Depot Maintenance
Actions Needed to Provide More Consistent Funding Allocation Data to Congress Gao ID: GAO-07-126 November 30, 2006Under 10 U.S.C. 2466, the military departments and defense agencies may 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 allocation of depot maintenance funding between the public and private sectors for the preceding fiscal year and projected distribution for the current and ensuing fiscal years for each of the armed forces and defense agencies. As required by Section 2466, GAO reviewed the report submitted in April 2006 and is, with this report, submitting its view to Congress on whether (1) the military departments and defense agencies complied with the 50-50 requirement for fiscal 2005 and (2) the projections for fiscal years 2006 and 2007 represent reasonable estimates. GAO obtained data used to develop the April 2006 report, conducted site visits, and reviewed supporting documentation.
Although DOD reported to Congress that it complied with the 50-50 requirement for fiscal year 2005, GAO could not validate compliance due to weaknesses in DOD's financial management systems and the processes used to collect and report 50-50 data. DOD's April 2006 report provides an approximation of the depot maintenance funding allocation between the public and private sectors for fiscal year 2005. GAO identified errors in the reported data which, if adjusted, would increase the Army's private-sector funding allocation percentage from 49.4 percent to 50 percent. GAO found that 50-50 funding allocation data were not being consistently reported because some maintenance depots were reporting expenditures rather than following Office of the Secretary of Defense (OSD) guidance and reporting obligations. Combining obligations and expenditures produces an inaccurate accounting of 50-50 funding allocations. GAO also found amounts associated with interservice depot maintenance work may not accurately reflect the actual allocation of private- and public-sector funds because visibility over the allocation of these funds is limited. OSD guidance requires that the military departments establish measures to ensure correct accounting of interservice workloads. In prior years' reports on DOD's compliance with the 50-50 requirement, GAO discussed deficiencies limiting data accuracy and recommended specific corrective actions. While DOD has taken some additional actions to improve the quality of reported data for fiscal year 2005, it has not fully addressed the persistent deficiencies that have limited 50-50 data accuracy. Reported projections do not represent reasonable estimates of public- and private-sector depot maintenance funding allocations for fiscal years 2006 and 2007 due to data inaccuracies. Errors GAO identified for fiscal year 2005 could affect these projections. If the adjustments GAO made to the Army's fiscal year 2005 data--increasing the private-sector percentage by about 0.6 percentage points--are carried forward, it could move the Army's projection to within 2 percent of the 50 percent limitation for fiscal year 2007. GAO also found that the projected numbers often did not include supplemental funds, which could change the allocation percentages. These errors and omissions affect the reasonableness and accuracy of the reported projections. To avoid breaching the 50 percent threshold in future years, the Air Force is implementing its plan to ensure compliance with the 50-50 requirement until fiscal year 2010. The plan involves moving some maintenance workload, including the F-100 engine, from the private sector to the public sector.
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-07-126, Depot Maintenance: Actions Needed to Provide More Consistent Funding Allocation Data to Congress
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
November 2006:
Depot Maintenance:
Actions Needed to Provide More Consistent Funding Allocation Data to
Congress:
GAO-07-126:
GAO Highlights:
Highlights of GAO-07-126, a report to congressional committees
Why GAO Did This Study:
Under 10 U.S.C. § 2466, the military departments and defense agencies
may 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 allocation of
depot maintenance funding between the public and private sectors for
the preceding fiscal year and projected distribution for the current
and ensuing fiscal years for each of the armed forces and defense
agencies. As required by Section 2466, GAO reviewed the report
submitted in April 2006 and is, with this report, submitting its view
to Congress on whether (1) the military departments and defense
agencies complied with the 50-50 requirement for fiscal 2005 and (2)
the projections for fiscal years 2006 and 2007 represent reasonable
estimates. GAO obtained data used to develop the April 2006 report,
conducted site visits, and reviewed supporting documentation.
What GAO Found:
Although DOD reported to Congress that it complied with the 50-50
requirement for fiscal year 2005, GAO could not validate compliance due
to weaknesses in DOD‘s financial management systems and the processes
used to collect and report 50-50 data. DOD‘s April 2006 report provides
an approximation of the depot maintenance funding allocation between
the public and private sectors for fiscal year 2005. GAO identified
errors in the reported data which, if adjusted, would increase the
Army's private-sector funding allocation percentage from 49.4 percent
to 50 percent. GAO found that 50-50 funding allocation data were not
being consistently reported because some maintenance depots were
reporting expenditures rather than following Office of the Secretary of
Defense (OSD) guidance and reporting obligations. Combining obligations
and expenditures produces an inaccurate accounting of 50-50 funding
allocations. GAO also found amounts associated with interservice depot
maintenance work may not accurately reflect the actual allocation of
private- and public-sector funds because visibility over the allocation
of these funds is limited. OSD guidance requires that the military
departments establish measures to ensure correct accounting of
interservice workloads. In prior years‘ reports on DOD‘s compliance
with the 50-50 requirement, GAO discussed deficiencies limiting data
accuracy and recommended specific corrective actions. While DOD has
taken some additional actions to improve the quality of reported data
for fiscal year 2005, it has not fully addressed the persistent
deficiencies that have limited 50-50 data accuracy.
Reported projections do not represent reasonable estimates of public-
and private-sector depot maintenance funding allocations for fiscal
years 2006 and 2007 due to data inaccuracies. Errors GAO identified for
fiscal year 2005 could affect these projections. If the adjustments GAO
made to the Army‘s fiscal year 2005 data”increasing the private-sector
percentage by about 0.6 percentage points”are carried forward, it could
move the Army‘s projection to within 2 percent of the 50 percent
limitation for fiscal year 2007. GAO also found that the projected
numbers often did not include supplemental funds, which could change
the allocation percentages. These errors and omissions affect the
reasonableness and accuracy of the reported projections. To avoid
breaching the 50 percent threshold in future years, the Air Force is
implementing its plan to ensure compliance with the 50-50 requirement
until fiscal year 2010. The plan involves moving some maintenance
workload, including the F-100 engine, from the private sector to the
public sector.
What GAO Recommends:
GAO recommends that DOD improve the consistency and accuracy of depot
maintenance workload allocation funding data in its 50-50 report to
Congress. DOD should ensure that obligations rather than expenditures
are reported, and that measures are established to ensure proper
accounting of interservice workloads between the public and private
sectors. DOD concurred with the recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-126].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William M. Solis (202)
512-8365 or solisw@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
DOD's Compliance with the 50-50 Requirement for Fiscal Year 2005 Could
Not Be Validated:
Fiscal Year 2006 and 2007 Projections Are Not Reasonable Due to Data
Inaccuracies:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: GAO Adjustments to Army Fiscal Year 2005 Reported Data:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: DOD's Reported Depot Maintenance Funding Allocations for
Fiscal Year 2005:
Table 2: DOD's Projected Allocations of Depot Maintenance Funds for
Fiscal Years (FY) 2006 and 2007:
Table 3: Adjustments to Army Fiscal Year 2005 Reported Data:
United States Government Accountability Office:
Washington, DC 20548:
November 30, 2006:
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:
Each year the Department of Defense (DOD) spends billions of dollars
for depot maintenance of its ships, aircraft, tanks, and other weapons
systems.[Footnote 1] DOD reported total depot maintenance funding of
more than $26 billion for fiscal year 2005. This maintenance is
accomplished by both federal government workers in the public sector
and contractor personnel in the private sector. Under 10 U.S.C. §
2466(a), not more than 50 percent of funds made available in a fiscal
year to a military department or defense agency for depot-level
maintenance and repair may be used to contract for the performance by
nonfederal government personnel of such workload for the military
departments and defense agencies.[Footnote 2] Section 2466(b) states
that the Secretary of Defense may waive the 50 percent limitation if he
determines the waiver is necessary for national security and submits to
Congress a notice of the waiver and the reasons for the waiver. Section
2466(d)(1) directs the Secretary of Defense to submit an annual report
to Congress identifying, for each of the armed forces and defense
agencies, the percentage of the funds referred to in Section 2466(a)
that was expended during the preceding fiscal year, and are projected
to be expended during the current fiscal year and the ensuing fiscal
year, for performance of depot-level maintenance and repair workloads
by the public and private sectors. In its most recent annual report,
dated April 6, 2006, DOD reported that depot maintenance allocations by
the Departments of the Army, Navy,[Footnote 3] and Air Force were below
the 50 percent threshold in fiscal year 2005, and all the departments
except for the Air Force projected that they will remain below the
threshold for fiscal years 2006 and 2007. According to DOD's report,
the Air Force projected that it would exceed the 50 percent limit in
fiscal year 2007.
Section 2466(d)(2) also requires us to submit to Congress our views on
whether DOD complied with Section 2466(a) during the preceding fiscal
year and whether the expenditure projections for the current and
ensuing fiscal years are reasonable. This is the ninth year that we
have evaluated and reported on DOD's annual 50-50 report to
Congress.[Footnote 4] Specifically, our objectives were to determine
whether (1) the military departments complied with the 50-50
requirement for fiscal year 2005 and (2) the projections for fiscal
years 2006 and 2007 represent reasonable estimates.
To accomplish these objectives, we reviewed guidance for reporting 50-
50 workload funding data and analyzed the military services' procedures
and internal controls for collecting data and ensuring the accuracy and
completeness of data included in the report. To determine whether the
military departments complied with the 50-50 requirement, we obtained
service data used to develop DOD's April 2006 report, conducted site
visits at reporting commands and depots, interviewed officials involved
in the 50-50 process, and reviewed documentation supporting reported
funding data. Our work covered all four military services, but we
placed greater emphasis on reviewing Army data because that service was
close to the 50 percent threshold for fiscal year 2005. We reviewed a
total of $2.7 billion of reported depot maintenance funding. We based
our sample on previously identified areas of concern, varying program
amounts, and selected locations for our site visits. Because we
selected a nonprobability sample of data for our review, our results
cannot be projected. To determine the reasonableness of fiscal year
2006 and 2007 projections, we discussed with service officials how they
developed their projections and whether historical funding information
and known increases in funding were included in their projections. As
discussed below, we have found that reported depot maintenance funding
allocation data are not reliable because of weaknesses in DOD's
financial systems[Footnote 5] and 50-50 data gathering and reporting
processes. For the past several years, we have reported that DOD's
report on the use of these funds cannot be relied upon as an accurate
reflection of the distribution of these funds. We conducted our review
from March 2006 to September 2006 in accordance with generally accepted
government auditing standards. See appendix I for a more detailed
discussion of our scope and methodology.
Results in Brief:
Although DOD reported to Congress that it complied with the 50-50
requirement for fiscal year 2005, we could not validate compliance due
to weaknesses in DOD's financial management systems and the processes
used to collect and report 50-50 data. On the basis of our evaluation
of selected 50-50 data, DOD's April 2006 report provides an
approximation of the depot maintenance funding allocation between the
public and private sectors for fiscal year 2005. However, we identified
errors in the reported data which, if adjusted, would increase the
Army's private-sector funding allocation percentage from 49.4 percent
to 50 percent. During our current review, we determined that 50-50
funding allocation data were not being consistently reported because
some maintenance depots were reporting expenditures rather than
following Office of the Secretary of Defense (OSD) guidance on
reporting obligations. Combining obligations and expenditures produces
an inaccurate accounting of 50-50 funding allocations, including
accounting for workload that is carried over from one fiscal year to
the next. For example, an Army depot official estimated that almost
$1.5 million was expended in fiscal year 2006 on a fiscal year 2005
contract obligation. The official stated that this obligation would not
be reported in fiscal year 2005 because it was not yet expended, and it
would not be reported in fiscal year 2006 because it was expended on a
fiscal year 2005 obligation. Until reporting organizations consistently
identify and report depot maintenance funding obligations, rather than
a combination of expenditures and obligations, inaccurate allocation of
depot maintenance funding between the public and private sectors will
continue to be reported. We also found that amounts associated with
interservice depot maintenance work may not accurately reflect the
actual allocation of private-and public-sector funds because visibility
over the allocation of these funds is limited. For example, we found
instances where a military service awarded public depot maintenance
work to another military service, which then contracted out a portion
of that workload to the private sector. The military service awarding
the work inaccurately reported this as public workload because it had
not inquired whether all the awarded work was performed at the public
depot. OSD guidance requires that the military departments establish
measures to ensure correct accounting of interservice workloads, but
the services have not established sufficient measures for complying
with this guidance. Until the military services accurately account for
and report their distribution of depot maintenance workload performed
under interservice agreements, the 50-50 data reported by DOD will
continue to be inaccurate. We also found several other errors that
resulted in inaccuracies in reported 50-50 data for the Navy and Army.
In prior years' reports on DOD's compliance with the 50-50 requirement,
we have discussed deficiencies that have limited data accuracy and
recommended specific corrective actions. While we found that DOD has
taken some additional actions to improve the quality of reported data
for fiscal year 2005, it has not fully addressed the persistent
deficiencies that have limited 50-50 data accuracy.
Reported projections do not represent reasonable estimates of public-
and private-sector depot maintenance funding allocations for fiscal
years 2006 and 2007 due to data inaccuracies. In the April 2006 report,
the Army and Navy projected that they would remain below the 50-50
threshold in fiscal years 2006 and 2007; while the Air Force projected
that it would be below the threshold in fiscal year 2006 but would
exceed the threshold in fiscal year 2007. However, data errors similar
to those we identified for fiscal year 2005 could affect these
projections. For example, some errors in DOD's fiscal year 2005 data
are carried into the projected years. If the adjustments we made to the
Army's fiscal year 2005 data--increasing the private-sector percentage
by about 0.6 percentage points--are carried forward, it could move the
Army's projection to within 2 percent of the 50 percent limitation for
fiscal year 2007. Under OSD guidance, the 2 percent threshold triggers
certain planning requirements to avoid breaching the 50 percent
limitation. In addition, we found $1.6 million in errors in the Army's
2006 projections, and the projected numbers do not include supplemental
funds, which can change the allocation percentages. These errors and
omissions affect the reasonableness and accuracy of the reported
projections. To avoid breaching the 50 percent threshold in future
years, the Air Force is implementing its plan to ensure compliance with
the 50-50 requirement through fiscal year 2010. The plan involves
moving some maintenance workload, including the F-100 engine, from the
private sector to the public sector.
To improve the consistency and accuracy of depot maintenance funding
allocation data submitted to Congress, we are recommending that the
components report obligations rather than expenditures, and establish
measures to properly account for the allocation of interservice
workloads. In commenting on the draft of this report, DOD concurred
with our recommendations and cited actions it planned to take to
implement them.
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(a) of Title 10 defines "depot-level maintenance and
repair" as material maintenance or repair requiring the overhaul,
upgrading, or rebuilding of parts, assemblies, or subassemblies and the
testing and reclamation of equipment as necessary, regardless of the
source of funds for the maintenance or repair, or the location at which
the maintenance or repair is performed. This term also includes: (1)
all aspects of software maintenance classified by DOD as of July 1,
1995 as depot-level maintenance and repair; and (2) interim contractor
support or contractor logistics support (or any similar contractor
support) to the extent that such support is for the performance of
services described in the preceding sentence. Section 2460(b)(1)
excludes from the definition of depot maintenance the nuclear refueling
of an aircraft carrier, and the procurement of major modifications or
upgrades of weapon systems that are designed to improve program
performance, although a major upgrade program covered by this exception
could continue to be performed by private-or public-sector entities.
Section 2460(b)(2) also excludes from the definition of depot-level
maintenance the procurement of parts for safety modifications, although
the term does include the installation of parts for safety
modifications.
* Depot maintenance funding involving certain public-private
partnerships is exempt from the 50 percent limitation. Section 2474(f)
of Title 10 provides that amounts expended for the performance of depot-
level maintenance and repair by nonfederal government personnel at
Centers of Industrial and Technical Excellence[Footnote 6] under any
contract entered into during fiscal years 2003 through 2009 shall not
be counted when applying the 50 percent limitation in Section 2466(a)
if the personnel are provided by entities outside DOD pursuant to a
public-private partnership. In its annual 50-50 report to Congress, DOD
identifies this funding as a separate category called "exempt."
* Section 2466(b) allows the Secretary of Defense to waive the 50
percent limitation if he determines the waiver is necessary for
national security, and he 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.
OSD issues guidance to the military departments for reporting public-
private workload funding allocations. The guidance's definition of
"depot level maintenance and repair" is consistent with the definition
of "depot-level maintenance and repair" in 10 U.S.C. § 2460. The
military services have also issued internal instructions to manage the
data collection and reporting process, tailored to their individual
organizations and operating environments.
DOD's Compliance with the 50-50 Requirement for Fiscal Year 2005 Could
Not Be Validated:
Although DOD reported that the military departments complied with the
50-50 requirement for fiscal year 2005, we could not validate
compliance because of systemic weaknesses in DOD's financial management
systems[Footnote 7] and persistent deficiencies in the processes used
to collect and report 50-50 data. DOD's report provides an
approximation of the depot maintenance funding allocation between the
public and private sectors but contains some inaccuracies. Our current
review showed that 50-50 funding data were not being consistently
reported because some maintenance depots were reporting expenditures
rather than obligations as directed by OSD guidance. We also found that
amounts associated with interservice depot maintenance work and certain
contract agreements between depots and private contractors may not
accurately reflect the distribution reported for private-and public-
sector funds because visibility over the allocation of these funds is
limited. In addition, we found several other errors that resulted in
inaccuracies in reported 50-50 data for the Navy and Army. DOD took
some actions this year to improve 50-50 reporting. However, our work
over the last several years has identified a number of persistent
deficiencies, such as inadequate management attention and review, which
have affected the quality of reported 50-50 data. While DOD took
actions to improve 50-50 reporting this year, DOD has not implemented
recommendations we made last year to address these deficiencies.
DOD Reported Compliance with the 50-50 Requirement in Fiscal Year 2005,
but Reported Data Contained Inaccuracies:
In DOD's April 2006 report to Congress on funding allocations for depot
maintenance, all three military departments reported that their private-
sector depot maintenance allocation was below the 50 percent limitation
for fiscal year 2005. However, we found that the reported data
contained inaccuracies. Table 1 shows the reported allocation between
the public and private sectors and the exempted workload funding.
Table 1: DOD's Reported Depot Maintenance Funding Allocations for
Fiscal Year 2005:
Dollars in millions.
Private;
Army: 2,861; (49.4%);
Navy: 4,709; (43.2%);
Air Force: 4,592; (47.3%);
Total: 12,162; (46.1%).
Public;
Army: 2,908; (50.2%);
Navy: 5,936; (54.5%);
Air Force: 5,106; (52.6%);
Total: 13,950; (52.9%).
Exempt;
Army: 28; (0.5%);
Navy: 245; (2.3%);
Air Force: 8; (0.1%);
Total: 281; (1.0%).
Total;
Army: 5,796; (100%);
Navy: 10,890; (100%);
Air Force: 9,706; (100%);
Total: 26,393; (100%).
Sources: GAO analysis of DOD data.
Notes: Based on data and analysis of DOD's April 6, 2006, reported 50-
50 data. The numbers in the table may not add due to rounding. The
Department of the Navy includes the Marine Corps.
[End of table]
On the basis of our evaluation of selected 50-50 data, DOD's April 2006
report provides an approximation of depot maintenance funding
allocations between the public and private sectors for fiscal year
2005. However, we identified errors in reported workload funding data.
The net effects of correcting the data inaccuracies we identified would
increase the Army's private-sector funding allocation from 49.4 percent
to 50 percent. Identified errors in the Army's data resulted in a total
decrease in public-sector funding of $5.9 million and a total increase
in private-sector funding of $68.1 million. Appendix II provides
additional information on these adjustments. We could not quantify the
errors that we identified for the Air Force regarding direct sales
agreements. We continue to identify areas that continue to be excluded
from the Navy's 50-50 reporting. While we found an error in the Marine
Corps data, correcting this inaccuracy would not result in changes to
the Department of the Navy's funding allocation percentages. We did not
conduct a review of all reported 50-50 data; therefore, there may be
additional errors, omissions, and inconsistencies that were not
identified.
DOD's 50-50 Report Included Both Expenditures and Obligations:
Depot maintenance funding data for fiscal year 2005 were not being
consistently reported because some maintenance depots were reporting
expenditures, rather than obligations as directed by OSD guidance. The
reporting of expenditures instead of obligations by some depots
presents an inaccurate picture of depot maintenance allocations since
the amounts may differ. For the most part, the allocation percentages
for public funds represent obligation amounts obtained from the
military department's financial accounting systems. However, in
reporting the amount of depot maintenance funds allocated to the
private sector, some reporting organizations used expenditures rather
than obligations as required by OSD guidance.[Footnote 8] For example,
three depots we visited reported their subcontracted depot-level
maintenance work as expenditures rather than obligations. Reasons given
by depot officials for reporting expenditures rather than obligations
include the following: (1) the workload against obligated funds may not
have been fully performed during the fiscal year, and therefore they
believed reporting expenditures was a better reflection of the actual
workload; (2) they did not know that obligations were to be reported
instead of expenditures; and (3) many work orders can be associated
with a multiyear contract, so they believed that reporting expenditures
would be a better representation of the costs associated with multiyear
contracts for the fiscal year in question.
Accurately reporting carryover work is a problem when the services'
data contain both expenditures and obligations. Carryover is work that
a depot may "carry over" from one fiscal year to another to ensure a
smooth flow of work during the transition between fiscal years. This
means that while the funds are obligated in one fiscal year, a certain
portion may not be expended until the next fiscal year. When
expenditures rather than obligations are reported, we found that the
carryover work that is performed in the following year may not be
included in either year's 50-50 report. For example, an Army depot
official provided us with an estimate of almost $1.5 million that was
expended in fiscal year 2006 on a fiscal year 2005 contract obligation.
The official stated that this portion of the obligation was not
reported in fiscal year 2005 because it was not yet expended, and it
would not be reported in fiscal year 2006 because it was expended on a
fiscal year 2005 obligation. As a result, the private portion of the
service's depot maintenance funds was underreported in the year of the
obligation, while the public portion was overreported. Until depot
maintenance funding obligations are consistently reported, rather than
a combination of expenditures and obligations, inaccurate reporting of
the allocation of depot maintenance funding between the public and
private sectors will continue.
Depot Maintenance Allocations Involving Some Interservice and Direct
Sales Agreements May Not Be Properly Reported:
Because DOD has limited visibility over the allocation of private-and
public-sector funds in some interservice agreements and direct sales
agreements, inaccurate reporting of the depot maintenance workload
allocation may result. Interservice workload agreements refer to work
that is performed by one component for another. OSD guidance requires
that the military departments establish measures to ensure correct
accounting of interservice workloads; however the allocation of these
funds may not always be accurately reported. We found instances where a
military service awarded public depot maintenance work to another
military service, which then contracted out a portion of that workload
to the private sector. The military service awarding the work, as
principal owner of the funds, inaccurately reported this as public
workload because it had not inquired whether all the awarded work was
performed at the public depot. For example, we identified approximately
$172,000 of private-sector work that may have been inaccurately
reported as public-sector work because the principal owner of the funds
did not follow up to determine whether all of the work was performed by
the public depot. While we were unable to fully evaluate the extent of
inaccurate reporting associated with interservice agreements, until the
military departments establish sufficient measures to accurately
account for and report their distribution of depot maintenance
workload, the 50-50 data reported by DOD may continue to be inaccurate.
The limited visibility over direct sales agreements is another reason
why the depot maintenance workload allocation may be inaccurately
reported to Congress. A direct sales agreement involves private vendors
contracting back to a DOD maintenance facility for labor to be
performed by DOD employees. OSD guidance requires that sales of
articles and services by DOD maintenance depots to entities outside of
DOD, when work is accomplished by DOD employees, shall be reported as
public-sector work. However, we found that the reporting of the
distribution of private-and public-sector workload for direct sales
agreements may not be accurate. With a direct sales agreement, there is
no requirement for the private vendor to identify and break out the
contract costs, such as materials and other factors of production, and
allocate them to expenses performed by the private vendor or the public
depot. We found the use of direct sales agreements by the Air Force may
have resulted in an overstatement of private-sector funds, with a
corresponding understatement of public-sector funds. In addition, we
found similar instances in the Army where work performed by the public
sector under a direct sales agreement with a private vendor may have
been misreported as being performed by the private sector. Although we
were unable to fully evaluate the extent to which costs associated with
these types of contract agreements were misreported, until private
vendors break out direct sales agreement costs by the private and
public sectors, DOD's reporting of 50-50 funding allocation may remain
inaccurate.
Other Identified Errors:
We identified several other errors that resulted in inaccurate reported
50-50 data for the Navy and Army. As we reported in previous
years,[Footnote 9] we identified two areas that continue to be excluded
from the Navy's 50-50 reporting. First, the Navy did not report any
depot maintenance work on aircraft carriers performed while nuclear
refueling. Navy officials cited the exclusion of nuclear refueling in
10 U.S.C. § 2460(b)(1) and guidance from the General Counsel's office
in the Department of the Navy as reasons for not including $115 million
in depot maintenance work performed on aircraft carriers while nuclear
refueling. However, we continue to believe that depot repairs not
directly associated with the task of nuclear refueling should be
reported. Second, the Navy, as in prior years, continues to
inconsistently report ship-inactivation activities related to the
servicing and preservation of systems and equipment before ships are
placed in storage or in an inactive status. The Navy did not report
$14.4 million of private-sector allocations for inactivation work on
nonnuclear ships, even though it reported inactivation activities on
nuclear ships. The Navy contends that the work for nuclear ship
inactivation is complex while the work for nonnuclear ships is not. We
continue to maintain that all such depot-level work should be reported,
since the statute and implementing guidance do not make a distinction
based on complexity. In addition, our review of the Marine Corps data
found that it underreported the private-sector total and overreported
the public-sector total by about $1.5 million. This amount was for
depot-level maintenance that was performed in a public depot by
contractor personnel, which was misreported as public sector rather
than private sector.
We also identified several data inaccuracies in the Army's 50-50 data.
For example, one Army depot failed to include approximately $31 million
of private contract work it had outsourced for depot maintenance in its
50-50 report. An Army official said that they had not known that this
type of contract work should be included in 50-50 reporting, but they
now plan to include it in future submissions. Our review also
determined that several Army omissions, totaling approximately $53
million, were due to misinterpretation of the guidance regarding
modifications and remanufacturing. The OSD guidance provides
information about what to include and not to include in reporting depot
maintenance with regard to upgrades, modifications, and
remanufacturing. An Army official acknowledged that there has been
confusion over what to report for 50-50 depot maintenance and stated
the Army is in the draft stages of updating the Army's Depot
Maintenance Workload Distribution Reporting Procedures. In addition,
the Army's 50-50 data contained errors totaling approximately $4
million due to changes in program costs. Finally, our review of the
Army's data found miscellaneous errors, including one instance of
double counting and the transposition of numbers in some entries.
DOD Took Actions to Improve 50-50 Reporting, but Deficiencies Affecting
Data Accuracy Have Persisted:
During our review we noted actions taken by OSD and the military
services that, while not fully implemented, provided some improvement
in the 50-50 reporting process. For example, OSD, in its 50-50
guidance, added a new requirement that the military services include
variance analyses in their submissions of 50-50 data. The services
performed variance analyses; however, these were at a very high level
and provided little detail on how the fiscal year 2005 allocations
differed from the prior year's data. OSD guidance also included a new
requirement that the services maintain records and reports for 50-50
data for at least 2 years, although we did find two instances where
reporting locations could not provide backup documentation for their 50-
50 data. In addition, as in previous years, OSD instructed the services
to use a third-party reviewer, such as a service audit agency, to
validate their data prior to submission. However, due to time
constraints, each service audit agency performed only a limited review
of the service's data. For example, the Air Force directed its audit
service to perform a limited review that focused on two issues.
Additionally, each service headquarters continued to provide some form
of training for its 50-50 reporting activities, although no service
required attendance by all individuals involved in 50-50 data gathering
and reporting. Guidance issued by OSD emphasized, but did not require,
training for individuals involved in the 50-50 process. In one
instance, an official who was responsible for querying the 50-50
information from the service's data systems was unaware that any
training was ever offered for 50-50 reporting.
Our work over the last several years has identified a number of
persistent deficiencies, such as inadequate management attention and
review, which have affected the quality of reported 50-50 data. DOD has
not implemented recommendations we made last year to address these
deficiencies. In prior years' reports, we have identified problems in
50-50 data accuracy attributable to deficiencies in management
attention, controls, and oversight; documentation of procedures and
retention of records; independent validation of data; training for
staff involved in the 50-50 process; and guidance. DOD has taken steps
over the years to improve 50-50 reporting in response to our
recommendations, but we have found that some deficiencies have
persisted, including inadequate management attention and review,
limited review and validation of data by independent third parties, and
inadequate staff training. In our November 2005 report, we concluded
that the recurring nature of deficiencies in 50-50 reporting indicates
a management control weakness that DOD should disclose in its annual
performance and accountability report to Congress.[Footnote 10] By
doing so, DOD would increase the level of management attention and help
focus improvement efforts so that the data provided to Congress are
accurate and complete. DOD partially concurred with this
recommendation, stating that systemic changes to the 50-50 reporting
process had already been made in response to previous recommendations.
DOD did not disclose 50-50 reporting as a management control weakness
in its most recent performance and accountability report. An OSD
official responsible for developing the annual 50-50 report to Congress
noted that completion of the department's Enterprise Transition
Plan[Footnote 11] would result in more accurate 50-50 reporting.
As we have previously reported, DOD's April 2006 report satisfies the
annual mandate as required by 10 U.S.C. § 2466(d). In our November 2005
report, we stated that DOD could enhance the usefulness of its report
for congressional oversight by providing additional information. For
example, we recommended that DOD add information such as variance
analyses that identify significant changes from the prior year's report
and the reasons for these variances, longer term trend analyses, an
explanation of methodologies used to estimate workload allocation
projections for the current and ensuing fiscal years, and plans to
ensure continued compliance with the 50-50 requirement, including
decisions on new weapon systems maintenance workload sourcing that
could be made to support remaining within the 50 percent threshold. DOD
partially concurred with this recommendation and stated that producing
the types of information we suggested would require a massive
undertaking and may be of limited value. We disagreed and, on the basis
of DOD's response, 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.
In the April 2006 report, DOD did not make changes consistent with our
recommendations, nor has Congress acted.
Fiscal Year 2006 and 2007 Projections Are Not Reasonable Due to Data
Inaccuracies:
DOD's reported projections for fiscal years 2006 through 2007 do not
represent reasonable estimates of public-and private-sector depot
maintenance funding allocations, in part because some errors in DOD's
fiscal year 2005 data are carried into the projected years. As shown in
table 2, the Army and the Navy projected that their private-sector
depot maintenance allocations will remain below the 50 percent
limitation for fiscal years 2006 and 2007. The Air Force projected that
it will remain below the limitation for fiscal year 2006, but will
exceed the limitation for fiscal year 2007.
Table 2: DOD's Projected Allocations of Depot Maintenance Funds for
Fiscal Years (FY) 2006 and 2007:
Army;
Private sector: FY 2006: 40.3%;
Private sector: FY 2007: 47.5%;
Public sector: FY 2006: 59.4%;
Public sector: FY 2007: 52.2%;
Exempt: FY 2006: 0.3%;
Exempt: FY 2007: 0.4%.
Navy;
Private sector: FY 2006: 45.1%;
Private sector: FY 2007: 41.2%;
Public sector: FY 2006: 53.1%;
Public sector: FY 2007: 58.8%;
Exempt: FY 2006: 1.8%;
Exempt: FY 2007: 0.0%.
Air Force;
Private sector: FY 2006: 48.4%;
Private sector: FY 2007: 50.2%;
Public sector: FY 2006: 51.6%;
Public sector: FY 2007: 49.6%;
Exempt: FY 2006: 0.1%;
Exempt: FY 2007: 0.2%.
Source: DOD.
Notes: Based on data from DOD's April 6, 2006, reported 50-50 data. The
Department of the Navy includes the Marine Corps.
[End of table]
Errors similar to those we identified in fiscal year 2005 reported data
could affect these projections, as the Air Force is moving closer to
the threshold for private-sector funding in fiscal year 2006 (48.4
percent) and beyond the threshold in fiscal year 2007 (50.2 percent).
If the adjustments we made to the Army's fiscal year 2005 data--
increasing the private-sector percentage by about 0.6 percentage
points--are carried forward into fiscal year 2007 projections, it could
cause the Army to come within 2 percent of the 50 percent limitation on
contracting for depot-level maintenance and repair. When spending
projections reflect data within 2 percent of the 50 percent limitation
in a fiscal year, OSD guidance directs the components to submit a plan
that identifies actions to be taken to ensure continued compliance.
This plan shall include identification of decisions on candidate
maintenance workload sourcing that could be made to support remaining
within compliance with the 50 percent limitation. In addition, we found
an error of approximately $1.6 million in the Army's fiscal year 2006
projections, which further limits the accuracy of reported projections.
Furthermore, DOD's projected fiscal year 2006 and fiscal year 2007
allocations are based on the President's budget numbers and often did
not include supplemental funds, which can change the percentage
allocations. However, in the case of some Air Force depot projections,
supplemental funds are included in the projections if the amounts are
already known. These limitations affect the reasonableness of the data
reported as projections of future funding allocations.
While the Army and Navy project compliance with the 50-50 requirement
through fiscal year 2007, the Air Force's fiscal year 2006 projections
are within 2 percent of the 50 percent limitation and its fiscal year
2007 projections exceed the 50 percent limitation by 0.2 percent. To
avoid breaching the 50 percent threshold, the Air Force is implementing
a plan to ensure compliance in fiscal years 2007 through 2010. Under
this plan, the Air Force is identifying and evaluating candidate weapon
system programs for shifting maintenance workload from the private
sector to the public sector. The Air Force has committed resources and
approved shifting some maintenance associated with the F-100 engine
beginning in fiscal year 2006. The Air Force plan shows that a total
workload of $68 million associated with the F-100 engine could be
shifted to the public sector, enabling the Air Force to achieve
compliance with the 50-50 requirement in fiscal year 2007. The Air
Force is also evaluating workload associated with the KC-135 aircraft,
the C-17 aircraft, the B-2 aircraft, the F-119 engine, and the F-117
engine that may be shifted to the public sector.
Conclusions:
The errors we identified in DOD's April 2006 50-50 report--while not
extensive--are indicative of the long-standing problems DOD has
encountered in providing accurate depot maintenance funding allocation
data to Congress. We have previously observed that the usefulness of
the annual 50-50 report to Congress is limited because of data
reliability concerns. Our prior reports identified data inaccuracies
and recommended corrective actions aimed at addressing deficiencies
that limited the accuracy of 50-50 reporting. In addition, we have
recommended actions that Congress could take to improve the reliability
and usefulness of DOD's annual report. Our current review shows that
while DOD has taken some additional actions to improve the quality of
reported data for fiscal year 2005, it has not fully addressed the
persistent deficiencies that have limited 50-50 data accuracy in the
past. DOD's report presented an inaccurate measure of the balance of
funding between the public and private sectors due to inconsistencies
in reporting expenditures rather than obligations, and inaccurate
distribution of reporting of allocations from interservice and direct
sales agreements. Without consistent reporting of depot maintenance
funding obligations, rather than a combination of expenditures and
obligations, inaccurate reporting of the funding allocation between the
public and private sectors will continue. Moreover, without accurate
reporting of the allocation of depot maintenance workload performed by
the private and public sectors under interservice and direct sales
agreements, the 50-50 data reported by DOD will continue to be
inaccurate.
Recommendations for Executive Action:
To improve the consistency and accuracy of depot maintenance funding
allocation data in DOD's annual 50-50 report to Congress, we recommend
that the Secretary of Defense take the following two actions:
* Direct the Secretaries of the Army, Navy, and Air Force and the
Commandant of the Marine Corps to follow OSD guidance and report
funding obligations rather than expenditures.
* Direct the Under Secretary of Defense for Acquisition, Technology,
and Logistics, in conjunction with the Secretaries of the Army, Navy,
and Air Force, and the Commandant of the Marine Corps, to establish
measures to ensure proper accounting of the allocation of interservice
workloads between the public and private sectors.
Agency Comments and Our Evaluation:
In commenting on a draft of this report, DOD concurred with our
recommendations. Regarding our recommendation that the military
services follow guidance and report funding obligations rather than
expenditures, DOD stated that it will be specific in its guidance on 50-
50 reporting and require organizations to report obligations rather
than expenditures. Also, DOD stated that Army guidance and training
will address our findings. Consistent with our recommendation, we
believe that the Air Force, Navy, and Marine Corps also should take
appropriate steps to ensure that obligations are reported. Regarding
our recommendation that measures be established to ensure proper
accounting of the allocation of interservice workloads, DOD said that
its guidance will require component audit agencies to specifically
validate interservice data prior to submitting the 50-50 report to the
department. Validation of interservice data would meet the intent of
our recommendation.
DOD also stated that it did not agree with our adjustments to the work
accomplished during the nuclear refueling of aircraft carriers and for
inactivation work on nonnuclear ships. DOD stated that all costs during
nuclear aircraft carrier refueling are properly excluded and
conventional ship inactivation workload is not considered depot-level
maintenance. We have had a long-standing disagreement with DOD on
including funding for these two areas in its 50-50 report. For the past
several years we have maintained that DOD should include these funds,
while DOD has disagreed. Our reasons for including these adjustments
are discussed in this report.
DOD's written comments are reprinted in appendix III. DOD also provided
technical comments which we have incorporated as appropriate.
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 staffs 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]
Appendix I: Scope and Methodology:
To determine whether the military departments provided accurate data in
reporting depot maintenance funding allocations and whether they met
the 50-50 requirement for fiscal year 2005, we reviewed military
services' procedures and internal management controls for collecting
and reporting their depot maintenance allocations. We discussed with
key officials the process used to identify and report depot maintenance
workload allocation between the public and private sectors. We selected
a nonprobability sample of reported 50-50 obligations totaling $2.7
billion of the reported $26.4 billion reported in the Department of
Defense's (DOD) report to Congress on depot maintenance funding
allocation. We based our sample on previously identified areas of
concern, varying program amounts, and selected locations for our site
visits. We also contacted service audit agencies and third-party
officials at service headquarters to discuss their verification review
of the fiscal year 2005 50-50 obligation data. We did not conduct a
review of all reported 50-50 data; therefore, there may be additional
errors, omissions, and inconsistencies that were not identified.
Because we used a nonprobability sample, our results cannot be
projected.
We visited departmental headquarters, major commands, and selected
maintenance activities. We interviewed service officials responsible
for data collection, and we reviewed the reported data for accuracy and
completeness. We compared reported amounts to funding documents,
contracts, and accounting reports for selected programs for all the
military services, but we placed greater emphasis on the Army data
because the Army was close to the 50 percent threshold for fiscal year
2005.
To determine the actions taken by the Office of the Secretary of
Defense (OSD) and military departments to improve the quality of the
reported 50-50 data and implementation of GAO's prior year's
recommendations, we reviewed the results of studies conducted by the
service audit agencies and reconciled areas of concern identified
during prior years' audits. We also reviewed prior years'
recommendations to find out whether known problem areas were being
addressed and resolved. We discussed with officials actions they took
to improve 50-50 data gathering and reporting processes.
To determine the reasonableness of fiscal year 2006 and 2007
projections, we discussed with service officials how they developed
their projections and whether historical funding information and known
increases in funding were included in their projections. Our analysis
of the data for fiscal years 2006 and 2007 was limited because 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 allocation of depot
maintenance funds between the public and private sectors. We discussed
with Air Force officials reasons for the increase in their fiscal year
2007 projection and their plans to avoid breaching the 50 percent
limitation.
In accomplishing our objectives, 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, Ala; Red River Army Depot
in Texarkana, Tex; Army Material Command in Alexandria, Va; Tank-
automotive and Armaments Command (TACOM) Life Cycle Management Command
in Warren, Mi; Naval Air Systems Command in Patuxent River, Md; U.S.
Fleet Forces Command in Norfolk, Va; Air Force Materiel Command in
Wright-Patterson Air Force Base, Oh; Marine Corps Logistics Command in
Albany, Ga; and Army, Navy, and Air Force Audit Services. We conducted
our work from March 2006 to September 2006 in accordance with generally
accepted government auditing standards.
[End of section]
Appendix II: GAO Adjustments to Army Fiscal Year 2005 Reported Data:
Our review of the Army's data supporting the Department of Defense's
(DOD) fiscal year 2005 50-50 report identified the following
adjustments.
Table 3: Adjustments to Army Fiscal Year 2005 Reported Data:
Site: Anniston Army Depot;
Public adjustment (+/-): $35,779.00;
Private adjustment (+/-): -$35,779.00;
Description: Contract amount overreported.
Site: Anniston Army Depot;
Public adjustment (+/-): $33,212.93;
Private adjustment (+/-): -$33,212.93;
Description: Contract amount overreported.
Site: Red River Army Depot;
Public adjustment (+/-): -$1,482,178.10;
Private adjustment (+/- ): $1,482,178.10;
Description: Private carryover work misreported.
Site: Red River Army Depot;
Public adjustment (+/-): -$30,823,990.55;
Private adjustment (+/
-): Site: $30,823,990.55;
Description: Outsourced contract work misreported.
Site: Red River Army Depot;
Public adjustment (+/-): $245,011.00;
Private adjustment (+/-): -$245,011.00;
Description: Miscellaneous math errors in report.
Site: U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command;
Public adjustment (+/-): $742,490.00;
Private adjustment (+/-): [Empty];
Description: Reset work underreported due to changes in program costs.
Site: U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command;
Public adjustment (+/-): [Empty];
Private adjustment (+/-): -$5,156,575.00;
Description: Reset work overreported due to double counting.
Site: U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command;
Public adjustment (+/-): $11,170,845.00;
Private adjustment (+/-): [Empty];
Description: M9 Armored Combat Earthmover (M9 ACE) work unreported due
to not reporting all applicable amounts.
Site: U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command;
Public adjustment(+/-): [empty];
Private adjustment (+/-): $39,445,735.53;
Description: Heavy Expanded Mobility Tactical Truck (HEMTT) work
unreported due to guidance misinterpretation.
Site: U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command;
Public adjustment (+/-): -$127,738.97;
Private adjustment (+/-): [Empty];
Description: High Mobility Multipurpose Wheeled Vehicle (HMMWV) work
overreported due to changes in program costs.
Site: U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command;
Public adjustment(+/-): [Empty];
Private adjustment (+/-): $1,848,952.51;
Description: High Mobility Multipurpose Wheeled Vehicle (HMMWV) work
underreported due to changes in program costs.
Site: U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command;
Public adjustment (+/-): $13,953,000.00;
Private adjustment (+/- ): [Empty];
Description: Bradley work unreported due to guidance misinterpretation.
Site: U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command;
Public adjustment (+/-): -$500,580.00;
Private adjustment (+/-): [Empty];
Description: Abrams work overreported due to changes in program costs.
Site: U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command;
Public adjustment (+/-): $504,278.50;
Private adjustment (+/-): [Empty];
Description: Bradley work underreported due to changes in program
costs.
Site: U.S. Army Tank-automotive and Armaments Command (TACOM) Life
Cycle Management Command;
Public adjustment (+/-): $302,546.90;
Private adjustment (+/-): [Empty];
Description: Bradley work underreported due to changes in program
costs.
Total Army adjustments;
Public adjustment (+/-): -$5,947,324.19;
Private adjustment (+/-): $68,130,278.66;
Description: [Empty].
Source: GAO analysis of DOD data.
[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 16, 2006:
Mr. William M. Solis:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Solis:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-07-126, `Depot Maintenance: Actions Needed to Provide More
Consistent Funding Allocation Data to Congress,' dated October 13, 2006
(GAO Code 350818).
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:
* Performance of variance analyses at each reporting activity level to
preclude report omissions, data transcription errors, and correct over-
reported data.
* Third party review of Service data prior to submission to OSD.
As in previous years, the DoD does not agree with the two GAO
adjustments to the work accomplished during the nuclear refueling of
aircraft carriers, and private-sector allocations for inactivation work
on non-nuclear ships. As reported in previous years, DoD states that
all costs during nuclear aircraft carrier refueling are properly
excluded, and conventional ship inactivation workload is not considered
depot level maintenance, therefore properly excluded, and not omitted.
The Department's comments on the GAO recommendations are enclosed.
Sincerely,
Signed by: Jack Bell:
Enclosure:
As stated:
GAO Draft Report -Dated October 13, 2006 GAO Code 3508181GAO-07-126:
"Depot Maintenance: Actions Needed to Provide More Consistent Funding
Allocation Data to Congress"
Department Of Defense Comments To The Recommendations:
Recommendation 1: The GAO recommended that the Secretary of Defense
direct the Secretaries of the Army, Navy, Air Force and the Commandant
of the Marine Corps to follow OSD guidance and report funding
obligations rather than expenditures.
DOD Response: Concur. The DoD has made steady progress over the years
in improving the 50-50 reporting process and quality of data reported
to the Congress. To further improve this quality the data call guidance
from the Secretary of Defense for Distribution of DoD Depot Maintenance
Workloads will be specific to require obligations rather than
expenditures, and the Army guidance and training will specifically
address the GAO findings.
Recommendation 2: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology, and
Logistics in conjunction with the Secretaries of the Army, Navy, Air
Force, and the Commandant of the Marine Corps, to establish measures to
ensure proper accounting of the allocation of interservice workloads
between the public and private sectors.
DOD Response: Concur. The data call guidance from the Secretary of
Defense for Distribution of DoD Depot Maintenance Workloads will
require DoD component audit agencies to specifically validate
interservice data prior to submission to the department for the next
50150 report to Congress.
[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; Connie W. Sawyer, Jr; Janine Cantin; Clara Mejstrik;
Stephanie Moriarty; and Renee Brown.
[End of section]
Related GAO Products:
Depot Maintenance: Persistent Deficiencies Limit Accuracy and
Usefulness of DOD's Funding Allocation Data Reported to Congress. GAO-
06-88. Washington, D.C.: November 18, 2005.
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.
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.
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 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: Workload Allocation Reporting Improved, but
Lingering Problems Remain. GAO/NSIAD-99-154. Washington, D.C.: July 13,
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: Information on Public and Private Sector
Workload Allocations. GAO/NSIAD-98-41. Washington, D.C.: January 20,
1998.
Defense Depot Maintenance: More Comprehensive and Consistent Workload
Data Needed for Decisionmakers. GAO/NSIAD-96-166. Washington, D.C.: May
21, 1996.
FOOTNOTES
[1] Depot maintenance is the highest level of maintenance within DOD
and generally refers to major maintenance and repair actions such as
the overhauling, upgrading, or rebuilding of parts, assemblies, or
subassemblies.
[2] This limitation is sometimes referred to as the "50-50"
requirement, although the limitation applies only to the allocation of
funds for work that may be performed by nonfederal government
personnel.
[3] The Marine Corps is part of the Department of the Navy.
[4] A list of related GAO products is provided at the end of this
report.
[5] DOD has had long-standing weaknesses in its financial management
that affect its ability to produce auditable financial information as
well as provide accurate and timely information for management and
Congress to use in making informed decisions. We have previously
reported on these problems and have identified DOD financial management
as one of the federal government's high-risk programs. See GAO, High-
Risk Series: An Update, GAO-05-207 (Washington, D.C.: January 2005).
[6] Section 2474(a) states that the Secretary concerned (or the
Secretary of Defense in the case of a defense agency) shall designate
depot-level activities of the military departments and defense agencies
(other than facilities approved for closure or major realignment under
the Defense Base Closure and Realignment Act of 1990) as Centers of
Industrial and Technical Excellence in their recognized core
competencies. The Secretary of Defense was also directed to establish a
policy to encourage the secretary of each military department and the
head of each defense agency to reengineer industrial processes and
adopt best business practices at the Centers of Industrial and
Technical Excellence in connection with their core competency
requirements so as to serve as recognized leaders in their core
competencies.
[7] For a recent discussion of weaknesses in DOD financial management,
see GAO, Department of Defense: Sustained Leadership Is Critical to
Effective Financial and Business Management Transformation, GAO-06-
1006T (Washington, D.C.: Aug. 3, 2006).
[8] Although 10 U.S.C. § 2466(d) specifies that the Secretary of
Defense report the percentage of funds referred to in § 2466(a) that
were expended in the preceding fiscal year and projected to be expended
in the current and ensuing fiscal years, DOD's past and current 50-50
reports are generally based on obligation data. 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.
[9] For the two most recent reports, see GAO, Depot Maintenance:
Persistent Deficiencies Limit Accuracy and Usefulness of DOD's Funding
Allocation Data Reported to Congress, GAO-06-88 (Washington, D.C.: Nov.
18, 2005), and Depot Maintenance: DOD Needs Plan to Ensure Compliance
with Public-and Private-Sector Funding Allocation, GAO-04-871
(Washington, D.C.: Sept. 29, 2004).
[10] For a discussion of this issue, see GAO, Depot Maintenance:
Persistent Deficiencies Limit Accuracy and Usefulness of DOD's Funding
Allocation Data Reported to Congress, GAO-06-88 (Washington, D.C.: Nov.
18, 2005).
[11] In September 2005, DOD issued the Enterprise Transition Plan as
part of its program to modernize business systems.
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