Depot Maintenance
Persistent Deficiencies Limit Accuracy and Usefulness of DOD's Funding Allocation Data Reported to Congress Gao ID: GAO-06-88 November 18, 2005Under 10 U.S.C. 2466, the military departments and defense agencies can use no more than 50 percent of annual depot maintenance funding for work performed by private-sector contractors. The Department of Defense (DOD) must submit a report to Congress annually on the division of depot maintenance funding between the public and private sectors during the preceding fiscal year and projected distribution for the current and ensuing fiscal years. As required, GAO reviewed the report submitted in April 2005 and is, with this report, submitting its views to Congress on whether (1) the military departments complied with the "50-50 requirement" for fiscal year 2004 and (2) the projections for fiscal years 2005 and 2006 represent reasonable estimates. Additionally, GAO is assessing whether the data currently provided in DOD's annual 50-50 report are useful to Congress in exercising its oversight role.
As in previous years, systemic weaknesses in DOD's financial systems and persistent deficiencies in 50-50 data reporting processes continue to prevent GAO from determining whether the military departments complied with the 50-50 requirement for public- and private-sector depot maintenance funding allocations for fiscal year 2004. Persistent deficiencies, such as inadequate management attention and review to ensure accurate and complete reporting, limited independent review and validation of data by audit services or other third parties, and inadequate training for those responsible for data gathering and reporting, continue to limit the quality of the 50-50 data submitted to Congress. GAO's previous reports over the last 7 years identified similar problems and recommended corrective actions, but DOD and the military services have failed to consistently implement corrective actions sufficient to resolve the deficiencies and alleviate data accuracy problems. The recurring nature of these problems indicates a management control weakness as defined under the Federal Managers' Financial Integrity Act. Reported projections do not represent reasonable estimates of public- and private-sector depot maintenance funding allocations for fiscal years 2005 through 2006 because some data errors and omissions in DOD's prior-year report are carried into the projected years. It is difficult to project out-year data due to factors such as changing depot maintenance requirements, the ongoing consolidation of maintenance facilities, and the trend toward more contractor logistics support for new and existing weapon systems. Although DOD's current 50-50 report to Congress satisfies the annual mandate, it lacks additional detail that might be useful to Congress as it exercises its oversight role. The report currently submitted by DOD contains data that are aggregated at a high level and provides no analysis of changes from the prior years or long-term trends. The report also does not identify actual funding and workload distribution variances from year to year, nor explain the reasons behind them. Furthermore, it does not contain information as to the methodologies used to prepare the current and future year projections.
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-06-88, Depot Maintenance: Persistent Deficiencies Limit Accuracy and Usefulness of DOD's Funding Allocation Data Reported to Congress
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Report to Congressional Committees:
November 2005:
Depot Maintenance:
Persistent Deficiencies Limit Accuracy and Usefulness of DOD's Funding
Allocation Data Reported to Congress:
GAO-06-88:
GAO Highlights:
Highlights of GAO-06-88, a report to congressional committees.
Why GAO Did This Study:
Under 10 U.S.C.§ 2466, the military departments and defense agencies
can use no more than 50 percent of annual depot maintenance funding for
work performed by private- sector contractors. The Department of
Defense (DOD) must submit a report to Congress annually on the division
of depot maintenance funding between the public and private sectors
during the preceding fiscal year and projected distribution for the
current and ensuing fiscal years. As required, GAO reviewed the report
submitted in April 2005 and is, with this report, submitting its views
to Congress on whether (1) the military departments complied with the
’50-50 requirement“ for fiscal year 2004 and (2) the projections for
fiscal years 2005 and 2006 represent reasonable estimates.
Additionally, GAO is assessing whether the data currently provided in
DOD‘s annual 50-50 report are useful to Congress in exercising its
oversight role.
What GAO Found:
As in previous years, systemic weaknesses in DOD‘s financial systems
and persistent deficiencies in 50-50 data reporting processes continue
to prevent GAO from determining whether the military departments
complied with the 50-50 requirement for public- and private-sector
depot maintenance funding allocations for fiscal year 2004. Persistent
deficiencies, such as inadequate management attention and review to
ensure accurate and complete reporting, limited independent review and
validation of data by audit services or other third parties, and
inadequate training for those responsible for data gathering and
reporting, continue to limit the quality of the 50-50 data submitted to
Congress. GAO‘s previous reports over the last 7 years identified
similar problems and recommended corrective actions, but DOD and the
military services have failed to consistently implement corrective
actions sufficient to resolve the deficiencies and alleviate data
accuracy problems. The recurring nature of these problems indicates a
management control weakness as defined under the Federal Managers‘
Financial Integrity Act.
Reported projections do not represent reasonable estimates of public-
and private-sector depot maintenance funding allocations for fiscal
years 2005 through 2006 because some data errors and omissions in DOD‘s
prior-year report are carried into the projected years. It is difficult
to project out-year data due to factors such as changing depot
maintenance requirements, the ongoing consolidation of maintenance
facilities, and the trend toward more contractor logistics support for
new and existing weapon systems.
Although DOD‘s current 50-50 report to Congress satisfies the annual
mandate, it lacks additional detail that might be useful to Congress as
it exercises its oversight role. The report currently submitted by DOD
contains data that are aggregated at a high level and provides no
analysis of changes from the prior years or long-term trends. The
report also does not identify actual funding and workload distribution
variances from year to year, nor explain the reasons behind them.
Furthermore, it does not contain information as to the methodologies
used to prepare the current and future year projections.
What GAO Recommends:
GAO recommends that DOD improve the accuracy, reliability and
usefulness of depot maintenance workload allocation data submitted to
Congress. DOD partially concurred with the recommendations but did not
indicate specific actions it would take. GAO suggests the Congress
require DOD to enhance its annual 50-50 report as stated in GAO‘s
recommendations.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William M. Solis at (202)
512-8365 or solisw@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Management Control Weaknesses Prevent Determination of Military
Departments' Compliance with 50-50 Requirement for Fiscal Year 2004:
Fiscal Year 2005 and 2006 Projections Do Not Represent Reasonable
Estimates of Public-and Private-Sector Funding:
DOD's Current 50-50 Report Satisfies the Annual Mandate but Could
Provide More Useful Data and Analysis:
Conclusions:
Recommendations for Executive Action:
Matter for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: GAO Adjustments for Inaccuracies Found in the Military
Departments' 50-50 Data for Fiscal Year 2004:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: GAO Adjustments to DOD's Reported Depot Maintenance Funding
Allocations for Fiscal Year 2004:
Table 2: Summary of Prior GAO 50-50 Recommendations:
Table 3: GAO's Adjustments to the Army's Fiscal Year 2004 Reported
Depot Maintenance Allocations:
Table 4: GAO's Adjustments to the Navy's Fiscal Year 2004 Reported
Depot Maintenance Allocations:
Table 5: GAO's Adjustments to the Air Force's Fiscal Year 2004 Reported
Depot Maintenance Allocations:
Figures:
Figure 1: DOD's Prior, Current, and Budget Year Public-and Private-
Sector Allocations for Fiscal Years 2004 through 2006:
Figure 2: Historical Private-Sector Reported Allocations (Fiscal Years
1998-2004):
Abbreviations:
DOD: Department of Defense:
GAO: Government Accountability Office:
OSD: Office of the Secretary of Defense:
U.S.C. United States Code:
Letter:
November 18, 2005:
The Honorable John Warner:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Committee on Armed Services:
United States Senate:
The Honorable Duncan L. Hunter:
Chairman:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
Under 10 U.S.C. § 2466, not more than 50 percent of annual depot
maintenance funding provided to the military departments and defense
agencies can be used for work accomplished by private-sector
contractors. Section 2466 also directs the Department of Defense (DOD)
to submit a report to Congress by April 1 of each year on the
percentage distribution of depot-level maintenance and repair funds
between the public-and private-sectors for each military department and
defense agency during the preceding fiscal year and the projected
distribution for the current and ensuing fiscal years. The Secretary of
Defense may waive the 50 percent limitation if he determines the waiver
is necessary for national security, and he submits notification of the
waiver along with the reasons for the waiver to Congress. For fiscal
year 2004, DOD issued the report on April 1, 2005. All the services
reported that their private sector depot maintenance allocation fell
below the 50 percent funding limitation for fiscal year 2004 and will
remain below the 50 percent limitation for fiscal years 2005 and 2006.
Section 2466 also requires us to review DOD's report to Congress and
evaluate whether DOD complied with the so-called 50-50 requirement.
This is the eighth year that we have evaluated and reported on DOD's
annual 50-50 report to Congress.[Footnote 1] Specifically, this report
discusses whether (1) the military departments complied with the 50-50
requirement for public and private sector depot maintenance funding
allocations in fiscal year 2004 and (2) the projections for public-and
private-sector depot maintenance funding allocations in fiscal years
2005 and 2006 represent reasonable estimates. Additionally, we are
providing our assessment concerning whether the data currently provided
by DOD in its annual 50-50 report are useful to Congress in exercising
its oversight role.
To accomplish these objectives, we reviewed DOD and service-specific
guidance for collecting and reporting 50-50 data, and analyzed the
military services' procedures and internal management controls for
validating depot maintenance information included in the reported data
and for responding to the section 2466 requirements. We assessed the
reliability of the reported depot maintenance workload funding
allocations for fiscal year 2004 for each of the military services. To
assess the reliability of DOD's data, we undertook a number of steps,
including conducting variance analyses and limited testing on reported
funding allocations. Based on the significance of funding variance from
previous years and other factors, we selected specific locations and
weapons systems for more in-depth reviews. We conducted site visits,
interviewed service officials responsible for data collection, and
reviewed the data for accuracy and completeness. For example, we
verified reported obligations using the source documents provided by
service officials. We also reviewed the results of internal studies
conducted by the service audit agencies or other third parties, and
reconciled areas of concern identified during prior years' audits. As
discussed below, we found that the reported private-and public-sector
allocation data are not reliable because of long-standing systemic
weaknesses in DOD's financial systems[Footnote 2] and persistent
deficiencies in 50-50 data reporting processes. Our analysis of
projected allocations for fiscal years 2005 and 2006 was limited
because our initial audit efforts identified significant recurring
problems in these areas. We conducted our review from April 2005
through September 2005 in accordance with generally accepted government
auditing standards. See appendix I for a more detailed description of
our scope and methodology.
Results in Brief:
As in previous years, systemic weaknesses in DOD's financial systems
and persistent deficiencies in 50-50 data reporting processes continue
to prevent us from determining whether the military departments
complied with the 50-50 requirement for public-and private-sector depot
maintenance funding allocations for fiscal year 2004. Our analysis of
the April 2005 report submitted to Congress and the military
departments supporting data identified errors, omissions, and
inconsistencies in DOD funding allocation data, which, if adjusted,
would increase the Army's and Navy's percentages of funding allocations
going to the private sector, causing them to come very close to
reaching the 50 percent private-sector limit. As a result, the data
reported for fiscal year 2004 cannot be relied on to provide an
accurate measure of the balance of funding between the public and
private sectors or to determine if the military departments complied
with the statutory limitation set by Congress for private-sector depot-
level maintenance funding allocations. Persistent deficiencies, such as
inadequate management attention and review to ensure accurate and
complete reporting, limited independent review and validation of 50-50
data by audit services or other third parties, and inadequate training
for those responsible for data gathering and reporting, continue to
limit the accuracy of the 50-50 data submitted to Congress. Our
previous reports over the last 7 years identified similar problems and
recommended corrective actions, but DOD and the military services have
failed to consistently implement corrective actions sufficient to
resolve the deficiencies and alleviate data accuracy problems. The
recurring nature of these deficiencies in DOD's 50-50 reporting
processes indicates a management control weakness significant enough to
be reported in DOD's annual performance and accountability
report.[Footnote 3] This weakness has not been disclosed in DOD's
annual accountability reports to Congress even though the issues have
been previously identified in prior audits.
Reported projections do not represent reasonable estimates of public-
and private-sector depot maintenance funding allocations for fiscal
years 2005 and 2006 because some errors and omissions in DOD's fiscal
year 2004 data are carried into the projected years. In addition, it is
difficult to project out-year data due to factors such as changing
depot maintenance requirements, the ongoing consolidation of
maintenance facilities, and the trend toward more contractor logistics
support for new and existing weapon systems. These factors limit the
usefulness of the reported projections to congressional and, DOD
decision makers. We have reported these shortcomings with the future
years projections in the past, and the problems continue to occur. The
reported projection data show that all of the military services are
predicting higher percentages of funding for the private sector and
less for the public sector. Data inaccuracies similar to those we
identified for fiscal year 2004 could affect this trend, as all of the
services are moving closer to the threshold for private-sector funding.
For example, while the Army projects that its funding for fiscal years
2005 and 2006 for the private sector will be around 46 percent, the
magnitude of the adjustments we made to the Army's fiscal year 2004
data, when carried forward, could cause the Army to reach the
limitation on 50-50. Additionally, increasing contractor maintenance
support for military operations and new weapon systems scheduled to
reach initial operational capability in fiscal year 2007 and beyond
could result in all the military departments exceeding the 50 percent
threshold. The Air Force has integrated 50-50 reporting requirements
into its source of repair decisions for new weapon systems and major
system modifications.
Although DOD's current 50-50 report to Congress satisfies the annual
mandate, it lacks additional detail that might be useful to Congress as
it exercises its oversight role. The report currently submitted by DOD
contains data that are aggregated at a high level and provides no
analysis of changes from the prior years. For example, the report does
not identify funding trends and workload distribution variances from
the prior year, nor does it explain the reasons behind any significant
variances. Furthermore, it does not contain information on the
methodologies used to prepare the current and future year projections.
Because of the limited data provided by the military departments in the
50-50 report, we have developed and reported these types of information
as part of our mandated work over the past 7 years to better meet
Congress's needs in exercising its oversight role.
We are making two recommendations to the Secretary of Defense to
improve the accuracy and reliability of depot maintenance funding
allocation data submitted to Congress and to provide congressional
decision makers with more useful information. In commenting on a draft
of this report, DOD partially concurred with our recommendations. DOD
stated it has made and will continue to make improvements in data
quality and accuracy. However, DOD did not indicate specific actions it
would take to address the persistent deficiencies we identified or to
improve the usefulness of the information provided to the Congress.
Therefore, we are also suggesting that the Congress require the
Secretary of Defense to enhance the department's annual 50-50 report
submitted to Congress as stated in our recommendations. DOD's comments
and our evaluation are discussed in detail in a later section of this
report.
Background:
In addition to the 50-50 requirement in 10 U.S.C. § 2466, the following
provisions directly affect the reporting of workload funding
allocations to the public and private sectors.
* Section 2460 defines depot maintenance to include material
maintenance or repair requiring the overhauling, upgrading, or
rebuilding of parts, assemblies, or subassemblies and the testing and
reclamation of equipment, regardless of the source of funds or where
maintenance or repair is performed. Depot maintenance also encompasses
software maintenance, interim contractor support,[Footnote 4] and
contractor logistics support[Footnote 5] to the extent that work
performed in these categories is for depot maintenance. The statute
excludes from depot maintenance the nuclear refueling of an aircraft
carrier; the procurement of major modifications or upgrades of weapon
systems that are designed to improve program performance; and the
procurement of parts for safety modifications, although the term does
include the installation of parts for safety modifications.
* Section 2474 directs DOD to designate public depots as Centers of
Industrial and Technical Excellence and to improve their operations to
serve as recognized leaders in their core competencies.[Footnote 6]
Section 342 of the National Defense Authorization Act for Fiscal Year
2002 (Pub. L. No. 107-107, Dec. 28, 2001) amended this statute to
exclude qualifying public-private partnerships,[Footnote 7] referred to
as private exempt, from the 50 percent funding limitation on
contracting in section 2466. Specifically, section 342 provides that
the funds expended for the performance of depot-level maintenance by
nonfederal government personnel located at the Centers of Industrial
and Technical Excellence shall not be counted when applying the 50
percent limitation if the personnel are provided pursuant to a public-
private partnership. This exclusion initially applied to depot
maintenance funding for fiscal years 2002 through 2005. The exclusion
later was extended to fiscal year 2006, and recently to fiscal year
2009.[Footnote 8]
Section 2466 allows the Secretary of Defense to waive the 50 percent
limitation if he determines the waiver is necessary for national
security. The Secretary submits the notification of waiver together
with the reasons for the waiver to Congress. Waivers were previously
submitted for the Air Force for fiscal years 2000 and 2001.
The Office of the Secretary of Defense (OSD) issues guidance to the
military departments for reporting public-private workload funding
allocations. The guidance is consistent with the definition of "depot-
level maintenance and repair" in 10 U.S.C. § 2460.[Footnote 9] The
military services have also issued internal instructions to manage the
data collection and reporting process, tailored to their individual
organizations and operating environments.
Summary of Data in DOD's 50-50 Report Submitted in April 2005:
Figure 1 summarizes DOD's April 2005 report to Congress on public-and
private-sector funding allocations for depot maintenance.[Footnote 10]
All three departments reported that their private-sector depot
maintenance allocation fell below the 50 percent funding limitation for
fiscal year 2004 and will remain below the 50 percent limitation for
fiscal years 2005 and 2006. The amounts shown are from DOD's record of
actual obligations incurred for depot maintenance work in fiscal year
2004 and projected obligations for fiscal years 2005 and 2006. The
percentages show the department's record of the relative allocations
between the public and private sectors and the exempted workload
funding.
Figure 1: DOD's Prior, Current, and Budget Year Public-and Private-
Sector Allocations for Fiscal Years 2004 through 2006:
[See PDF for image]
Notes: Based on analysis of DOD's April 1, 2005, reported 50-50 data.
The Department of the Navy includes the Marine Corps.
[End of figure]
Limitations on Use of 50-50 Data as Reported by DOD:
DOD's 50-50 data, with our adjustments, only provide a rough
approximation of the allocation of depot maintenance funding between
the public and private sectors. Our prior reports on depot maintenance
workload funding allocations have recognized systemic weaknesses in
DOD's financial systems, operations, and internal controls that impede
the department's ability to provide useful, reliable, and timely
financial information for day-to-day management and decision making. In
the financial management systems area, DOD continues to struggle in its
efforts to implement systems to support managerial decision making. To
date, none of the military services have passed the test of an
independent financial audit. Nonetheless, the data used to develop the
50-50 report are the only data available and are accepted by DOD and
used as input to Congress for its congressional oversight.
Management Control Weaknesses Prevent Determination of Military
Departments' Compliance with 50-50 Requirement for Fiscal Year 2004:
As in previous years, management control weaknesses in DOD's financial
systems and persistent deficiencies in 50-50 data reporting processes
continue to prevent us from determining whether the military
departments complied with the 50-50 requirement for public-and private-
sector depot maintenance funding allocations for fiscal year 2004.
DOD's April 1, 2005, report to Congress contained data errors,
omissions, and inconsistencies due to persistent deficiencies, such as
inadequate management attention and review to ensure accurate and
complete reporting, limited independent review and validation of 50-50
data by audit services or other third parties, and inadequate training
for those responsible for data gathering and reporting. As a result,
the data reported for the prior year cannot be relied on to provide an
accurate measure of the balance of funding between the public and
private sectors or to determine if the military departments complied
with the statutory limitation set by Congress for private-sector depot-
level maintenance funding allocations. The recurring nature of these
deficiencies indicates a management control weakness in DOD's 50-50
data reporting processes significant enough to be reported in DOD's
annual performance and accountability report. This weakness has not
been disclosed in DOD's annual accountability reports to Congress, even
though the issues have been identified in prior audits.
DOD's April 2005 Report to Congress Contained Data Errors, Omissions,
and Inconsistencies:
DOD's April 1, 2005, report to Congress contained errors, omissions,
and inconsistencies in the depot maintenance funding allocation data
for fiscal year 2004. The net effects of correcting the data
inaccuracies we identified would increase the Army's and Navy's
percentages of funding allocations going to the private sector, causing
both military departments to come very close to the 50 percent private-
sector limitation. Although we also found inaccuracies in the Air Force
data, adjusting for them does not change the funding allocation
distribution percentages. Table 1 summarizes the amounts and effects of
our adjustments to DOD's reported depot funding allocation data for
fiscal year 2004.
Table 1: GAO Adjustments to DOD's Reported Depot Maintenance Funding
Allocations for Fiscal Year 2004:
Dollars in millions.
[See PDF for image]
Source: GAO analysis of DOD data.
Notes: Based on analysis of Distribution of DOD Depot Maintenance
Workloads, Fiscal Year 2004, Office of the Secretary of Defense, April
1, 2005. Shaded cells indicate percentages within 2 percentage points
of the 50 percent limitation.
[A] The Department of Navy consists of the Navy and Marine Corps.
[End of table]
Department of the Army:
Adjusting the Army's data on the basis of the specific inaccuracies we
identified would reduce its total depot maintenance funding by $347.1
million for fiscal year 2004. The net effect of correcting for these
inaccuracies would increase the private-sector percentage allocation by
about 4.2 percentage points for an overall allocation of 49.2 percent.
(See table 3 in app. II for a detailed breakout of these adjustments.)
The Army's most significant data inaccuracies generally were due to
overreported public depot funding and underreported or unreported
private depot funding. Adjustments to the Army's reported public work
amounted to a $397 million decrease. The most significant of the errors
in public-sector depot maintenance reporting, $399.4 million, was due
to a transcription error. The Army also overreported an additional $9.6
million due to double-counting and $7.8 million for misclassifying
private-sector workload as public. Additionally, the Army underreported
$18.4 million in public-sector depot maintenance funding at the
Aviation and Missile Command and the Communications and Electronics
Command and did not report nearly $0.9 million in depot maintenance
funding for the FOX vehicle. Adjustments to the Army's private sector
workload resulted in a net increase of $49.6 million mostly due to
unreporting or underreporting. The Army did not report private depot
work for onetime repairs at a nondepot aviation location in the amount
of $20.7 million. The Army also failed to report $2.2 million in
private depot work at Anniston Army Depot and $6.2 million in private
depot work at a National Guard aviation classification and repair
depot. It also did not report $6.9 million in private depot work for
the Stryker vehicle and $5.9 million for the FOX vehicle. For fiscal
year 2004, the Army included amounts for its National Maintenance
Program,[Footnote 11] one of the two areas the Army previously
estimated made up the majority of its unreported depot-level
maintenance work performed at nondepot facilities; however, $5.7
million was underreported because planned funding was reported instead
of the amounts actually obligated. Finally, the Army underreported $7.8
million through a misclassification of private work as public work.
Department of the Navy:
Adjusting the Navy's and Marine Corps' data on the basis of the
specific inaccuracies we identified would reduce their total depot
maintenance funding by $251.7 million for fiscal year 2004, the net
effect of correcting for these inaccuracies would increase the private-
sector percentage allocation by 2.4 percentage points for an overall
allocation of 48.5 percent. (See table 4 in app. II for a detailed
breakout of these adjustments.)
The Navy's most significant data inaccuracies generally were due to
unreported private depot funding and overreported public depot funding.
For example, as we reported in past years, the Navy did not report
$80.3 million in depot maintenance funding for work accomplished during
the nuclear refueling of aircraft carriers, citing the exclusion of
nuclear refueling from the 10 U.S.C. § 2460 definition of "depot
maintenance." We continue to believe that depot maintenance repairs not
directly associated with the task of nuclear refueling should be
reported because these types of repair actions are reported by other
organizations and it is possible to identify the funding for these
tasks in Navy contracts and financial systems. The Navy also, as in
prior years, inconsistently reported on inactivation activities related
to the servicing and preservation of systems and equipment prior to
their placement in storage or on inactive status. Specifically, the
Navy did not report $14.4 million of private-sector allocations for
inactivation work on non-nuclear ships, even though it reported private-
sector funding for the inactivation for nuclear ships. The Navy
contends that the work for nuclear ship inactivation is complex while
the work for non-nuclear ships is not. We maintain that all such depot-
level work should be reported, since the statute and implementing
guidance do not make a distinction based on complexity. Additionally,
the Navy's public-sector depot maintenance allocation was overreported
by $357.6 million because of errors in reporting obligations for funds
available to be spent over multiple years. Navy and OSD guidance
requires that commands only report the funds actually obligated in the
fiscal year. We found that some Naval Sea Systems Command activities
incorrectly reported the funds available for obligation for depot
maintenance in fiscal year 2004 instead of the funds that were actually
obligated. As a result, some of the amounts included in the Navy's 50-
50 report were not obligated during fiscal year 2004. Additionally,
multiyear funds from a prior year appropriation that were obligated in
fiscal year 2004 were not, but should have been, included.
Our review of the Marine Corps' 2004 data found that it underreported
the public-sector total by about $1.3 million for maintenance work
performed at other military service depots. In previous years, the
Marine Corps' error rate was relatively high compared to that of the
other services despite its smaller depot maintenance program. Based on
our recommendation from last year, the Marine Corps addressed a key
contributor to its high error rate by appointing a 50-50 focal point
for the Marine Corps Systems Command, the command responsible for
acquiring and upgrading weapon systems. The focal point is responsible
for preparing and submitting a consolidated report for the command's
depot maintenance funding allocation between the public and private
sectors.
Department of the Air Force:
Adjusting the Air Force's data on the basis of the specific
inaccuracies we identified would increase its total depot maintenance
funding by $0.3 million but would not change the percentage allocation
between the public and private sectors. (See table 5 in app. II for a
detailed breakout of these adjustments.)
Additionally, we were unable to verify some of the private depot
maintenance amounts reported because the Air Force had no supporting
data. For example, we were unable to verify the total amount in private-
sector workload funding allocation for air crew training devices used
to train active duty air crews. According to the Air Force, all air
crew training devices are operated and maintained through contractor
logistics support contracts. The depot maintenance portion for these
contracts is computed by taking a percentage of the cost incurred
against a selected contract line item or, in some instances, a
percentage of the entire amount obligated for the year. DOD's 50-50
guidance allows algorithms to be used when precise determinations
cannot be made; however, the line items included and the percentages
used are largely determined by the contractor, and the Air Force lacks
access to the data needed to validate the percentages used.
Additionally, the Air Force incorrectly reported amounts for depot
maintenance warranties in its fiscal year 2004 50-50 data. The Air
Force's guidance states that onetime obligations for warranties over
extended periods will be prorated for each year over the life of the
warranty. However, OSD guidance states that although warranty support
that occurs prior to initial operating capability shall not be reported
as depot maintenance and repair, warranty support that is contracted
for prior to initial operating capability but occurs after initial
operating capability shall be reported. Also, the total warranty costs
for depot maintenance and repair services are to be reported in the
year in which the obligation occurs. Therefore, consistent with OSD
guidance, the Air Force should have reported all amounts obligated for
warranties for depot maintenance repair that cover periods after
initial operating capability in the year the obligations were made.
Although we found the aforenoted inaccuracies, overall the Air Force's
data had the least problems. Additionally, the Air Force correctly
included contract administrative and oversight costs in its fiscal year
2004 data. In previous years, the Air Force adjusted its reported
amounts for contract administration and oversight costs, which
decreased the amount of funding for the private sector and increased
funding for the public sector. We repeatedly reported that this
adjustment was not consistent with 50-50 guidance, which states that
costs should be associated with the end product (i.e., the repaired
item), and that the costs should be treated as contracting expenses.
Persistent Deficiencies Continue to Limit Accuracy of Reported Data:
Systemic weakness in DOD's financial systems and persistent
deficiencies, such as inadequate management attention and review to
ensure accurate and complete reporting, limited independent review and
validation of 50-50 data by audit agencies or other third parties, and
inadequate training for those responsible for data collection and
reporting continue to limit the accuracy of the 50-50 data provided to
Congress. For these reasons, the reported data cannot be relied on to
provide an accurate measure of the balance of funding between the
public and private sectors or to determine whether the military
departments complied with the 50 percent statutory limitation set by
Congress for private-sector depot-level maintenance.
Moreover, during the past 7 years, we have made 33 recommendations for
improving the depot maintenance reporting process for 50-50 purposes,
addressing both DOD and individual service reporting issues and
concerns. Of these recommendations 19 have been officially closed by
GAO. The 14 recommendations that remain open contain several recurring
themes. Table 2 summarizes the number of times these themes are
mentioned in the 14 open recommendations as well as the number of times
these themes have been recommended throughout the course of the past 7
years of reviewing DOD's 50-50 depot maintenance report.
Table 2: Summary of Prior GAO 50-50 Recommendations:
Recommendation: Improve management attention, controls, and oversight;
Number of open recommendations[A]: 4;
Number of times recommended over 7 years: 9;
Year(s) recommended[B]: 1999, 2000, 2001, 2002 (Marine Corps, Army).
Recommendation: Document procedures and retention of records to support
reported data for future follow-up;
Number of open recommendations[A]: 2;
Number of times recommended over 7 years: 6;
Year(s) recommended[B]: 1998,1999, 2000, 2001.
Recommendation: Use service audit agencies or third party to validate
data before sending to OSD/Congress;
Number of open recommendations[A]: 4;
Number of times recommended over 7 years: 6;
Year(s) recommended[B]: 1999, 2001 (Army, Navy), 2002 (Navy), 2003,
2004.
Recommendation: Ensure proper and timely training for staff involved in
50-50 process;
Number of open recommendations[A]: 2;
Number of times recommended over 7 years: 2;
Year(s) recommended[B]: 2003, 2004.
Recommendation: Issue, clarify, and/or disseminate guidance;
Number of open recommendations[A]: 6;
Number of times recommended over 7 years: 14;
Year(s) recommended[B]: 1998, 1999, 2000, 2001, 2002, 2003.
Source: GAO.
[A] In many cases, the recommendations covered multiple issue areas,
and therefore the number of open recommendations is not equal to the
number of times these issues are mentioned in the open recommendations.
[B] Recommendations made prior to 2001 have been closed. However, most
recommendations made in 2001 or later have not been implemented or have
been partially implemented and therefore remain open.
[End of table]
The problems in DOD's 50-50 data reporting processes have not been
disclosed in DOD's annual accountability reports to Congress, even
though the problems have been previously identified in prior audits,
and in our view result in more than a remote risk that significant
misstatements will not be prevented or detected. As a result, managers
or oversight officials' decisions based on this reporting--to include
workload or funding allocation decisions--may be adversely affected.
Title 31 U.S.C. § 3512(c)[Footnote 12] requires that management
controls be in place to reasonably ensure that obligations and costs
comply with the applicable law; all assets are safeguarded against
waste, loss, unauthorized use, and misappropriation of assets; and
revenues and expenditures are properly reported and accounted for.
Management controls are the organization, policies, and procedures that
help managers achieve results and safeguard the integrity of their
programs. Title 31 U.S.C. § 3512(c) also requires agency heads to
provide an annual statement of assurance on the effectiveness of the
management controls and to identify and report on material weaknesses.
As defined in Office of Management and Budget Circular A-123,
Management's Responsibility for Internal Control, December 21, 2004
(effective for Fiscal Year 2006), materiality for financial
reporting[Footnote 13] is risk of error or misstatement that could
occur in a financial report that would affect management's or users'
decisions or conclusions based on such report. An official from OSD's
Materiel Readiness and Maintenance Policy, the office responsible for
submitting the 50-50 report to Congress each year, told us they had
never evaluated whether DOD's 50-50 reporting should be included in
DOD's annual accountability report.
Inadequate Management Attention and Review:
One of the primary reasons for the recurring inaccuracies in the
military services' 50-50 data was inadequate management attention and
review to ensure accurate and complete reporting. Generally, we found
that personnel collecting the data at the various reporting centers or
program offices did not review or verify the data before submitting
them up the reporting chain to the service representative responsible
for compiling and forwarding the data to OSD. Additionally, little
documentation is provided to the military service's 50-50 data focal
points or the reporting commands' focal points to support the data
included in the 50-50 report. In prior reports we recommended that the
Secretary of Defense direct the military services to provide more
management review at all levels in DOD to ensure accurate and complete
reporting. Despite these recommendations, the services have limited
policies and procedures for such management review. For example, an
Army official told us that no one checks the accuracy of the data or
performs a variance analysis with previously reported data. Our
variance analysis of the Army's fiscal year 2004 data compared with the
fiscal year 2003 data resulted in identifying nearly $400 million in
overreported public-sector workload funding allocations due to a
transcription error. The same location reported only about $2.3 million
the previous fiscal year. This error may have been identified and
corrected if the Army emphasized reviewing, analyzing, and questioning
variances from year to year.
As in previous years, we found that the Marine Corps officials
responsible for compiling and submitting the Marine Corps' final report
to OSD performed no review to ensure the completeness or accuracy of
the reported data. Moreover, during our review of the Navy's U.S.
Pacific Fleet, we found the Southwest Regional Maintenance Facility did
not maintain documentation to support the amounts it reported. It took
the facility more than a month to recreate a list of the transactions
to support the $339.3 million in workload funding allocation data
reported for fiscal year 2004. Additionally, the Naval Audit Service
could not verify the amount of public-sector depot maintenance workload
funding allocation for the Puget Sound Naval Shipyard and Intermediate
Maintenance Facility. Moreover, the Air Force often lacks access to the
documentation needed to validate the completeness or accuracy of the
data associated with its contractor logistics support/interim
contractor support programs and the algorithms used to determine the
amount of depot maintenance for each contract.
Independent Review and Validation of Data Limited by Time and Scope:
Although each of the military departments obtained some level of
independent review and validation[Footnote 14] of its 50-50 data, the
reviews were constrained by time and limited in scope. Moreover, not
all of the errors were corrected prior to submission to Congress. In
prior reports we repeatedly recommended that to further enhance 50-50
data accuracy, the Secretary of Defense require the secretaries of the
military departments to direct the use of service audit agencies, or an
agreed-upon alternate method, for third-party review and validation of
depot maintenance workload funding allocation data and to ensure that
auditor-identified errors in the data are rectified before reports are
submitted to Congress. DOD guidance for this year's 50-50 report
directed the military departments to implement this recommendation.
Concerning fiscal year 2004 depot maintenance allocation data, the Army
Audit Agency evaluated whether the Army implemented or planned to
implement selected recommendations made based on prior audits of depot-
level maintenance workload allocation reporting, and whether the Army
accurately reported the status of implementation to the Office of the
Army Deputy Chief of Staff for Logistics. The Army Audit Agency did not
review the accuracy of the 50-50 data submitted to Congress. The Army
hired a consulting firm to review and validate its 50-50 data for
fiscal year 2004. The firm selected a statistical sample of the
reported allocations to review. However, due to time constraints, the
Army did not correct several of the errors identified by the consulting
firm prior to submitting the report to Congress. Naval Audit Service
identified errors in the Navy's data, which were corrected before the
50-50 report went to Congress. However, the Naval Audit Service's
review was limited to two activities, which accounted for only 6
percent of the Navy's reported depot maintenance funding for fiscal
year 2004. Furthermore, although it did not review 100 percent of
transactions, the results and errors found during the review were
considered an indicator that similar errors might exist at the other
eight Navy reporting organizations. Due to time constraints, the Naval
Audit Service did not attempt to determine the underlying cause for the
errors identified. Air Force Audit Agency focused its review on
contractor logistics support/interim contractor support maintenance
programs, an area where problems in 50-50 reporting had been identified
in the past. The contracts reviewed by the audit agency represented
about three-fourths of the contractor logistics support/interim
contractor support programs. Errors identified by the Air Force Audit
Agency were corrected prior to submitting the report to Congress. Air
Force officials acknowledge that even with improvements, errors still
occur and accurate reporting remains an ongoing concern. However, they
do not believe additional errors that may be found would threaten
compliance with the 50-50 statute.
Inadequate Staff Training:
Inadequate training for those responsible for collecting, aggregating,
and reporting 50-50 data continues to be a problem. In two prior
reports we recommended that the Secretary of Defense require the
secretaries of the military departments to ensure that the 50-50
guidance is properly disseminated and that staff are properly and
promptly trained in the application of the 50-50 guidance. During our
review we found that although the reporting activities generally
received the 50-50 data call guidance, several reporting activities did
not report 50-50 data accurately. Additionally, we found that although
the Army, Marine Corps, and Air Force provide some training, not all
staff responsible for 50-50 reporting attended this training. According
to a Navy official, no formal training on procedural requirements or
Navy guidance to develop and report the 50-50 data is provided to the
personnel responsible for compiling the data. Rather, the reporting
activity coordinators are expected to provide guidance on reporting
requirements as questions arise from the reporting activities.
According to an Air Force official, program managers have not had
sufficient training to prepare and maintain documentation to ensure
that 50-50 data are accurate.
Fiscal Year 2005 and 2006 Projections Do Not Represent Reasonable
Estimates of Public-and Private-Sector Funding:
DOD's reported projections for fiscal years 2005 through 2006 do not
represent reasonable estimates of public-and private-sector depot
maintenance funding allocations. The usefulness of the reported
projections to congressional and DOD decision makers is limited because
errors, omissions, and inconsistencies in DOD's reported prior-year
data are carried into future years and because of the difficulty in
projecting out-year data due to factors such as changing depot
maintenance requirements, consolidating maintenance facilities, and the
trend toward more contractor logistics support for new and existing
weapon systems. We reported these shortcomings with the future years'
projections in the past. While limitations affect the usefulness of the
data reported as a predictor of funding allocations, the reported
projection data show that all of the military services are predicting a
greater percentage of funds for the private sector and less for the
public sector.
Recurring errors, omissions, and inconsistencies similar to those we
identified for the fiscal year 2004 reported data could affect this
trend, as all of the services are moving closer to the threshold for
private-sector funding. For example, while the Army projects that its
private-sector depot maintenance workload allocation will be around 46
percent, the magnitude of the adjustments we made to the Army's fiscal
year 2004 data--increasing the private-sector percentage by about 4.2
percentage points--when carried forward, could cause the Army to exceed
the 50-50 limitation. Similarly, the Navy projects that its private-
sector depot maintenance workload allocation for fiscal year 2006 will
be around 48 percent. The magnitude of the adjustments we made to the
Navy's fiscal year 2004 data--increasing the private-sector percentage
by about 2.4 percentage points--when carried forward, could cause the
Navy to exceed the 50-50 limitation.
DOD has agreed that 50-50 data within 2 percentage points of exceeding
the 50 percent threshold is a reasonable trigger for additional
oversight and management to ensure compliance with the 50 percent
threshold. Last year, we recommended that the Secretary of Defense
direct each military department's secretary, within 30 days of
reporting 50-50 data indicating that past, current, or budget year data
are within 2 percentage points of exceeding the 50 percent threshold,
to submit a plan to OSD that identifies actions the military department
shall take to ensure continued compliance, including the identification
of decisions on candidate maintenance workload sourcing that could be
made to support remaining within the 50 percent threshold. To date,
none of the services have provided such plans because their reported
data did not indicate that such submissions were necessary.
Additionally, increasing contractor maintenance support for military
operations and increasing the number of new weapon systems scheduled to
reach initial operational capability in fiscal year 2007 and beyond
could result in all the military departments exceeding the 50 percent
threshold. During our review, the Air Force provided evidence that it
has integrated 50-50 reporting requirements into its source of repair
decisions for new weapon systems and major system modifications.
DOD's Current 50-50 Report Satisfies the Annual Mandate but Could
Provide More Useful Data and Analysis:
Although DOD's current 50-50 report to Congress satisfies the annual
mandate, it lacks additional detail that might be useful to Congress as
it exercises its oversight role. For example, the report provides no
analysis of the data to show how the fiscal year 2004 funding
allocations compared to prior years' figures. Furthermore, the reported
data are aggregated at the service level. The report also does not
identify funding allocation variances from year to year, nor explain
the reasons behind them. Additionally, the report does not contain
analysis of long-term trends; historical trend data must be calculated
using previous 50-50 reports. Finally, DOD's 50-50 report to Congress
does not contain information about the methodologies used to prepare
the current and future year projections or the reasons for projected
funding variances and changes in workload distribution.
Because of the limited data provided in DOD's 50-50 report, we have
developed these types of information as part of our mandated work over
the past 8 years to better meet Congress's needs in exercising its
oversight role. Our analysis of trend data shows that although reported
depot maintenance funding for fiscal year 2004 increased by about $700
million over fiscal year 2003, only the Army's total funding and
private-sector workload allocation increased significantly. Compared to
the other services, the Army reported the largest increase in total
funding (almost $1.8 billion) and the largest jump in workload funding
allocation to the private sector. With this increase, the Army's
reported private sector allocation is on par with those of the other
services. The Navy shows the biggest overall decrease in depot workload
funding allocation (almost $1.3 billion), and the Air Force shows
little change. Figure 3 shows a historical trend for private-sector
reported allocations for fiscal years 1998 through 2004.
Figure 2: Historical Private-Sector Reported Allocations (Fiscal Years
1998-2004):
[See PDF for image]
Note: Decrease in private-sector percentage starting in fiscal year
2002 was largely due to reporting private-exempt allocations
separately.
[End of figure]
Conclusions:
Year after year we continue to see the same persistent deficiencies in
DOD's 50-50 report to Congress. As a result, the reported 50-50 data
cannot be relied on to provide an accurate measure of the balance of
funding between the public and private sectors or to determine if the
military services exceeded the statutory limitations set by Congress
for private-sector depot-level maintenance funding allocations. By
disclosing the persistent deficiencies in the 50-50 reporting processes
as a management control weakness, along with planned corrective
actions, in future accountability reports, DOD will increase the level
of management attention and help focus improvement efforts so that the
data provided to Congress are accurate and complete.
The data DOD provides in its annual 50-50 report to Congress satisfy
the annual mandate but lack additional detail that may well be useful
to Congress as it exercises its oversight role. Until DOD provides
additional information and analysis on changes in depot maintenance
funding and allocations, significant variances from the prior year's
report, and methodologies used to estimate workload allocation
projections for the current and ensuing fiscal years in its annual 50-
50 report, Congress will continue to be hindered in its ability to
exercise effective oversight. Additionally, the extent of the
percentage adjustments we find each year, coupled with the persistent
lack of progress by the Army and the Navy toward improving their
reporting processes and data quality, indicate that DOD cannot afford
to wait until the services reach the 50 percent limit before
formulating and providing a plan that identifies actions the military
departments will take to avoid exceeding the threshold for private-
sector funding.
Recommendations for Executive Action:
To improve the accuracy and reliability of depot maintenance funding
allocation data submitted to Congress and to provide congressional
decision makers with better information on funding allocations, we
recommend that the Secretary of Defense take the following two actions.
We recommend that the Secretary, in future accountability reports,
disclose a management control weakness in DOD's 50-50 data reporting
processes along with planned corrective actions to improve management
control in the following areas:
* Management review, attention, and policies sufficient to ensure
accurate and complete 50-50 reporting.
* Independent review and validation of 50-50 data by service audit
agencies or other third parties, with auditor-identified data
inaccuracies corrected prior to submission of the annual report to
Congress.
* Annual training on 50-50 policies and procedures for all individuals
participating in data gathering and reporting.
We also recommend that the Secretary enhance DOD's annual 50-50 report
submitted to Congress. This enhanced reporting should include the
following types of information:
* Variance analyses that identify significant changes in depot
maintenance workload allocations from the prior year's report and the
reasons for these variances.
* Analysis of historical trends in depot maintenance workload
allocations.
* Explanation of the methodologies used to estimate workload allocation
projections for the current and ensuing fiscal years.
* The military departments' plans to ensure continued compliance with
the 50-50 requirement, including the identification of decisions on new
weapon systems maintenance workload sourcing that could be made to
support remaining within the 50 percent threshold.
Matter for Congressional Consideration:
If Congress determines, for oversight purposes, that improvements are
needed in the reliability and usefulness of DOD's annual report on
depot maintenance funding allocations, Congress should require the
Secretary of Defense to enhance its annual 50-50 report to Congress as
stated in our recommendations. Specifically, this enhanced reporting
should include (1) variance analyses of significant changes in depot
maintenance workload allocations from the prior year's report and the
reasons for these variances; (2) analysis of historical workload
allocation trends; (3) explanation of the methodologies used to
estimate workload allocation projections; and (4) plans to ensure
continued compliance with the 50-50 requirement, including the
identification of decisions on new weapon systems maintenance workload
sourcing that could be made to support remaining within the 50 percent
threshold. Additionally, the enhanced reporting should address the
corrective actions DOD is taking to improve the persistent deficiencies
we have identified in DOD's 50-50 data reporting processes.
Agency Comments and Our Evaluation:
In commenting on a draft of this report, DOD partially concurred with
our recommendations but did not indicate specific actions it would take
address the persistent deficiencies we identified in its 50-50
reporting processes or to improve the usefulness of the information
provided to Congress. DOD agreed there were errors in the 50-50 report
and stated that it is committed to providing accurate data in its
annual report to Congress, has made improvements in its reporting over
the past several years, and will continue to improve.
DOD partially concurred with our recommendation that the Secretary of
Defense, in future accountability reports, disclose a management
control weakness in DOD's 50-50 data reporting processes along with
planned corrective actions to improve management control. However, DOD
did not indicate that it would disclose its 50-50 data reporting
processes as a management control weakness in future accountability
reports. Instead, DOD stated that it currently reports internal
management control weaknesses in its annual accountability reports. The
currently reported weaknesses, however, are not specific to DOD's 50-50
data reporting processes, and we continue to believe that the recurring
nature of the deficiencies we have found in DOD's 50-50 reporting
processes indicates a management control weakness significant enough to
be reported separately in DOD's annual accountability reports. Neither
DOD nor the military services have consistently implemented corrective
actions sufficient to resolve the deficiencies. As discussed in the
report, during the past 7 years we have made 33 recommendations for
improving 50-50 reporting. Of these recommendations, 19 have been
officially closed by GAO. The 14 recommendations that remain open
contain several recurring themes, which include the need for increased
management attention to ensure accurate and complete 50-50 reporting,
independent review, and validation of data and annual training on 50-50
policies and procedures for all individuals participating in data
gathering and reporting. Nevertheless, in its comments DOD stated that
systemic changes to the reporting process have already been made in
response to previous recommendations. DOD noted that it instituted
third-party review of data by service audit agencies and corrected
auditor-identified data inaccuracies prior to submission of the annual
report to Congress. While we agree that DOD has made improvements in
its reporting processes over the past several years, our work
nevertheless has identified persistent deficiencies in these processes
that continue to prevent us from determining whether the military
departments complied with the 50-50 requirement. For example, as we
reported, although each of the military services obtained some level of
independent review and validation this year, the reviews were
constrained by time and limited in scope. Moreover, not all of the
errors were corrected prior to submission to Congress. Disclosing 50-50
reporting processes as a management control weakness in future
accountability reports could increase DOD management emphasis on
addressing the persistent deficiencies that continue to limit the
accuracy and usefulness of the depot maintenance funding allocation
data reported to Congress.
DOD also partially concurred with our recommendation that the Secretary
of Defense enhance DOD's annual 50-50 report submitted to Congress.
However, DOD stated that producing the types of information suggested
in our recommendation would require a massive undertaking and may be of
limited value. We disagree. We have developed these types of
information as part of our annual mandated review of DOD's 50-50
report, and the information has been valuable in understanding and
evaluating DOD's depot maintenance funding allocations. For example, we
compared fiscal year 2004 reported allocations for specific programs
and reporting centers with fiscal year 2003 allocations, and followed
up with the military services to determine the reasons for significant
differences. The goal of this recommendation is not to place an
unnecessary burden on the department but to provide additional
information on depot maintenance funding that would make the annual 50-
50 report to Congress more informative and useful as an oversight tool.
Furthermore, we believe that if DOD would provide more detailed and
analytical information to Congress, it would place additional emphasis
on assuring the accuracy of the data provided in its annual 50-50
report.
Because it does not appear to us that DOD's actions will address the
persistent deficiencies we identified in its 50-50 reporting processes
or improve the usefulness of the information provided to Congress, we
have added a matter for congressional consideration suggesting that
Congress require the Secretary of Defense to enhance the department's
annual 50-50 report as stated in our recommendations.
DOD also stated in its written comments that its 50-50 data quality has
improved, as shown by reductions in the Navy's and the Air Force's
private-sector corrections. DOD further noted that the Army's one
transcription error accounted for 99.3 percent of its private sector
corrections. Our report does not conclude that the department's data
quality has improved. On the contrary, we state as in past years that
DOD's 50-50 data, with our adjustments, provide only a rough
approximation of the allocation of depot maintenance funding between
the public and private sectors. We reported that DOD's April 1, 2005,
report to Congress contained errors, omissions, and inconsistencies
that if corrected, would increase the Army's and Navy's percentages of
funding allocations going to the private sector. Additionally, we did
not conduct a detailed review of all reported 50-50 data; therefore,
there may be additional errors, omissions, and inconsistencies that
were not identified during our review. We agree that the Army's $399.4
million transcription error was the single largest correction we
identified. However, this error involved a public-sector correction
rather than a private-sector correction as DOD stated. We noted several
other errors in the Army's data for both the public and private
sectors, as shown in table 3 of this report. We continue to believe
that adequate management attention and review of 50-50 data to ensure
accurate and complete reporting would have helped identify the
transcription error and other errors prior to submitting the data to
DOD and Congress.
DOD believes, based on guidance from the General Counsel's office in
the Department of the Navy, that it has properly excluded depot
maintenance associated with nuclear carrier refueling and inactivation
work performed on non-nuclear ships. We have disagreed in prior years
with DOD's decision to exclude these types of depot maintenance repairs
from its 50-50 reports. As discussed in our report, we continue to
believe that depot maintenance repairs not directly associated with the
task of refueling of nuclear aircraft carriers should be included in
DOD's annual report to Congress. We also continue to believe that
inactivation work performed on non-nuclear ships should be included in
DOD's report.
DOD's written comments are reprinted in appendix III.
We are sending copies of this report to appropriate congressional
committees; the Secretary of Defense; the Secretaries of the Army,
Navy, and Air Force; the Commandant of the Marine Corps; and the
Director, Office of Management and Budget. We will make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at [Hyperlink,
http://www.gao.gov]. If you or your staff have any questions on the
matters discussed in this report, please contact me at (202) 512-8365
or solisw@gao.gov. Contact points for our Offices of:
Congressional Relations and Public Affairs may be found on the last
page of this report. Key contributors to this report are listed in
appendix IV.
Signed by:
William M. Solis:
Director, Defense Capabilities and Management:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
To determine the accuracy of the military services' reporting of their
depot maintenance allocations and whether they met the 50-50
requirement for fiscal year 2004, we analyzed each service's procedures
and internal management controls for collecting and reporting its depot
maintenance allocations. Certain programs, reporting centers, and
maintenance activities were identified for in-depth reviews.[Footnote
15] In particular, we focused on those reporting locations, programs,
and issues that Department of Defense (DOD) personnel and we identified
as problem areas in current and past reviews as well as those that had
experienced significant funding variances over time. We did not conduct
a detailed review of all reported 50-50 data; therefore there may be
additional errors, omissions, and inconsistencies that were not
identified.
As part of these in-depth reviews, we conducted site visits to
departmental headquarters, major commands, selected maintenance
activities, and reporting centers; interviewed the service officials
involved with the data collection; and reviewed the data utilized for
accuracy and completeness. Our data verification efforts included
examining summary records, accounting reports, budget submissions, and
contract documents. We also reviewed DOD, military service, and command-
specific guidance for collecting and aggregating 50-50 data. We also
compared this year's instructions with last year's to identify any
changes and additions and reviewed service efforts to identify
reporting sources and to distribute guidance and tasks to develop and
report the 50-50 data.
To determine what actions the services took to improve the quality of
reported 50-50 data and implementation of GAO's prior year's
recommendations, we reviewed the results of internal studies conducted
by the service audit agencies or other third parties, and reconciled
areas of concern identified during prior years' audits. Additionally,
we reviewed prior years' recommendations to determine whether known
problem areas were being addressed and resolved. We applied this
knowledge to identify additional areas for improving the reporting
process and management controls. We examined the process used to
compile the reports and the data reported to determine that it was
consistent and in compliance with legislative requirements and to
identify any errors, omissions, or inconsistencies in the data
reported. We discussed with officials managing and coordinating the
reporting process their efforts to address known problem areas and
respond to recommendations by internal audit agencies and GAO.
Our analysis of the data for fiscal years 2005 and 2006 was limited
because our audit efforts identified significant recurring problems in
this area of the report. To determine whether DOD's projected
allocations for the current fiscal year and ensuing fiscal year were
reasonable, we performed certain checks and tests, including variance
analyses, to judge the consistency of this information with data from
prior years and with the future years' budgeting and programming data
used in DOD's budget submissions and reports to Congress. We found
repeated and significant changes, even though the estimates were
prepared only about 1 year apart.
We used the results of our analysis of fiscal year 2005 and 2006
projections to further discuss with officials, and analyze the reasons
behind, changes in reported data and percentage allocations between the
2004 and 2005 50-50 reports submitted to Congress. Our current and past
work on this issue has shown that DOD's 50-50 data cannot be relied
upon as a precise measure of the allocation of depot maintenance funds
between the public and private sectors. However, the mandate in 10
U.S.C. § 2466 requires (1) DOD to report the data, which are the only
data available and accepted and used for DOD decision making and for
congressional oversight, and (2) us to submit our views on whether DOD
has complied with the 50-50 requirement to Congress. While DOD's data
cannot be relied upon to provide a precise measure of the funding
between the public and private sectors, the data, along with our
adjustments, provide a rough approximation of the allocations and some
trends that may be useful to Congress in exercising its oversight role
and to DOD officials in managing the depot maintenance program.
Concerns about the accuracy and completeness of the 50-50 data
available were considered and incorporated into our methodology and
approach to reviewing the fiscal year 2004 report. Along with the
limitations on the 50-50 data available from DOD, the constrained time
frame for our review limited the extent to which our analysis could be
relied upon to identify all the errors, inconsistencies, and omissions
in DOD's data. We recognize that we have not been able to
comprehensively identify all of the errors and omissions in the 50-50
report for fiscal year 2004. However, we were able to conclude that the
reported depot maintenance workload funding allocations were not
sufficiently reliable for accurately determining whether the military
departments complied with the 50-50 requirement for fiscal year 2004.
As a result, we developed recommendations for improving the 50-50 data
collection, verification, and reporting processes.
We interviewed officials, examined documents, and obtained data at the
Office of the Secretary of Defense, Army, Navy, Marine Corps, and Air
Force headquarters in the Washington, D.C., area; Anniston Army Depot
in Anniston, Alabama; Army Materiel Command in Alexandria, Virginia;
National Guard Bureau Aviation Classification Repair Activity Depot in
Gulfport, Mississippi; Tank Automotive Command in Warren, Michigan;
Naval Air Systems Command in Patuxent River, Maryland; Naval Sea
Systems Command in Washington, D.C; Naval Inventory Control Point in
Philadelphia, Pennsylvania; U.S. Fleet Forces Command in Norfolk,
Virginia; Pearl Harbor Naval Shipyard and Intermediate Maintenance
Facility in Honolulu, Hawaii; U.S. Pacific Fleet Command in Honolulu,
Hawaii; Air Force Materiel Command in Dayton, Ohio; Ogden Air Logistics
Center in Ogden, Utah; Marine Corps Logistics Command in Albany,
Georgia; Marine Corps Logistics Command in Barstow, California; Marine
Corps Systems Command in Quantico, Virginia; Army, Naval, and Air Force
Audit Services; several public depots managed by the military
departments' materiel commands; and selected operating bases. We
conducted our review from April 2005 through September 2005 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: GAO Adjustments for Inaccuracies Found in the Military
Departments' 50-50 Data for Fiscal Year 2004:
Our review of the data supporting DOD's 50-50 report identified errors,
omissions, and inconsistencies that if corrected, would revise the
total workload funding allocations and increase the private-sector
allocations for each of the military departments. (See tables 3, 4, and
5.)
Table 3: GAO's Adjustments to the Army's Fiscal Year 2004 Reported
Depot Maintenance Allocations:
Dollars in millions.
Category: Private work reported;
Allocation: $2,376.3;
Percentage: 45.0%.
Category: Private work adjusted;
Allocation: $2,425.9;
Percentage: 49.2%.
Change;
Allocation: $49.6;
Percentage: 4.2%.
Category: Overreported--third party verification analysis at Aviation
and Missile Command and Communications and Electronics Command;
Allocation: ($5.8).
Category: Underreported--misclassified as public work;
Allocation: $7.8.
Category: Underreported--private depot work at National Maintenance
Program nondepot locations due to reporting planned versus obligated
funding;
Allocation: $5.7.
Category: Unreported--private depot work at Anniston Army Depot;
Allocation: $2.2.
Category: Unreported--private depot work ($3.5 million) and government-
furnished equipment ($2.7 million) at a National Guard Aviation
Classification and Repair Depot;
Allocation: $6.2.
Category: Unreported--private depot work for onetime repairs at
nondepot aviation maintenance location;
Allocation: $20.7.
Category: Unreported--private depot work for Stryker vehicle ($6.9
million) and FOX vehicle ($5.9 million);
Allocation: $12.8.
Category: Public work reported;
Allocation: $2,902.1;
Percentage: 55.0%.
Category: Public work adjusted;
Allocation: $2,505.1;
Percentage: 50.8%.
Change;
Allocation: ($397.0);
Percentage: -4.2%.
Category: Overreported--transcription error;
Allocation: ($399.4).
Category: Overreported--double-counting;
Allocation: ($9.6).
Category: Overreported--misclassified private work;
Allocation: ($7.8).
Category: Underreported--reported workload allocation at Aviation and
Missile Command and Communications and Electronics Command;
Allocation: $18.4.
Category: Underreported--National Maintenance Program workload
allocation reported as amounts planned rather than obligated;
Allocation: $0.5.
Category: Unreported--FOX vehicle;
Allocation: $0.9.
Category: Private work exempt reported;
Allocation: $0.0;
Percentage: 0.0%.
Category: Private work exempt adjusted;
Allocation: $0.3;
Percentage: 0.0%.
Change;
Allocation: $0.3;
Percentage: 0.0%.
Category: Unreported--two partnerships at Anniston Army Depot that
qualified for Centers of Industrial and Technical Excellence exemption;
Allocation: $0.3.
Total work reported;
Allocation: $5,278.4.
Total work adjusted;
Allocation: $4,931.3.
Change;
Allocation: ($347.1).
Sources: DOD (data); GAO (analysis).
Notes: Numbers in parentheses are negative. Percentages subject to
rounding.
[End of table]
Table 4: GAO's Adjustments to the Navy's Fiscal Year 2004 Reported
Depot Maintenance Allocations:
Dollars in millions.
Category: Private work reported;
Allocation: $4,675.3;
Percentage: 46.2%.
Category: Private work adjusted;
Allocation: $4,793.3;
Percentage: 48.5%.
Change;
Allocation: $118.0;
Percentage: 2.4%.
Category: Unreported--non-nuclear conventional ship inactivations;
Allocation: $14.4.
Category: Unreported--depot maintenance performed while nuclear
refueling of carriers;
Allocation: $80.3.
Category: Underreported--misclassified, private workload allocation
incorrectly reported as public;
Allocation: $23.3.
Category: Public work reported;
Allocation: $5,085.2;
Percentage: 50.2%.
Category: Public work adjusted;
Allocation: $4,705.6;
Percentage: 47.7%.
Change;
Allocation: ($379.6);
Percentage: -2.6%.
Category: Unreported--United States Marine Corps work performed at
other public depots;
Allocation: $1.3.
Category: Overreported--incorrect reporting of multiyear
appropriations;
Allocation: ($357.6).
Category: Overreported--misclassified, private workload allocation
incorrectly reported as public;
Allocation: ($23.3).
Category: Private work exempt reported;
Allocation: $366.1;
Percentage: 3.6%.
Category: Private work exempt adjusted;
Allocation: $376.0;
Percentage: 3.8%.
Change;
Allocation: $9.9;
Percentage: 0.2%.
Category: Underreported--incorrect reporting of multiyear
appropriations;
Allocation: $9.9.
Total work reported;
Allocation: $10,126.6.
Total work adjusted;
Allocation: $9,874.9.
Change;
Allocation: ($251.7).
Sources: DOD (data); GAO (analysis).
Notes: Numbers in parentheses are negative. Percentages subject to
rounding. The Department of Navy consists of the Navy and Marine Corps.
[End of table]
Table 5: GAO's Adjustments to the Air Force's Fiscal Year 2004 Reported
Depot Maintenance Allocations:
Dollars in millions.
Category: Private work reported;
Allocation: $4,417.2;
Percentage: 45.3%.
Category: Private work adjusted;
Allocation: 4,416.9;
Percentage: 45.3%.
Change;
Allocation: ($0.3);
Percentage: 0.0%.
Category: Underreported;
Allocation: $2.0.
Category: Overreported;
Allocation: ($2.3).
Category: Public work reported;
Allocation: $5,329.2;
Percentage: 54.6%.
Category: Public work adjusted;
Allocation: 5,329.2;
Percentage: 54.6%.
Change;
Allocation: $0.0;
Percentage: 0.0%.
Category: Private work exempt reported;
Allocation: $13.3;
Percentage: 0.1%.
Category: Private work exempt adjusted;
Allocation: $13.3;
Percentage: 0.1%.
Change;
Allocation: $0.0;
Percentage: 0.0%.
Total work reported;
Allocation: $9,759.7.
Total work adjusted;
Allocation: $9,759.4.
Change;
Allocation: ($0.3).
Sources: DOD (data); GAO (analysis).
Notes: Numbers in parentheses are negative. Percentages subject to
rounding.
[End of table]
[End of section]
Appendix III: Comments from the Department of Defense:
Deputy Under Secretary Of Defense For Logistics And Materiel Readiness:
3500 Defense Pentagon:
Washington, DC 20301-3500:
November 8, 2005:
Mr. William M. Solis:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, N.W.:
Washington, DC 20548:
Dear Mr. Solis:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-06-88 (GAO Code 350727), "DEPOT MAINTENANCE: Persistent
Deficiencies Limit Accuracy and Usefulness of DoD's Funding Allocation
Data Reported to Congress," dated September 30, 2005.
The Department is committed to providing accurate data in its annual
report on depot maintenance funding allocation and has made significant
improvements over the last several years. Many of those improvements
are as a result of GAO recommendations. These improvements include:
Detailed reporting instructions and conventions for allocating depot
costs. Third party review of Service data prior to submission to OSD.
The draft report states data cannot be relied upon to provide an
accurate reflection of the balance of funding between the public and
private sectors due to errors and omissions, yet uses the data to
conclude the Army and Navy are approaching the 50 percent limitation.
Further improvements in cost allocation data depend on the
implementation of a more detailed cost accounting system within the
depots.
The draft report cites examples of omissions to include nuclear ship
refueling and conventional ship inactivations. As reported in previous
years, we have been advised by the General Counsel's office in the
Department of the Navy that nuclear ship refueling costs are properly
excluded, and conventional ship inactivation workload is not considered
depot level maintenance, therefore properly excluded, not omitted.
We agree, due largely to extreme time constraints, there were errors in
Military Department reports. However, a review of past data indicates
the number of GAO private sector corrections have been consistently
reduced over the last three years. Third party reviews and other
process reviews will continue to improve data quality and accuracy.
The Department's comments on the GAO recommendations are enclosed.
Enclosure:
As stated:
Gao Draft Report - Dated September 30, 2005: Gao Code 350727/GAO-06-88:
"Depot Maintenance: Persistent Deficiencies Limit Accuracy and
Usefulness of DOD's Funding Allocation Data Reported to Congress"
Department Of Defense Comments To The Recommendations:
Recommendation 1: The GAO recommended that the Secretary of Defense, in
future accountability reports, disclose a management control weakness
in DOD's 50-50 data reporting processes along with planned corrective
actions to improve management control in the following areas:
* management review, attention, and policies sufficient to ensure
accurate and complete 50-50 reporting;
independent review and validation of 50-50 data by service audit
agencies or other third parties, with auditor-identified data
inaccuracies corrected prior to submission of the annual report to
Congress; and:
* annual training on 50-50 policies and procedures for all individuals
participating in data gathering and reporting.
DoD Response: Partially Concur. The Secretary of Defense currently
reports internal management control weaknesses in DOD's assurance
statement as part of the Performance and Accountability Report.
Independent review and validation of 50-50 data by service audit
agencies or other third parties, with auditor-identified data
inaccuracies corrected prior to submission of the annual report to
Congress was accomplished. GAO recognizes that there are extreme time
constraints for 50-50 data collection, review, and reporting. Even so,
the Department's data quality has improved as evidenced by reductions
in Navy and Air Forces's private sector corrections. The Army's one
transcription error accounted for 99.3 % of their private sector
corrections. Naturally, from year to year with staff turnover,
reorganizations, financial system changes, etc., limited errors can
occur. These process challenges identified by GAO have been addressed
by the Department in previous years and systemic changes such as third
party review, Service level supplemental guidance, as well as training
on exemption reporting have been made by the services to overcome these
challenges.
Recommendation 2: The GAO recommended that the Secretary of Defense
enhance DOD's annual 50-50 report submitted to Congress. This enhanced
reporting should include the following types of information:
* changes in depot maintenance workload allocations, including
significant variances from the prior year's report, the reasons for
these variances, and analysis of long-term trends;
* methodologies used to estimate workload allocation projections for
the current and ensuing fiscal years; and:
* the military departments' plans to ensure continued compliance with
the 50-50 requirement, including the identification of decisions on new
weapon systems maintenance workload sourcing that could be made to
support remaining within the 50 percent threshold.
DoD Response: Partially Concur. GAO acknowledges that the Congressional
reporting mandates are being met. Current and future year depot
maintenance workload projections are generated using a rigorous review
process and justification provided in the President's Budget. Variances
occur for a variety of reasons to include: Congressional "adds" and
supplemental funding, operational schedule changes, and emergent
requirements. Scope of work changes, and workload reprioritizations
also compound the net effect on variances from projection to actual. It
would require a massive undertaking to track the changes throughout the
year across the Department's diverse depot maintenance program.
Additionally, the Global War on Terrorism (GWOT) has necessitated a
dynamic support environment in which historical "long-term" trends in
depot maintenance requirements may be of limited value. Congress
recently eliminated the requirement to present five years of
projections for the reasons cited above.
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contact:
William M. Solis (202) 512-8365:
Acknowledgments:
Key contributors to this report include Thomas Gosling, Assistant
Director; Claudia Dickey; Frank Smith; Andy Marek; Janine Prybyla;
Oscar Mardis; Jennifer Jebo; Bathsheba Everett; Michael Zola; Renee
McElveen; and Renee Brown.
[End of section]
Related GAO Products:
Depot Maintenance: DOD Needs Plan to Ensure Compliance with Public-and
Private-Sector Funding Allocation. GAO-04-871. Washington, D.C.
September 29, 2004.
Depot Maintenance: Army Needs Plan to Implement Depot Maintenance
Report's Recommendations. GAO-04-220. Washington, D.C. January 8,
2004.
Depot Maintenance: DOD's 50-50 Reporting Should Be Streamlined. GAO-03-
1023. Washington, D.C. September 15, 2003.
Depot Maintenance: Key Unresolved Issues Affect the Army Depot System's
Viability. GAO-03-682. Washington, D.C. July 7, 2003.
Department of Defense: Status of Financial Management Weaknesses and
Progress Toward Reform. GAO-03-931T. Washington, D.C. June 25, 2003.
Depot Maintenance: Change in Reporting Practices and Requirements Could
Enhance Congressional Oversight. GAO-03-16. Washington D.C. October
18, 2002.
Depot Maintenance: Management Attention Needed to Further Improve
Workload Allocation Data. GAO-02-95. Washington, D.C. November 9,
2001.
Defense Logistics: Actions Needed to Overcome Capability Gaps in the
Public Depot System. GAO-02-105. Washington, D.C. October 12, 2001.
Defense Maintenance: Sustaining Readiness Support Capabilities Requires
a Comprehensive Plan. GAO-01-533T. Washington, D.C. March 23, 2001.
Depot Maintenance: Key Financial Issues for Consolidations at Pearl
Harbor and Elsewhere Are Still Unresolved. GAO-01-19. Washington, D.C.
January 22, 2001.
Depot Maintenance: Action Needed to Avoid Exceeding Threshold on
Contract Workloads. GAO/NSIAD-00-193. Washington, D.C. August 24,
2000.
Depot Maintenance: Air Force Waiver to 10 U.S.C. 2466. GAO/NSIAD-00-
152R. Washington, D.C. May 22, 2000.
Depot Maintenance: Air Force Faces Challenges in Managing to 50-50
Threshold. GAO/T-NSIAD-00-112. Washington, D.C. March 3, 2000.
Depot Maintenance: Future Year Estimates of Public and Private
Workloads Are Likely to Change. GAO/NSIAD-00-69. Washington, D.C.
March 1, 2000.
Depot Maintenance: Army Report Provides Incomplete Assessment of Depot-
Type Capabilities. GAO/NSIAD-00-20. Washington, D.C. October 15, 1999.
Depot Maintenance: Status of the Navy's Pearl Harbor Project. GAO/NSIAD-
99-199. Washington, D.C. September 10, 1999.
Depot Maintenance: Workload Allocation Reporting Improved, but
Lingering Problems Remain. GAO/NSIAD-99-154. Washington, D.C. July 13,
1999.
Navy Ship Maintenance: Allocation of Ship Maintenance Work in the
Norfolk, Virginia, Area. GAO/NSIAD-99-54. Washington, D.C. February
24, 1999.
Defense Depot Maintenance: Public and Private Sector Workload
Distribution Reporting Can Be Further Improved. GAO/NSIAD-98-175.
Washington, D.C. July 23, 1998.
Defense Depot Maintenance: DOD Shifting More Workload for New Weapon
Systems to the Private Sector. GAO/NSIAD-98-8. Washington, D.C. March
31, 1998.
Defense Depot Maintenance: Information on Public and Private Sector
Workload Allocations. GAO/NSIAD-98-41. Washington, D.C. January 20,
1998.
Defense Depot Maintenance: Uncertainties and Challenges DOD Faces in
Restructuring Its Depot Maintenance Program. GAO/T-NSIAD-97-112.
Washington, D.C. May 1, 1997. Also GAO/T-NSIAD-97-111. Washington,
D.C. March 18, 1997.
Defense Depot Maintenance: More Comprehensive and Consistent Workload
Data Needed for Decisionmakers. GAO/NSIAD-96-166. Washington, D.C. May
21, 1996.
Defense Depot Maintenance: DOD's Policy Report Leaves Future Role of
Depot System Uncertain. GAO/NSIAD-96-165. Washington, D.C. May 21,
1996.
Defense Depot Maintenance: Privatization and the Debate over the Public-
Private Mix. GAO/T-NSIAD-96-148. Washington, D.C. April 17, 1996. Also
GAO/T-NSIAD-96-146. Washington, D.C. April 16, 1996.
Depot Maintenance: Issues in Allocating Workload Between the Public and
Private Sectors. GAO/T-NSIAD-94-161. Washington, D.C. April 12, 1994.
(350727):
FOOTNOTES
[1] For the two most recent reports, see GAO, Depot Maintenance: DOD
Needs Plan to Ensure Compliance with Public-and Private-Sector Funding,
GAO-04-871 (Washington, D.C. Sept. 29, 2004), and Depot Maintenance:
DOD's 50-50 Reporting Should Be Streamlined, GAO-03-1023 (Washington,
D.C. Sept. 15, 2003). Other related GAO products are listed at the end
of this report.
[2] GAO has repeatedly reported about long-standing systemic weaknesses
in DOD's financial systems. See GAO, High-Risk Series: An Update, GAO-
05-207 (Washington, D.C. January 2005); DOD Business Systems
Modernization: Billions Being Invested without Adequate Oversight, GAO-
05-381 (Washington, D.C. Apr. 29, 2005); DOD Business Systems
Modernization: Billions Continue to Be Invested with Inadequate
Management Oversight and Accountability, GAO-04-615 (Washington, D.C.
May 27, 2004), and Department of Defense: Financial and Business
Management Transformation Hindered by Long-standing Problems, GAO-04-
941T (Washington, D.C. July 8, 2004).
[3] Title 31, U.S.C. § 3512(c), (d), commonly referred to as the
Federal Financial Managers' Financial Integrity Act, requires federal
agencies to report on whether the agency management controls are
adequate and effective and are achieving their intended objectives.
Guidance on reporting on management controls is contained in Office of
Management and Budget Circular A-123 (effective through fiscal year
2005) (revised June 21, 1995).
[4] Interim contractor support is an interim support arrangement in
which a contractor provides depot maintenance (and sometimes other
logistics support) as part of the acquisition strategy for new systems.
[5] Contractor logistics support is a lifetime support concept in which
a contractor provides most or all elements of logistics support,
including depot maintenance.
[6] Core competencies are depot-level maintenance capabilities to be
retained in public depots to meet DOD's strategic and contingency plans
and for which the military departments believe DOD should be a
recognized leader in the national technology and industrial base.
[7] DOD guidance defines a "public-private partnership" for depot
maintenance as an agreement between a public-sector depot maintenance
activity and one or more private industry or other entities to perform
work or utilize facilities and equipment. Such an arrangement includes
the use of public facilities, equipment, and employees to perform work
for the private sector under certain defined circumstances; private-
sector use of public-sector equipment and facilities to perform work
for the public sector; and work-sharing agreements using both public-
and private-sector facilities, employees, or both.
[8] National Defense Authorization Act for Fiscal Year 2003, Pub. L.
No. 107-314, § 334 (2002); Ronald W. Reagan National Defense
Authorization Act for Fiscal Year 2005, Pub. L. No. 108-375, § 323
(2004).
[9] Because of the difficulty of segregating installation costs for
safety modifications from costs for installing other modifications
(e.g., for improved performance), OSD's guidance specifies that all
modification installation costs be reported when an installation is
considered to be a depot-level service.
[10] Although 10 U.S.C. § 2466 specifies the reporting of funds
expended in prior years and projected to be expended in future years,
DOD's past and current 50-50 reports are based on obligation data. In
the past, a DOD official explained that obligation data are considered
to be more appropriate because of the statutory requirement to report
funds made available in a given fiscal year and because expenditure
data may not be completely recognized in the accounting records for a
year or more following the funds' obligation.
[11] The National Maintenance Program is the Army's ongoing action to
establish a fully integrated national maintenance requirements process
that includes all depot-level maintenance requirements, regardless of
the location of the work, in a field facility or a maintenance depot.
[12] Title 31, U.S.C. § 3512(c), (d), commonly referred to as the
Federal Financial Managers' Financial Integrity Act, requires federal
agencies to report on whether the agency management controls are
adequate and effective and are achieving their intended objectives.
Guidance on reporting on management controls is contained in Office of
Management and Budget Circular A-123 (effective through fiscal year
2005) (revised June 21, 1995).
[13] Financial reporting includes annual financial statements of an
agency or other significant financial reports that could have a
material effect on significant spending, budgetary, or other financial
decisions of the agency or that is used to determine compliance with
laws and regulations.
[14] Data validation is the process of verifying data by comparing
reported data to a source document to ensure the data are accurate and
complete and then attesting to the accuracy of the data.
[15] We selected the programs reviewed on the basis of size, location,
or any previously identified areas of concern. Given the nature of our
sample, the results are not projectable to the universe of depot
maintenance activities. We also did not audit the integrity of the
Department of Defense's financial systems and accounting data used to
prepare the 50-50 reports.
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