:
Congress has limited visibility of the services' reprogramming of
family housing O&M funds. Although the services are required to notify
Congress of reprogrammings to an account or subaccount by 10 percent or
more, notification of reprogrammings by less than 10 percent or a
decrease in funds to an account is not required. However,
appropriations such as the regular O&M do provide such information.
Compared with the other services, reporting for the Navy and the Marine
Corps provides even less visibility over their reprogramming actions
because reprogrammings for the four operations subaccounts were not
reported to Congress. In addition, their data reflecting reprogramming
actions throughout the year do not always match comparable official
obligation data produced by the Defense Finance and Accounting Service.
Current Requirements on Reprogrammings Provide Congress with Limited
Visibility:
Current requirements provide congressional decision makers with limited
visibility of the services' reprogrammings between the nine family
housing O&M accounts and subaccounts. The services are required to
report to Congress reprogrammings that are 10 percent or more to an
account or subaccount. However, Congress is not notified when
reprogrammings are below 10 percent or result in a funding decrease.
Other required appropriations reporting, such as regular O&M, provides
congressional decision makers with more information.
Current reporting requirements do not provide Congress with complete
visibility of the services' reprogrammings between the family housing
O&M nine accounts and subaccounts. First, the services are not required
to inform Congress of reprogrammings below 10 percent. Due to the
varying sizes of the accounts within family housing O&M, a below-
threshold reprogramming in a large account such as maintenance can be
significant when compared to smaller accounts or subaccounts. On the
other hand, smaller valued accounts may generate many more
reprogramming actions because of their smaller funding base. As shown
in table 1, in fiscal year 2003, the Army reprogrammed 4.7 percent
($22.6 million) to the maintenance account. Although the amount
reprogrammed into the maintenance account was below 10 percent, this
amount represented 54.4 percent of the services subaccount. In another
example, the Air Force was not required to notify Congress of a $3.7
million increase in the leasing account because it was below 10 percent
in fiscal year 2003. Second, the services are not required to notify
Congress of decreases to an account. Between fiscal year 2001 and 2003,
there were 14 instances involving decreases of 10 percent or more from
an account. As shown in table 1 for example, the Air Force reprogrammed
14.9 percent ($75 million) in fiscal year 2003 from the maintenance
account to fund expenses in other accounts.
Table 1: Services' Reprogramming Amounts and Percentages Reprogrammed,
Fiscal Year 2003:
Dollars in thousands.
Operations Management;
Army: Dollar amount change: -$7,103;
Army: Percent change: -8.0%;
Navy and Marine Corps: Dollar amount change: $16,063;
Navy and Marine Corps: Percent change: 19.7%;
Air Force: Dollar amount change: $19,434;
Air Force: Percent change: 40.4%.
Operations Services;
Army: Dollar amount change: $3,083;
Army: Percent change: 7.4%;
Navy and Marine Corps: Dollar amount change: $7,276;
Navy and Marine Corps: Percent change: 11.7%;
Air Force: Dollar amount change: $5,380;
Air Force: Percent change: 21.5%.
Operations Furnishings;
Army: Dollar amount change: -$3,857;
Army: Percent change: -8.0%;
Navy and Marine Corps: Dollar amount change: -$8,059;
Navy and Marine Corps: Percent change: -26.7%;
Air Force: Dollar amount change: $2,155;
Air Force: Percent change: 6.1%.
Operations Miscellaneous;
Army: Dollar amount change: -$118;
Army: Percent change: -9.0%;
Navy and Marine Corps: Dollar amount change: -$196;
Navy and Marine Corps: Percent change: -21.6%;
Air Force: Dollar amount change: $441;
Air Force: Percent change: 29.4%.
Operations Utilities;
Army: Dollar amount change: -$11,246;
Army: Percent change: -5.3%;
Navy and Marine Corps: Dollar amount change: $8,602;
Navy and Marine Corps: Percent change: 5.0%;
Air Force: Dollar amount change: $28,029;
Air Force: Percent change: 21.2%.
Maintenance;
Army: Dollar amount change: $22,605;
Army: Percent change: 4.7%;
Navy and Marine Corps: Dollar amount change: -$9,926;
Navy and Marine Corps: Percent change: -2.7%;
Air Force: Dollar amount change: -$75,000;
Air Force: Percent change: -14.9%.
Privatization;
Army: Dollar amount change: $5,000;
Army: Percent change: 24.2%;
Navy and Marine Corps: Dollar amount change: $3,087;
Navy and Marine Corps: Percent change: 27.3%;
Air Force: Dollar amount change: $9,200;
Air Force: Percent change: 60.0%.
Leasing;
Army: Dollar amount change: -$19,718;
Army: Percent change: -9.2%;
Navy and Marine Corps: Dollar amount change: $0;
Navy and Marine Corps: Percent change: 0.0%;
Air Force: Dollar amount change: $3,773;
Air Force: Percent change: 3.7%.
Mortgage insurance premium;
Army: Dollar amount change: $0;
Army: Percent change: 0.0%;
Navy and Marine Corps: Dollar amount change: $0;
Navy and Marine Corps: Percent change: 0.0%;
Air Force: Dollar amount change: $0;
Air Force: Percent change: 0.0%.
Source: GAO's analysis of service appropriation and obligation
information.
Note: A negative number means the services reprogrammed funds out of
the account or subaccount.
[End of table]
In other appropriations, DOD provides congressional decision makers
with more information on reprogrammings than in family housing O&M. For
example, the services are required to submit a Report of Programs to
Congress twice a fiscal year for regular O&M.[Footnote 12] The report
provides information tracking the movement of funds from initial
appropriation through final obligation, including supplementals,
rescissions, transfers, and reprogrammings. For the family housing O&M
appropriation, DOD is not required to provide such a report, thus
limiting congressional visibility over all reprogrammings. Service
officials told us that such information is already tracked at the
headquarters level and could be provided to Congress.
Navy and Marine Corps' Reporting Provides Even Less Visibility Over
Reprogrammings:
When compared to the other services, reporting on the Navy and the
Marine Corps' family housing O&M reprogrammings provides less
visibility. The reporting of the Navy and the Marine Corps' family
housing O&M funds does not always separate the operations account into
the four subaccounts. In addition, the Navy and Marine Corps obligation
data reflecting reprogramming actions during a fiscal year do not
always match comparable official obligation data produced by the
Defense Finance and Accounting Service.
The reporting of the Navy and the Marine Corps' family housing O&M
funds does not always separate the operations account into the four
subaccounts. While the other services notified Congress of
reprogrammings that were 10 percent or more for the subaccounts within
operations, until fiscal year 2004, the Navy and the Marine Corps
combined the four subaccounts into the operations account when
reporting reprogrammings. For example, in fiscal year 2003, the
management and services subaccounts increased by 19.7 percent ($16.1
million) and 11.7 percent ($7.3 million), respectively. Even though the
reprogrammings exceeded the 10 percent threshold, no notification was
sent to Congress because when these reprogrammings were combined with
the other subaccounts, overall reprogrammings in the operations account
did not exceed 10 percent. Navy budget officials said that with their
fiscal year 2004 notifications to Congress, the Navy and the Marine
Corps will be reporting reprogrammings for each subaccount
individually, similar to the practices of the other services. In
addition, the Defense Finance and Accounting Service does not report
obligations for the four subaccounts individually for the Navy and the
Marine Corps, as it does for the other services.
Unlike the other services, Navy and the Marine Corps obligation data
reflecting reprogramming actions during a fiscal year do not always
match comparable obligation data produced by the Defense Finance and
Accounting Service. For example, in fiscal year 2002, the Defense
Finance and Accounting Service reported obligations for the Navy and
Marine Corps' maintenance account as $391.1 million. However, the Navy
and the Marine Corps reported fiscal year 2002 obligations of $368.5
million for maintenance in their justification submission to Congress.
According to Navy and OSD officials, examples like this are part of
long-standing problems with ensuring the consistency of data between
Navy, Marine Corps, and Defense Finance and Accounting Service data
systems. However, because Defense Finance and Accounting Service
obligation data are considered official, OSD officials use that data
when evaluating the budgets for the family housing O&M program. Service
officials told us they are working with the Defense Finance and
Accounting Service to address these issues.
Conclusions:
The services' budget justification submissions to Congress have not
always been clear in explaining funding requirements and the impacts of
the privatization initiative on the budget requests for each of the
nine family housing O&M accounts and subaccounts. Although the family
housing O&M budget requests are expected to decrease due to reductions
in housing inventory as the services privatize more housing, a
continued lack of clarity in explaining the impacts of privatization
will not allow Congress to determine the appropriateness of any
decreases. Until the services provide Congress with sufficient data in
their budget justification submissions explaining the impact of
privatization, the services will continue to hinder the ability of
Congress to conduct its oversight responsibilities. This also places
the services at risk of having Congress reduce their budgets, as was
the case with their fiscal year 2004 appropriations for family housing
O&M.
Reprogramming notifications provide Congress some visibility over the
movement of funds; however, complete information on all movement of
funds is not required to be provided to Congress for the family housing
O&M appropriation. In contrast, DOD is required to provide Congress
with more information on the movement of funds for other defense
appropriations, such as regular O&M. Until DOD provides Congress
similar information on the reprogramming of family housing O&M funds,
Congress will continue to receive an incomplete picture over the total
movement of family housing O&M funds. Lacking such aggregate
information on all fund movements could also limit Congress' ability to
fully conduct oversight of family housing O&M programs and activities.
In addition, the Navy and the Marine Corps provide even less visibility
of reprogrammings of family housing O&M funds because they do not
report obligations for the four operations subaccounts and, prior to
fiscal year 2004, did not notify Congress of reprogrammings for these
subaccounts. Therefore, congressional and DOD decision makers are not
getting the same level of detail with regard to obligations for the
four subaccounts as they do for the other services. Also, the Navy and
the Marine Corps' family housing O&M obligation data have been
inconsistent with the comparable data produced by the Defense Finance
and Accounting Service. Until the Navy and the Marine Corps report
obligation data using the same structure that congressional conferees
use to designate funds for the four operations subaccounts and resolve
data inconsistencies between them and the Defense Finance and
Accounting Service, DOD and congressional decision makers will continue
to lack sufficient budget visibility, hindering their ability to
evaluate Navy and Marine Corps budget requests with the same degree of
confidence and detail as those of the other services.
Recommendations for Executive Action:
To provide Congress with sufficient data in the services' budget
justification submissions, we recommend that the Secretary of Defense
direct the Under Secretary of Defense (Comptroller) to work with the
services to better explain the impacts of the housing privatization
initiative on the budget requests for each of the nine family housing
O&M accounts and subaccounts.
To improve visibility over the Navy and the Marine Corps'
reprogrammings of family housing O&M funds, we recommend that the
Secretary of Defense direct the Secretary of the Navy to work with the
Defense Finance and Accounting Service to take the following two
actions:
* Report obligation data using the same budget structure that
congressional conferees use to designate how funds are to be used for
the four operations subaccounts, similar to reporting done by the other
military services.
* Resolve long-standing data inconsistencies to ensure that obligation
data reported by the Defense Finance and Accounting Service match
obligation data reported by the Navy and the Marine Corps.
Matter for Congressional Consideration:
To improve visibility over reprogrammings of family housing O&M funds
by all services, Congress may wish to consider requiring the Secretary
of Defense to provide it information covering the movement of funds for
the family housing O&M appropriations in a report at the end of the
fiscal year, similar to what DOD now provides to Congress on other DOD
appropriations. This report should provide timely and accurate
information on movement of funds, which includes reprogrammings within
the nine family housing O&M accounts and subaccounts, along with other
information on other fund movements such as transfers and
supplementals.
Agency Comments:
In written comments on a draft of this report, the Deputy Comptroller
(Program/Budget) within the Office of the Under Secretary of Defense
(Comptroller) agreed with our recommendations stating that the
department is taking steps to implement them. In reference to our
recommendation that the services better explain the data provided to
Congress regarding the impact of privatization on family housing O&M
budget requests, the department has already drafted changes to its
financial management regulation and expects to issue an update to these
regulations within the next 90 days. In reference to our two
recommendations to improve congressional visibility of Navy and Marine
Corps' reprogrammings of family housing O&M accounts and subaccounts
and to improve the consistency of Navy and Marine Corps obligation
data, DOD plans to provide written direction to the Secretary of the
Navy and the Defense Finance and Accounting Service within 30 days
after the release of our report to address these two recommendations.
In addition, the Deputy Comptroller (Program/Budget) within the Office
of the Under Secretary of Defense (Comptroller) responded favorably to
our matter for congressional consideration suggesting that Congress may
wish to consider further improving the visibility of the services'
reprogrammings by requiring DOD to provide information covering the net
movement of funds for each of the nine family housing O&M accounts and
subaccounts. DOD's comments, which are included in this report in
appendix III, also discusses the types of information DOD would provide
to Congress covering the net movement of funds for the family housing
O&M accounts and subaccounts.
Scope and Methodology:
To assess the services' assumptions and methods used to develop
individual budget requests and how well their budget justifications
explain the impact of privatization on family housing O&M funds, we
reviewed and analyzed the services' budget justification submissions
covering fiscal years 2002 through 2004. We evaluated how these
justifications incorporated the services' privatization schedule and
the resulting explanation in the budget requests. In addition, we
interviewed Army, Navy, Marine Corps, and Air Force family housing
officials to obtain information on the assumptions and methods used to
develop the family housing O&M budget requests. We identified
statements in the services' budget justification submissions to assess
how well the services explained their assumptions, methodology, and the
impact of privatization.
To assess the extent to which Congress has visibility over the
services' reprogramming of family housing O&M funds, we compared the
services' initial funding levels with year-end obligations for the nine
family housing O&M accounts and subaccounts to determine the amount
reprogrammed by the services during fiscal years 2001 through 2003. To
review the reprogramming of funds between the family housing O&M
accounts, including amounts over and under established reprogramming
thresholds, we analyzed the services' and the Defense Finance and
Accounting Service's budget data for the family housing O&M account. In
addition, we compared these reprogrammings with the congressionally
mandated requirements for the services to report reprogrammings to
Congress and the execution data in the services' justification
submissions to the Defense Finance and Accounting Service's reports to
ensure that the information was consistent. For the Army and the Air
Force, we found that the obligation amounts reported matched those
reported by the Defense Finance and Accounting Service. Based on our
comparisons and speaking with Army and Air Force officials, we were
satisfied with the information. Consequently, we determined the use of
Army and Air Force justification materials and Defense Finance and
Accounting Service reports was sufficiently reliable for meeting our
objectives. For the Navy and Marine Corps, we found inconsistencies
between the services' justification submission and the Defense Finance
and Accounting Service's reports.
We discussed the results of our work with officials from the Office of
the Under Secretary of Defense (Comptroller); the Housing and
Competitive Sourcing Office within the Office of the Under Secretary of
Defense for Acquisition, Technology, and Logistics; the Defense Finance
and Accounting Service; and the military services. We have designated
DOD's financial management area--including funding and cost data--as
high risk due to long-standing deficiencies in DOD's systems,
processes, and internal controls.[Footnote 13] However, as discussed,
we determined the data we used during our review of the services'
reprogramming of family housing O&M funds were sufficiently reliable
for this report.
We are sending copies of this report to the Secretaries of Defense, the
Army, the Navy, and the Air Force; the Commandant of the Marine Corps;
and the Director; Office of Management and Budget. We will also make
copies available to others upon request. In addition, the report is
available at no charge on GAO's Web site at www.gao.gov.
Please contact me on (202) 512-8412, or my Assistant Director, Mark
Little, at (202) 512-4673 if you or your staff have any questions
regarding this report. Major contributors to this report were Laura
Talbott, James Reynolds, Daniel Chen, and Jane Hunt.
Signed by:
Barry W. Holman, Director:
Defense Capabilities and Management:
Congressional Committees:
The Honorable John W. Warner:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Committee on Armed Services:
United States Senate:
The Honorable Kay Bailey Hutchison:
Chairman:
The Honorable Dianne Feinstein:
Ranking Minority Member:
Subcommittee on Military Construction:
Committee on Appropriations:
United States Senate:
The Honorable Duncan Hunter:
Chairman:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
The Honorable Joe Knollenberg:
Chairman:
The Honorable Chet Edwards:
Ranking Minority Member:
Subcommittee on Military Construction:
Committee on Appropriations:
House of Representatives:
[End of section]
Appendix I: GAO Briefing Slides:
[See PDF for slides]
[End of section]
Appendix II: Family Housing Operation and Maintenance Budget
Definitions:
Department of Defense's Financial Management Regulation[Footnote 14]
defines the accounts and subaccounts that Congress uses to designate
its understanding of funds within the family housing operation and
maintenance appropriation as follows:
Operations account. This is a summary account for consolidating costs
accumulated in the following subordinate accounts:
* Management account. Accumulates costs of management, administrative,
and support type services at installation level involving (1)
administration costs for installation housing offices including
management office personnel, supplies, equipment, and utilities
pertaining to the functions of a family housing office and costs for
administrative support services provided in supply, comptroller,
maintenance, and other installation offices when the costs for such
services are attributable to family housing; (2) costs for housing
referral administration pertaining to private housing, including rental
guarantee projects and the provision of referral services, and
assistance in locating and inspecting privately owned family housing
for DOD personnel; (3) requirements surveys and preliminary family
housing studies or engineering construction plans made before Secretary
of Defense project approval, which also includes planning for
improvement and rental guarantee projects and inspection of
construction of rental guarantee housing; and (4) other identifiable
management costs that directly support the family housing program.
* Services account. Accumulates costs for authorized services such as
(1) refuse collection and disposal--includes costs of family housing
for collecting garbage, trash, ashes and debris, and for refuse
disposal, such as the operation and maintenance of incinerators,
sanitary fill, and regulated dumps. Also included are costs for
acquisition, maintenance and repair of garbage and trash containers,
and operation of can washing facilities; (2) fire protection--includes
costs for protection and prevention of family housing facilities; (3)
police protection--includes costs for law enforcement, traffic control,
and protection of family housing facilities, (4) entomological
services--includes costs of all control measures against fungi,
insects, and rodents within family housing dwellings, facilities, and
areas; (5) custodial services--includes costs of janitorial and
custodial services performed in common service areas and the cost of
elevator operation in family housing facilities; (6) snow removal--
includes costs of removing, hauling, and disposal of snow, the cost of
ice alleviation, and erection, maintenance, repairs and removal of snow
fences for family housing areas; (7) street cleaning--includes costs of
cleaning streets comprised of sweeping, flushing, and picking up
litter; (8) municipal type services--includes costs of miscellaneous
municipal type services not identifiable to other listed accounts; and
(9) other services--includes costs of all other authorized services for
family housing.
* Furnishings account. Accumulates costs for initial acquisition,
maintenance, repair, and replacement of furnishings, furniture, movable
household equipment, and authorized miscellaneous items. Also includes
control, handling, record keeping, moving of government-owned
furnishings into and out of dwelling units and charges for connecting
and disconnecting equipment, as well as handling costs incident to
storage.
* Miscellaneous account. Accumulates costs for (1) lease rents and
permit payments for housing and trailer spaces leased by the government
from private sources or provided by the Federal Housing Administration
or the Department of Veterans Affairs as well as reimbursement costs
for dwellings provided by state, municipal, or foreign governments or
by other federal agencies, (2) German land taxes paid to the Federal
Republic of Germany under the North Atlantic Treaty Organization Status
of Forces Agreement for local taxes on land and improvements of family
housing property, (3) fire insurance charges paid to the Federal
Republic of Germany to cover fire damage to family housing dwelling
units, (4) United Kingdom accommodation charges paid in accordance with
the country-to-country agreement for housing provided to U.S. Forces,
(5) other miscellaneous operations costs not covered elsewhere.
Utility operations account. This is a summary account for accumulating
costs for utilities consumed in family housing. This account excludes
the costs of maintenance and repair of utility systems identified to
the family housing property covered under the Maintenance of Real
Property Facilities Account. Electricity, water, sewage, gas fuel oil
or other heating fuels are the types of utilities reported in this
account.
Maintenance of real property facilities account. This is a summary
account for accumulating costs for the following: (1) Dwellings--costs
of maintenance and repair of all family housing buildings as defined in
DOD Instruction 4165.3 including all interior utilities and installed
equipment (typically this involves (a) service calls for minor work
including emergency and temporary repairs normally not in excess of 16
work hours, (b) routine maintenance for occupancy work and other
maintenance usually scheduled annually or more frequently, (c) repairs
and replacements for rehabilitations and replacement of major
components and installed equipment, (d) interior and exterior painting
and the necessary preparation, and (e) contract cleaning between
occupancy, where authorized); (2) exterior utilities--costs of
maintenance and repair of electric, gas, water, sewage and other
utility distribution, collection, or service systems assigned to family
housing (street and area lighting systems are included in exterior
utilities beginning at a point 5 feet from the house line and ending at
a point where the utility system joins a common use main or
terminates); (3) other real property--costs for (a) maintenance, care,
and repair of improved and unimproved grounds, storm sewerage, and
drainage structures and costs of acquisition, maintenance, and repair
of government-owned minor equipment, such as hand-operated lawn mowers
used for grounds maintenance by occupants, (b) maintenance and repair
of paved or stabilized streets, roads, walks, driveways, utility,
service, and parking areas, as well as curbs, gutters, signs, and other
road appurtenances, and (c) maintenance and repair of facilities other
than dwellings, such as fences when the facility is dedicated to
housing, athletic and recreation facilities, community buildings, and
service facilities (also included are the costs of maintenance of
trailer sites including outlets); and (4) alterations and additions--
costs for incidental additions, expansions, extensions, and alterations
to the existing real property (also includes the payments made to
military personnel for telephone reconnection charges when maintenance
or repair work necessitates government-directed nonpermanent change of
station moves and charges resulting from improvement or repair projects
funded in part from the family housing construction account).
Leased housing account. This is a summary account for accumulating
costs for the following: (1) lease cost--foreign account; costs for
charges and other payments specified in the lease agreement for housing
in foreign countries; (2) lease cost--foreign account government rental
guarantee program; costs for charges and other payments specified in
the lease agreement for housing in Europe under the Army's foreign
account government rental guarantee program; (3) lease cost--domestic
account; costs for charges and other payments specified in the lease
agreement for housing in the United States including U.S. possessions
and territories; (4) lease cost--section 801 account; costs for charges
and other payments specified in the lease agreement for section 801-
type housing; (5) other operation and maintenance cost--foreign
account; costs for maintenance, utilities, and contracted services not
provided by the lessor for housing in foreign countries (also includes
initial make-ready costs, costs of government-owned furnishings, any
pro rata share of the costs of installation services, and
administrative costs such as assignment, travel, and inspection by
installation personnel, and reimbursements to the Department of State
for foreign affairs administrative support costs); (6) other operation
and maintenance cost--foreign account government rental guarantee
program; costs for maintenance, utilities, and contracted services not
provided by the lessor for housing in foreign countries (also includes
initial make-ready costs, costs of government-owned furnishings, any
pro rata share of the costs of installation services, and
administrative costs such as assignment, travel, and inspection by
installation personnel, and reimbursements to the Department of State
for foreign affairs administrative support costs); (7) other operation
and maintenance cost--domestic account; costs for maintenance,
utilities, and contracted services not provided by the lessor for
housing in the United States (also includes initial make ready costs,
costs of government-owned furnishings, any pro rata share of the costs
of installation services, and administrative costs such as assignment,
travel, and inspection by installation personnel); and (8) other
operation and maintenance cost--Section 801 account; costs for
maintenance, utilities, and contracted services not provided by the
lessor for Section 801-type housing (also includes initial make ready
costs, costs of government-owned furnishings, any pro rata share of the
costs of installation services, and administrative costs such as
assignment, travel, and inspection by installation personnel).
Servicemen's mortgage insurance premiums account. This is a summary
account for accumulating the costs for servicemen's mortgage insurance
premium payments.
Privatization support cost account.[Footnote 15] This account is for
accumulating the costs that the government incurs in direct support of
the family housing privatization program with the exception of those
costs that will be included as part of the privatization project. These
costs include all administrative, planning, development, solicitation,
award, transition, construction oversight, and portfolio management
activities associated with military housing privatization and
specifically for: (1) site assessment costs which includes the costs in
direct support of the family housing privatization program for
environmental baseline assessments, environmental assessments,
environmental impact statements, and any efforts required to be
accomplished by the government prior to privatization for environmental
mitigation, site surveys, or real estate costs; (2) project costs which
includes all costs in direct support of the family housing
privatization program for project feasibility studies, concept
development, consultant fees, solicitation, procurement, contracting,
execution, transition, construction management (supervision,
inspection, and overhead), post award management and monitoring, and
portfolio management, and (3) administrative costs which includes all
costs in direct support of the family housing privatization program for
civilian pay, travel, training, supplies, equipment, and for any
services provided by a defense agency in support of the privatization
program.
[End of section]
Appendix III: Comments from the Department of Defense:
OFFICE OF THE UNDER SECRETARY OF DEFENSE
1100 DEFENSE PENTAGON
WASHINGTON, DC 20301-1100:
COMPTROLLER (Program/Budget):
MAY 14 2004:
Mr. Barry Holman:
Director, Defense Capabilities and Management:
U.S. General Accounting Office:
Washington, D.C. 20548:
Dear Mr. Holman:
This is the Department of Defense (DOD) response to the General
Accounting Office (GAO) report GAO-04-583, "MILITARY HOUSING:
Opportunities Exist to Better Explain Family Housing O&M Budget
Requests and Increase Visibility Over Reprogramming of Funds," dated
April 14, 2004 (GAO Code 350474).
Thank you for allowing the DOD to comment on your draft report. I
concur with each of your recommendations.
I concur with comment on the suggestion contained in the report that
the Congress may wish to consider requiring the Secretary of Defense to
provide Congress with information covering the movement of funds for
the family housing O&M appropriations in a report at the end of the
fiscal year, similar to what DOD now provides to Congress on other
appropriations. I have no objection to providing such report. I propose
that for each of the nine family housing O&M accounts and subaccounts
that the report would include: appropriated amounts, adjustments
reflecting enacted rescissions, general reductions and supplemental
appropriations, reprogrammings approved by the Secretary of Defense and
the congressional committees, the total of below threshold
reprogrammings not requiring approval by the Secretary of Defense or
the congressional committees, and the revised ending year program. A
brief description would be included for each account or subaccount
outlining the reasons for the below threshold reprogramming totals for
the year. Detailed comments regarding each of the reports
recommendations and suggestion to Congress are enclosed.
Sincerely,
Signed by:
John P. Roth:
Deputy Comptroller:
Enclosures: As stated:
GAO-04-583/GAO CODE 350474:
"MILITARY HOUSING: OPPORTUNITIES EXIST TO BETTER EXPLAIN FAMILY HOUSING
O&M BUDGET REQUESTS AND INCREASE VISIBILITY OVER REPROGRAMMING OF
FUNDS":
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense (Comptroller) to work with the
Services to better explain the impacts of the housing privatization
initiative on the budget requests for each of the nine family housing
O&M accounts and subaccounts. (Page 17/Draft Report):
DOD RESPONSE: Concur. This direction has been incorporated in the
update to the Department of Defense, Financial Management Regulations,
Volume 213, Chapter 6, that is due to be released within the next 90
days.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
direct the Secretary of the Navy to work with the Defense Finance and
Accounting Service (DFAS) to report obligation data using the same
budget structure that congressional conferees use to designate how
funds are used for the four operations subaccounts, similar to
reporting done by the other Military Services. (Page 17/Draft Report):
DOD RESPONSE: Concur. Within 30 days of the release of the final
report, written direction will be provided to the Secretary of the Navy
and DFAS to report obligation data on the monthly DD-1002
(Appropriation Status Report), by account and subaccount, similar to
how the DFAS reports the other Military Department's obligation data
for family housing O&M accounts.
RECOMMENDATION 3: The GAO recommended that the Secretary of Defense
direct the Secretary of the Navy to work with DFAS to resolve long-
standing data inconsistencies to ensure that obligation data reported
by the DFAS match obligation data reported by the Navy and the Marine
Corps. (Page 17/Draft Report):
DOD RESPONSE: Concur. Within 30 days of the release of the final
report, written direction will be provided to the Secretary of the Navy
to work with DFAS to ensure that the obligation data reported by DFAS
in the monthly DD-1002 (Appropriation Status Report), for the
Department of the Navy family housing account matches the obligation
data provided to DFAS by the Navy and Marine Corps.
Enclosure (1):
[End of section]
FOOTNOTES
[1] The National Defense Authorization Act for Fiscal Year 1996 (Pub.
L. No. 104-106, Feb. 10, 1996).
[2] H.R. Conf. Rep. No. 108-342, page 16 (2003).
[3] The President's budget shows four family housing O&M appropriation
accounts, which are broken down into five program activities. However,
for budget justifications and committee reports, both Congress and DOD
break down these four appropriation accounts into nine accounts and
subaccounts that roughly correspond to the five program activities.
This report discusses the nine accounts and subaccounts.
[4] The movement of funds from one appropriation account to another is
a "transfer." The movement of funds within the family housing O&M
appropriation accounts is referred to as a "reprogramming." Congress
and DOD refer to these reprogrammings as fund movements between the
nine family housing O&M accounts and subaccounts reported in budget
justifications and committee reports. The focus of this report is on
reprogrammings.
[5] For purposes of this report, regular O&M refers to operation and
maintenance other than family housing operation and maintenance,
normally provided in the DOD annual appropriations bill.
[6] Privatization support includes costs for consultants for advisory
and assistance activities such as individual project development,
federal civilian salaries and training activities, and for services
such as environmental assessments and land boundary surveys.
[7] These nine accounts and subaccounts are within each of the four
appropriation accounts shown in the President's budget.
[8] See app. II for definitions of the nine accounts and subaccounts
that comprise the family housing O&M appropriations.
[9] Conference Report (H.R. Conf. Rep. No. 108-342, page 16 (2003)),
accompanying H.R. 2559 (became Pub. L. No. 108-132 (2003)).
[10] DOD Financial Management Regulation 7000-14R, Volume 3, Chapter 7.
[11] The National Defense Authorization Act for Fiscal Year 1996 (Pub.
L. No. 104-106), Feb. 10, 1996.
[12] DOD Financial Management Regulation 7000-14R, Volume 3, Chapter 6.
[13] U.S. General Accounting Office, Major Management Challenges and
Program Risks: Department of Defense, GAO-03-98 (Washington, D.C.:
January 2003) and U.S. General Accounting Office, High-Risk Series: An
Update, GAO-03-119 (Washington, D.C.: January 2003).
[14] DOD Financial Management Regulation 7000-14R, Volume 6, Chapter 9.
[15] DOD has better defined costs for privatization support in response
to a prior GAO recommendation (U.S. General Accounting Office, Military
Housing: Better Reporting Needed of the Status of the Privatization
Program and the Costs of Its Consultants, GAO-04-111 (Washington, D.C.:
Oct. 9, 2003). At the time of this report, DOD's definition of
privatization support costs had not been incorporated into DOD's
Financial Management Regulation.
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