DOD Consulting Services

Congress has had long-standing concerns about the accuracy and the reliability of the costs reported by the Pentagon for consulting services, also known as advisory and assistance services. In a June 1997 report (GAO/NSIAD-97-166R), GAO noted that although the President's budget had reported Defense Department (DOD) expenditures of $3 billion for these services, GAO had identified $12 billion of DOD expenditures that could be advisory and assistance services. This report provides additional information on DOD's underreporting of advisory and assistance service costs and whether costs for these services may be included in a miscellaneous budget category. GAO also summarizes earlier audit reports and studies on DOD's reporting of these costs.

GAO noted that: (1) DOD's directives and instructions require increased scrutiny of advisory and assistance services and affirm the need for enhanced management and oversight of these services; (2) despite DOD's guidance to properly identify and report advisory and assistance services costs, GAO's analysis of selected contract actions shows that costs for these services are being reported as miscellaneous contract services; (3) a limited analysis of costs included in the Army's miscellaneous budget category showed that some advisory and assistance costs were erroneously shown as miscellaneous costs; (4) Army officials agreed that these costs should have been recorded as advisory and assistance services costs; (5) the Navy's and the Air Force's accounting systems did not have the capability of generating information on contracts included in the miscellaneous budget category; (6) however, discussions with Navy officials and prior Air Force audits indicate similar underreporting concerns; (7) DOD officials also indicated that there is a tendency to report costs for these services in the miscellaneous category to avoid the closer scrutiny and spending limitations on contract services identified as advisory and assistance services; (8) DOD-wide problems with the management of advisory and assistance services, including accurate identification and reporting of costs, have been documented since 1985; (9) despite congressional action requiring detailed reporting of advisory and assistance services costs, problems continue; and (10) officials in the DOD Comptroller's office stated that there is no incentive for accurate reporting of advisory and assistance services costs due to past congressional funding cuts in this area.