[Congressional Record (Bound Edition), Volume 145 (1999), Part 14]
[Senate]
[Pages 19855-19859]
[From the U.S. Government Publishing Office, www.gpo.gov]



                   CHEMICAL DEMILITARIZATION FUNDING

  Mr. BINGAMAN. Mr. President, I rise to highlight an issue of growing 
concern, namely funding for the U.S. chemical demilitarization program. 
My concern is that the Congress has been cutting the funding required 
to eliminate our stockpile of chemical weapons and agents, despite the 
fact that we have a treaty commitment under the Chemical Weapons 
Convention to destroy that stockpile by April 24, 2007.
  Simply put, if we in Congress do not provide the funds needed to meet 
that treaty commitment in time, we will be forcing the United States to 
violate an arms control treaty that we in the Senate approved with our 
vote of advise and consent to ratification.
  Mr. President, this is a trend we should not be continuing. In fact, 
we should be providing the funds needed to ensure that the United 
States can and does meet its treaty obligations for all treaties to 
which we are an adherent, including the Chemical Weapons Convention.
  Given the Senate's unique constitutional role in providing advice and 
consent to the ratification of treaties, I would hope this proposition 
would be self-evident to all our colleagues. Nonetheless, Mr. 
President, the Conference Report on the Military Construction 
Appropriations Bill, H.R. 2465, contains significant reductions from 
the funding requested for military construction of chemical 
demilitarization facilities needed to meet our treaty obligations.
  The program is cut by $93 million dollars in fiscal year 2000 funds, 
including a reduction of $15 million dollars for planning and design 
work. This appears to be a technical mistake, Mr. President, since the 
budget request did not contain any funds for planning and design in the 
military construction projects for chemical demilitarization. This is 
deeply disappointing since neither appropriations subcommittee had 
reduced the military construction funding in their respective bills. On 
the contrary, each subcommittee had provided full funding of the budget 
request for military construction for the chemical demilitarization 
program. The conference, however, chose to ignore that and cut funding.
  If, as I suspect, those funding reductions would jeopardize our 
ability to meet our CWC treaty obligations, I hope the Defense 
Department will take some remedial action, such as a reprogramming or a 
supplemental request to ensure that the necessary funds are available 
to do the work needed to ensure that we remain compliant with the 
treaty. I also hope that the Defense Appropriations Conference will 
provide the necessary funding for this program since there are 
reductions made by both House and Senate subcommittees that I believe 
are not warranted, and are based on incomplete information.
  Mr. President, there was a preliminary assessment conducted by the 
Defense Department's Comptroller office earlier this year that looked 
at the rate of obligations and disbursements for the chemical 
demilitarization program. Unfortunately, before that assessment was 
completed, an internal DoD memorandum was leaked with preliminary and 
incomplete information. That internal memo was the basis for much 
concern among various congressional committees. The problem is that 
some of the Committees acted on the basis of that incomplete 
information, and it is now clear that the preliminary information was 
incorrect. Consequently, Congress cut funds for the chemical 
demilitarization program based on faulty information.
  Since that internal memo was leaked, Congress has been looking into

[[Page 19856]]

the financial management of the chemical demilitarization program, and 
we have been provided with more complete and accurate information. This 
information makes it clear that we should not be cutting the program 
funding based on the earlier information.
  The Armed Services Committee, on which I serve as the Ranking Member 
of the Emerging Threats subcommittee that has responsibility for this 
program, asked the General Accounting Office to conduct a preliminary 
review of the financial management of the program. Their conclusion was 
that the funds requested are all needed and that there are plans for 
spending them at a reasonable rate. In other words, Mr. President, the 
worries about slow obligation or expenditure rates are not justified, 
and there is a good explanation for why the funds are obligated and 
expended at their current pace. In my view, this means that Congress 
should not be cutting the funds based on the incorrect information, but 
should provide the needed funding.
  The General Accounting Office sent the results of their preliminary 
review to the Armed Services Committee in a letter dated July 29, 1999, 
and I will ask unanimous consent that the letter be included in the 
Record at the conclusion of my remarks. In addition, Mr. President, the 
Office of the Comptroller of the Department of Defense conducted a 
thorough review of the funding status of the chemical demilitarization 
program to review unobligated and unexpended balances. The results of 
that review have recently been submitted to Congress. That review 
indicates that about $88 million dollars could conceivably be deferred 
until next fiscal year, but that such a deferral would entail risks to 
our ability to meet the CWC deadline, and ``should only be made after 
serious consideration.''
  In other words, Mr. President, the Defense Department Comptroller's 
office did not find the kinds of problems that had been suggested by 
the earlier preliminary internal review, and did not find excess funds 
suggested by that partial review. The review noted that ``without 
exception, the budgeted funds are needed to satisfy valid chemical 
demilitarization requirements. Should any funds be removed from FY 
2000, the funds will need to be added back in the future budget.''
  The Deputy Secretary of Defense, John Hamre, sent a letter to the 
congressional defense committees dated August 3, 1999, in which he 
explains the review and includes the executive summary of the 
Comptroller report. I will ask unanimous consent at the conclusion of 
my remarks that Secretary Hamre's letter and the enclosure be included 
in the Record.
  Mr. President, the only conclusion I can draw from this is that 
Congress should not cut the funding for chemical demilitarization to 
the extent the Appropriations Committees did on the basis of the 
preliminary and partial information contained in the leaked internal 
memo. Instead, the Congress should work with the Defense Department to 
determine the correct level of funding needed to comply with the treaty 
and provide it.
  Furthermore, since the completion of the Comptroller's review, the 
Defense Department has agreed to conduct an evaluation of three 
additional alternative technologies for chemical demilitarization, as 
sought in the Senate Military Construction Appropriations bill. This 
evaluation alone will cost some $40 million in FY 2000 funds, so that 
means that there is even less money that can be considered for 
deferral.
  Mr. President, I addressed the Senate on the issue of the chemical 
demilitarization program when the Military Construction Appropriations 
bill, S. 1205, was before the Senate in June. At that time, I expressed 
my concern that the Senate bill had restrictions that could jeopardize 
our ability to meet the CWC deadline. I am glad to say that since then, 
the Defense Department has reached an understanding with the 
Appropriations Committee on a plan to evaluate the three additional 
alternative technologies without blocking or delaying construction 
activity. I am pleased to see this agreement and I commend all those 
who helped to achieve it, particularly the senior Senator from 
Kentucky, Senator McConnell.
  Mr. President, I know we take our treaty responsibilities very 
seriously here whenever a treaty is sent to the Senate for advice and 
consent to ratification. I know that was the case when the Chemical 
Weapons Convention was approved by more than three-quarters of the 
Senate. I hope we will take as seriously our obligation to provide the 
funds necessary to meet our treaty obligations. In this case, that 
means providing necessary funds for the chemical demilitarization 
program.
  Mr. President, I now ask unanimous consent that the documents I 
referred to previously, be included in the Record at the conclusion of 
my remarks and I yield the floor.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                  Deputy Secretary of Defense,

                                   Washington, DC, August 3, 1999.
     Hon. John W. Warner,
     Chairman, Committee on Armed Services,
     U.S. Senate, Washington, DC.
       Dear Mr. Chairman: You are aware, I am sure, of the 
     extensive efforts we have been taking to destroy all of our 
     chemical weapons by April 29, 2007, the date that ensures 
     compliance with the Chemical Weapons Convention (CWC). Our 
     Chemical Demilitarization program, however, has suffered from 
     a lack of programmatic and technical stability.
       One result of this instability has been that funds were not 
     used at the rate anticipated at the time budgets were 
     prepared, causing an unexpended balance to accrue. A 
     preliminary review of the current status of this balance was 
     made earlier this year. This assessment indicated the need 
     for a more detailed review, and as a result, the Office of 
     the Under Secretary of Defense (Comptroller) recently 
     conducted a thorough analysis of the unexpended balances.
       Enclosed is the Executive Summary of the resulting report, 
     the full details of which have been provided to your staff. 
     At the bottom line, the report indicates that about $88 
     million could be deferred from the FY 2000 budget to the FY 
     2001 budget. This action, however, would eliminate some of 
     the program manager's ability to make necessary program 
     adjustments without jeopardizing CWC compliance.
       Since the completion of the report, we have agreed to 
     conduct evaluations of the remaining alternative technologies 
     for destruction of chemical weapons. This effort will require 
     an additional $40 million in FY 2000, reducing to about $48 
     million the amount that could be deferred to FY 2001.
       I am sure you share my concern about meeting the deadline 
     for completing destruction of our chemical weapons stockpile, 
     and ask that you carefully consider this report as you 
     complete action on the FY 2000 budget.
       A similar letter is being sent to the Chairman and Ranking 
     Member of the other Defense Oversight Committees.
           Sincerely,
                                                    John J. Hamre.
       Enclosure.

                           Executive Summary

       The Chemical Demilitarization (Chem Demil) program includes 
     both an acquisition and an operational component with the 
     goal of destroying a variety of chemical warfare agents 
     residing in weapons (all-up-rounds), storage containers, and 
     at production and storage facilities.
       The program's schedule and funding has been driven by the 
     requirement to eliminate the existing stockpile and 
     associated components within the framework of the Chemical 
     Weapons Convention (CWC) treaty. The treaty stipulates that 
     all stockpiled agents must be destroyed by April 29, 2007.
       The Chem Demil program has suffered from a lack of 
     programmatic and technical stability, in part due to 
     continuing concern and skepticism about the safety of the 
     incineration process used by the Army to destroy the chemical 
     agents.
       As a result, the program office has regularly requested 
     schedule and funding realignments.
       Two of the nine planned destruction facilities are 
     operational. Fourteen percent of the stockpiled chemical 
     agents have been destroyed as of June 23, 1999. At this time, 
     no firm plan or decision regarding nonstockpiled buried 
     chemical agents has been made. Furthermore, the final 
     disposition of the destruction facilities has yet to be 
     approved by the Environmental Protection Agency.
       There is considerable schedule and cost risk with the 
     Assembled Chemical Weapons Assessment Program at both the 
     Pueblo, Colorado and Blue Grass, Kentucky facilities. The 
     technology to be used to dispose of the chemical agents has 
     not been determined. Three technical proposals for 
     alternative disposal methods have been demonstrated to the 
     program office. Evaluation of the technologies by the 
     government is currently ongoing.

[[Page 19857]]

       Information provided by the Department of the Army and the 
     Defense Finance and Accounting Service (DFAS) indicated that 
     as of February 1999, approximately $1 billion of current and 
     prior year Operation and Maintenance (O&M), Procurement, and 
     Research Development, Testing & Evaluation (RDT&E) funds were 
     unexpended. A preliminary review of the cause of the large 
     unexpended balances was conducted in February 1999, which 
     suggested a need for a more detailed review.
       The current review is based on more complete program 
     execution data (through May 30th) and provides a more 
     accurate assessment of the reasons for the large unexpended 
     balances. Out of the $3.2 billion appropriated between FY 
     1993 and FY 1999, $845.6 million (26 percent) remain 
     unexpended. However, a detailed evaluation of the program 
     execution history indicates that the low expenditure rates 
     for the most part have been beyond the influence and control 
     of the program office.
       Neither review uncovered an instance involving inadequate 
     program management controls, or gross violation of 
     departmental financial regulations.
       In this review, the cause of the under execution of the 
     prior and current year program has been categorized into 
     seven causes:

                          [Dollars in millions]
 
                                                              Percentage
                                                               of amount
                                                              unexpended
 
Forward Financing................................       $5.8           1
Accounting Recording Lag.........................        120  ..........
Administrative/In Progress.......................      224.7          44
FEMA/State Processing............................       26.8  ..........
Awaiting Permit Issuance.........................      331.7  ..........
Technical Restructure Delay......................       41.1          55
Contracting Delays...............................       95.5  ..........
 

       The majority of the unexpended balance was budgeted to meet 
     schedules that seemed reasonable when the budget was built. 
     Fully 44 percent of the balance is associated with work that 
     either has occurred for which the payment has not been 
     recorded or work that is yet to occur but is on its planned 
     schedule. None of these funds should be considered for 
     deferral.
       Only 1 percent is associated with classical forward 
     financing and should be considered for deferral.
       The balance of unexpended funds reflect contracting 
     regulatory or technical delays that were largely beyond the 
     control of the program manager. The paper carefully reviews 
     each of these by site. It accepts the contractor's estimate 
     of the cost of work to be performed during FY 2000, because 
     the contractor is in the best position to judge what can be 
     accomplished in FY 2000 and he must be encouraged to 
     accomplish as much as possible if the Department is to 
     achieve the treaty compliance date. The paper then evaluates 
     remaining unexpended balances using a standard established in 
     prior execution reviews.
       As one reviews this program, the overriding concern is that 
     the Department do everything in its power to achieve the 
     legislated target date of April 29, 2007, for completion of 
     chemical agent destruction. While this analysis indicates 
     that $87.9 million may be deferrable into FY 2001, such a 
     deferral should only be made after serious consideration 
     because it will take away some of the program manager's 
     ability to take additional steps to meet the treaty 
     compliance date.
       It should also be noted that without exception the budgeted 
     funds are needed to satisfy valid chemical demilitarization 
     requirements. Should any funds be removed from FY 2000, the 
     funds will need to be added back in a future budget.


                 events since completion of the report

       The Department has agreed to conduct evaluations of the 
     three additional alternative technologies (Assembled Chemical 
     Weapons Assessment Program). This will require an additional 
     $40.0 million in FY 2000 and could be financed with funds 
     considered for deferral in this report, which would reduce 
     the total to be considered for deferral from $87.9 million to 
     $47.9 million.
                                  ____



                                                           GAO

                                    Washington, DC, July 29, 1999.
     Subject: Chemical Demilitarization: Funding Status of the 
         Chemical Demilitarization Program.

     Hon. John W. Warner,
     Chairman.

     Hon. Carl Levin,
     Ranking Minority Member,
     Committee on Armed Services, U.S. Senate.
       Since the late 1980's, the Department of Defense (DOD) has 
     been actively pursuing a program to destroy the U.S. 
     stockpile of obsolete chemical agents and munitions. DOD has 
     reported that this program, known as the Chemical 
     Demilitarization Program, is estimated to cost $15 billion 
     through 2007; approximately $6.2 billion has been 
     appropriated for the program from fiscal year 1988 through 
     fiscal year 1999. Because of the lethality of chemical 
     weapons and environmental concerns associated with proposed 
     disposal methods, the program has been controversial from the 
     beginning and has experienced delays, cost increases, and 
     management weaknesses.
       The Chemical Demilitarization Program is funded through 
     operation and maintenance (O&M), procurement, research and 
     development (R&D), and military construction appropriations, 
     with each being available for use for varying periods of 
     time.\1\ Concerns were recently raised within DOD that the 
     program had built up significant levels of funding in excess 
     of spending plans. This led to concerns that the program's 
     fiscal year 2000 budget request might be overstating funding 
     requirements. As requested, we reviewed the extent to which 
     the program retains significant levels of prior years' 
     appropriations in excess of spending plans. Accordingly, this 
     report summarizes the results of a briefing we provided to 
     your office on July 23, 1999, in which we reported our 
     preliminary findings concerning (1) amounts of reported 
     unallocated appropriations and unliquidated obligations from 
     prior years' appropriations, (2) the extent to which more 
     obligations have been liquidated than previously reported, 
     (3) primary reasons for the reported unliquidated 
     obligations, and (4) actions that have affected or will 
     affect unliquidated obligations.\2\ We except to analyze the 
     program more extensively in a more detailed review. As part 
     of that review, we will examine program costs, spending 
     plans, schedules, and other management issues.


                            results in brief

       For the selected Chemical Demilitarization Program 
     appropriation accounts reviewed, we did not find sizable 
     amounts of unallocated appropriations and unliquidated 
     obligations from prior years that appear to be available for 
     other uses. There were sizable unliquidated obligations 
     reported from prior years. However, based on our review of 
     $382.1 million (62.6 percent) of the reported $610.5 million 
     in unliquidated obligations from the Chemical 
     Demilitarization Program for fiscal years 1992-98, we found 
     that $150.6 million (39.4 percent of the sample) had already 
     been liquidated but not recorded in Defense Finance and 
     Accounting Service (DFAS) budget execution reports. Further, 
     the remaining $231.5 million in unliquidated obligations in 
     our sample was scheduled to be liquidated by November 2000. 
     Reported unliquidated obligations were caused by a number of 
     factors such as delays in obtaining environmental permits and 
     technical delays. At the same time, we identified a number of 
     factors that have affected or will have the effect of 
     reducing previously identified unliquidated obligations. The 
     program has a reported $155.7 million in appropriations not 
     yet allocated or obligated to specific program areas. 
     However, nearly this entire amount ($145.2 million) involves 
     current year appropriations that can obligated and liquidated 
     over several years.


                               background

       In 1985, the Congress passed Public Law 99-145 directing 
     the Army to destroy the U.S. stockpile of obsolete chemical 
     agents and munitions. On April 25, 1997, the United States 
     ratified the Chemical Weapons Convention, an international 
     treaty banning the development, production, stockpiling, and 
     use of chemical weapons. The Convention commits member 
     nations to dispose of (1) unitary chemical weapons stockpile, 
     binary chemical weapons, recovered chemical weapons, and 
     former chemical weapon production facilities by April 29, 
     2007, and (2) miscellaneous chemical warfare materiel by 
     April 29, 2002.\3\
       To comply with congressional direction and meet the mandate 
     of the Chemical Weapons Convention, the Army established the 
     Chemical Demilitarization Program and developed a plan to 
     incinerate the agents and munitions on site in specially 
     designed facilities. The Program Manager for Chemical 
     Demilitarization in the Edgewood area of Aberdeen Proving 
     Ground, Maryland, manages the daily operations of the 
     program. The Army currently projects this program will cost 
     $15 billion to implement through 2007; approximately $6.2 
     billion had been appropriated from 1988 through fiscal year 
     1999.\4\
       Since its beginning, the Chemical Demilitarization Program 
     has been beset by controversy over disposal methods; delays 
     in obtaining needed federal, state, and local environmental 
     permits and other approvals; and increasing costs. We have 
     previously reported on these problems as well as problems 
     with management weaknesses in the program and disagreements 
     over the respective roles and responsibilities among federal, 
     state, and local entities associated with the program. For 
     example, in 1995, we reported that program officials lacked 
     accurate financial information to identify how funds were 
     spent and ensure that program goals were achieved.\5\ A list 
     of related GAO products is included at the end of this 
     report.
       Concerns over chemical demilitarization financial 
     management issues surfaced again in February 1999, following 
     a quick program review summarized in internal memorandums 
     prepared by an official in the Office of the DOD Comptroller. 
     The memorandums suggested that significant portions of prior 
     years' O&M, procurement, and R&D appropriations obligated by 
     specific Military

[[Page 19858]]

     Inter-departmental Purchase Requests (MIPR) \6\ remained 
     unliquidated, and could be deobligated and reprogrammed for 
     other uses.


       Funding Balances for the Chemical Demilitarization Program

       The Chemical Demilitarization Program budget reports showed 
     $155.7 million in current and prior years' appropriations not 
     yet allocated ($107.1 million) or obligated ($48.6 million) 
     to specific program areas. Nearly this entire amount ($145.2 
     million) is in current year appropriations. Also, the program 
     currently has approximately $1 billion in unliquidated 
     obligations, of which about 61 percent or $610.5 million are 
     associated with prior years' appropriations for fiscal years 
     1992-98.
       To identify the amounts of unallocated appropriations and 
     unliquidated obligations from prior years, we collected 
     official DFAS budget execution data for the Chemical 
     Demilitarization Program. DFAS is responsible for providing 
     the program office and other DOD organizations' financial and 
     accounting services and information. Table 1 lists the 
     reported budget authority and the unallocated unobligated, 
     and obligated appropriations, along with unliquidated 
     balances for selected appropriations for the Chemical 
     Demilitarization Programs as of May 31, 1999. Budget 
     authority allows agencies to enter into financial obligations 
     that will result in immediate or future outlays of funds.

   TABLE 1.--REPORTED BUDGET AUTHORITY AND UNALLOCATED, UNOBLIGATED, OBLIGATED, AND UNLIQUIDATED BALANCES FOR
             SELECTED APPROPRIATIONS FOR THE CHEMICAL DEMILITARIZATION PROGRAM (AS OF MAY 31, 1999)
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                      Budget                                                       Unliquidated
Fiscal year and funding category     authority      Unallocated     Unobligated      Obligated      obligations
----------------------------------------------------------------------------------------------------------------
1992-98.........................        $3,170.2           $10.3            $0.2         $3159.5          $610.5
                                 -------------------------------------------------------------------------------
    Operation and Maintenance...         1,821.8             8.9               0         1,812.5           135.8
    Procurement.................         1,119.6             1.3             0.2         1,118.3           444.7
    Research and Development....           228.8             0.1               0           228.7            30.0
                                 ===============================================================================
1999............................          $666.8           $96.8           $48.4          $521.6          $393.0
                                 -------------------------------------------------------------------------------
    Operation and Maintenance...           428.3            17.2            23.5           387.6           263.1
    Procurement.................           100.3            57.5             2.8            40.0            39.9
    Research and Development....           138.2            22.1            22.1            94.0            90.0
                                 ===============================================================================
      Total.....................        $3,837.0          $107.1           $48.6        $3,681.1        $1,003.5
----------------------------------------------------------------------------------------------------------------
Note 1.--The Chemical Demilitarization Program had a reported $3.2 billion in budget authority for fiscal years
  1992-98 and $666.8 million in budget authority in fiscal year 1999. The budget authority for fiscal years 1992
  and 1993 O&M funds and fiscal year 1992 R&D funds are not included in the table because these funds have been
  canceled. In addition, the table does not include military construction funds because these funds were not
  included in this review.
Note 2.--Unless otherwise specifically provided by law, a fixed appropriation account is generally available for
  adjusting and liquidating obligations properly chargeable to the account for 5 years following its period of
  availability for obligation. At the end of this 5-year period, the account is closed, and all balances are
  permanently canceled. O&M appropriations are available for obligation for 1 year, R&D appropriations are
  available for obligation for 2 years, and procurement appropriations are available for obligation for 3 years.
Note 3.--Numbers not intended to total horizontally.
Note 4.--The program office refers to unallocated funds as unissued fu 
Source: DFAS data provided by the program office.

       As shown in table 1, the program office had a reported 
     $10.3 million unallocated balance for fiscal years 1992-98. 
     This balance consisted of funds that were never allocated to 
     a specific project or were returned to this category after 
     allocation. Returned funds include those amounts that were 
     returned to the program office from projects that were 
     terminated or completed for less than the obligated amount. 
     Most of the unallocated funds are no longer available for 
     obligation because their periods of availability for 
     obligation have lapsed. In addition, the program office's 
     unobligated balance for fiscal years 1992-98 was reported to 
     be approximately $200,000. At the same time, the program 
     reported $610.5 million in unliquidated obligations from 
     fiscal years 1992-98.
       In addition, as shown in table 1, the program office had a 
     reported $96.8 million in unallocated and $48.4 million 
     unobligated appropriations, and $393 million in unliquidated 
     obligations in fiscal year 1999 funds. However, it is 
     important to note that the R&D and procurement, but not O&M 
     funds, will still be available for obligation for the 
     remainder of this year and 1 or 2 more future years; and the 
     obligations of all three appropriations may be liquidated for 
     several more years beyond that.


    more fiscal years 1992-98 obligations have been liquidated than 
                                reported

       For our preliminary review, we focused our analysis on the 
     status of the unliquidated obligations for fiscal years 1992-
     98. Based on our review of 28 MIPRs with $382.1 million in 
     unliquidated obligations (or 62.6 percent of the total 
     reported unliquidated obligations), we found that $150.6 
     million (39.4 percent) had been liquidated.\7\ The remaining 
     $231.5 million (60.6 percent) of the reported $382.1 million 
     in unliquidated obligations is scheduled to be liquidated 
     between August 1999 and February 2000 (see table 2).

          TABLE 2.--ADJUSTED UNLIQUIDATED OBLIGATIONS FOR 28 MIPRS (AS OF JULY 7 THROUGH JULY 14, 1999)
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                  Liquidated funds        Adjusted unliquidated
                                  Number of      Reported    --------------------------        obligations
       Category of funds          MIPRs GAO    unliquidated                            -------------------------
                                   reviewed     obligations      Amount      Percent       Amount      Percent
----------------------------------------------------\1\---------------------------------------------------------
Operation and Maintenance......            8          $79.3         $66.9         84.4        $12.4         15.6
Procurement....................           16          283.2          74.1         26.2        209.1         73.8
Research and Development.......            4           19.6           9.6         49.0         10.0         51.0
                                --------------------------------------------------------------------------------
      Total....................           28         $382.1        $150.6         39.4       $231.5         60.6
----------------------------------------------------------------------------------------------------------------
\1\ Reported as of May 31, 1999, by DFAS.
 
Note 1.--The MIPRs were for fiscal years 1992-98 funds.
Note 2.--Unless otherwise specifically provided by law, a fixed appropriation account is generally available for
  adjusting and liquidating obligations properly chargeable to the account for 5 years following its period of
  availability for obligation. At the end of this 5-year period, the account is closed and all balances are
  permanently canceled. O&M appropriations are available for obligation for 1 year, R&D appropriations are
  available for obligation for 2 years, and procurement appropriations are available for obligation for 3 years.
 
Source: DFAS data provided by the program office.

       As shown in table 2, we reviewed eight MIPRs that included 
     a reported $79.3 million in unliquidated O&M obligations. Of 
     this amount, $55.2 million was allocated to the FEMA for the 
     Chemical Stockpile Emergency Preparedness Program (CSEPP). 
     According to FEMA officials and supporting documentation, the 
     total amount has been liquidated but was not timely reported 
     to the program office for input to the finance service 
     records. In addition, another $11.7 million of the reported 
     $79.3 million in unliquidated O&M obligations has been 
     liquidated by the program office and its contractors. The 
     remaining $12.4 million of the $79.3 million amount is 
     scheduled to be liquidated between now and February 2000.
       In addition,, as shown in table 2, we reviewed 16 MIPRs 
     that included a reported $283.2 million in unliquidated 
     procurement obligations. Of this amount, $54.2 million was 
     allocated to FEMA for CSEPP projects. According to FEMA 
     officials and supporting documentation, $40.5 million of the 
     $54.2 million in CSEPP obligations has been liquidated but 
     not reported to the program office in time for input to the 
     finance service records. The remaining $13.7 million is still 
     unliquidated but allocated to Alabama for its CSEPP projects. 
     In addition, another $33.6 million of the reported $283.2 
     million in unliquidated procurement obligations has been 
     liquidated by the program office and its contractors by May 
     31, 1999, and the remaining $209.1 million is scheduled to be 
     liquidated between now and November 2000.
       We also reviewed four MIPRs that included a reported $19.6 
     million in unliquidated R&D

[[Page 19859]]

     obligations. Of this amount, the program office and its 
     contractors have liquidated $9.6 million. The remaining $10 
     million is scheduled to be liquidated between now and 
     September 2000. Our preliminary review of the budget 
     execution reports and MIPRs shows no indication that the 
     program office obligated the same funds to separate projects 
     and contracts in order to reduce its unobligated balances. We 
     plan to complete a more extensive analysis of the potential 
     for such double obligations as part of our future review 
     discussed previously.


            PRIMARY REASONS FOR THE UNLIQUIDATED OBLIGATIONS

       We identified a variety of reasons for the reported 
     unliquidated obligation balances. Most included procedural 
     delays associated with reporting financial transactions to 
     the finance service. More specifically, they included:
       Accounting and procedural delays: According to DOD and Army 
     officials, it can take from 90 to 120 days to process and 
     report liquidation data before liquidations are included in 
     the finance service budget execution data and reports. For 
     example, the program office's projects are large enough to 
     include a primary contractor and several subcontractors. 
     Primary contractors may take several weeks to validate, 
     process, and report liquidation actions by their 
     subcontractors to the program office, which also has its own 
     processes and procedures before reporting to the finance 
     service. Furthermore, the finance service requires time to 
     input and report its liquidation data to responsible DOD and 
     Army officials.
       Army and FEMA accounting and procedural delays for CSEPP 
     funds: On the basis of our MIPR sample, CSEPP liquidations 
     were included in the finance service data because FEMA had 
     not reported liquidation actions in a timely manner to the 
     program office.
       Environmental permit delays: Program officials found that 
     estimating the time required to obtain environmental permit 
     approvals was much more difficult than expected. For example, 
     permits to construct the Umatilla, Anniston, and Pine Bluff 
     chemical demilitarization facilities took 2 to 3 years more 
     than the program office anticipated. Although funds were 
     obligated for these projects, the program office could not 
     liquidate the obligations until after the respective state 
     approved the construction permit and the demilitarization 
     facilities were constructed.
       Technical delays: According to program officials, lessons 
     learned from ongoing demilitarization operations at Johnston 
     Atoll in the Pacific Ocean and Tooele, Utah, resulted in 
     technical and design changes for future facilities that 
     required additional time and resources. While these changes 
     were being incorporated, liquidation of obligated funds 
     proved to be slower than program officials expected.


   actions that have affected or will affect unliquidated obligations

       Several factors have affected or will affect the program 
     office's unliquidated obligations. First, in fiscal year 
     1999, the Congress reduced the administration's budget 
     request for the Chemical Demilitarization Program by $75.1 
     million. Consequently, there were fewer funds to obligate 
     during fiscal year 1999 than planned for the program. A 
     factor that should reduce unliquidated obligations is the 
     1997 approval of environmental permits for the construction 
     of the Umatilla, Oregon, and Anniston, Alabama, chemical 
     demilitarization facilities. The construction of these 
     facilities should allow the program office to liquidate 
     unliquidated procurement obligations for these locations. In 
     addition, the environmental permits were approved in 1999 for 
     the construction of Pine Bluff, Arkansas, and Aberdeen, 
     Maryland, chemical demilitarization facilities, which should 
     allow the program office to liquidate unliquidated 
     procurement obligations for these locations. At the same 
     time, program officials expect additional procurement costs 
     at the Umatilla and Anniston disposal sites due to design and 
     technical changes to previously purchased equipment.


                   agency comments and our evaluation

       We provided a draft copy of this report to DOD and the Army 
     for comment. Responsible officials stated that they did not 
     have sufficient time to formally review and comment on the 
     report. However, we were provided with various technical 
     comments which were used in finalizing the report.


                         scope and methodology

       To assess the unobligated appropriations and unliquidated 
     obligations for the Chemical Demilitarization Program, we 
     interviewed and obtained data from DOD, Army, and FEMA 
     officials, including officials from the Program Manager for 
     Chemical Demilitarization Program in the Edgewood area of 
     Aberdeen Proving Ground, Maryland; Office of the United 
     Secretary of Defense (Comptroller); Deputy Assistant 
     Secretary of the Army, Chemical Demilitarization; Assistant 
     Secretary of the Army for Financial Management; Army Audit 
     Agency; and Office of Management and Budget. We reviewed DFAS 
     reported budget execution data for selected appropriations 
     for chemical demilitarization program budget authority, 
     unallocated, unobligated, and unliquidated balances for 
     fiscal years 1992-99. We did not attempt to reconcile budget 
     execution data with DOD's financial statements.\8\ In 
     addition, we interviewed DOD and Army officials to discuss 
     the (1) requirements for these funds, (2) primary causes for 
     the unliquidated obligations, and (3) actions that have 
     affected or will affect unliquidated obligations.
       Because most unallocated appropriations are no longer 
     available for obligations, unobligated balances are 
     relatively small compared to the budget authority and fiscal 
     year 1999 funds are still available for obligation and 
     liquidation for several years, we focused our analysis on the 
     status of the unliquidated obligations for fiscal years 1992-
     98. We judgmentally selected and reviewed 28 of the program's 
     63 MIPRs with reported unliquidated obligations of more than 
     $1 million to (1) verify the reported unliquidated 
     obligation, and (2) identify specific requirements and time 
     frames for liquidating the obligations. To verify the 
     reported unliquidated obligations, we interviewed responsible 
     program officials and reviewed supporting documentation from 
     the Army and its contractors and compared these data with the 
     unliquidated obligations reported in DFAS budget execution 
     reports. On the basis of this comparison, we determined the 
     extent to which more obligations have been liquidated than 
     previously reported by the finance service. These liquidated 
     obligations were deducted from the reported unliquidated 
     obligations to determine the revised unliquidated amount. In 
     addition, we interviewed responsible program officials and 
     reviewed supporting documentation from the Army and its 
     contractors to determine the schedules for liquidating the 
     remaining unliquidated obligations.
       We conducted our review from July 6 to July 26, 1999, in 
     accordance with generally accepted government auditing 
     standards. We are continuing our review of the Chemical 
     Demilitarization Program. This report represents the 
     preliminary results of our work.
       We are sending copies of this report to Senator Pete V. 
     Domenici, Senator Daniel K. Inouye, Senator Ted Stevens, 
     Senator Robert Byrd, Senator Frank R. Lautenberg, Senator 
     Joseph I. Lieberman, and Senator Fred Thompson and to 
     Representative John R. Kasich, Representative Jerry Lewis, 
     Representative C.W. (Bill) Young, Representative David R. 
     Obey, Representative John P. Murtha, Representative Ike 
     Skelton, Representative Floyd D. Spence, and Representative 
     John M. Spratt, Jr., in their capacities as Chair or Ranking 
     Minority Member of cognizant Senate and House Committees and 
     Subcommittees. We are also sending copies of this report to: 
     the Honorable William S. Cohen, Secretary of Defense; the 
     Honorable William J. Lynn, Under Secretary of Defense 
     (Comptroller); the Honorable Louis Caldera, Secretary of the 
     Army; and the Honorable Jacob Lew, Director, Office of 
     Management and Budget.
       If you have any questions regarding this letter, please 
     contact Barry Holman or me on (202) 512-8412. Key 
     contributors to this assignment are Don Snyder, Claudia 
     Dickey, and Mark Little.

                                              David R. Warren,

                                                         Director,
                                        Defense Management Issues.


                               footnotes

     \1\ We did not include military construction appropriations 
     in our review.
     \2\ Unallocated appropriations refer to funds not yet 
     committed to specific projects--the program office refers to 
     unallocated funds as unissued funds. Unobligated balances 
     represents funds committed or allocated to specific programs 
     but pending contract award. Obligations are the amounts of 
     orders placed, contracts awarded, services received, and 
     similar transactions during a given period that require 
     payments. Unliquidated obligations consist of those 
     obligations for which disbursements have not yet occurred.
     \3\ If a country is unable to maintain the Convention's 
     disposal schedule, the Convention's Organization for the 
     Prohibition of Chemical Weapons may grant a one-time 
     extension of up to 5 years.
     \4\ This estimated cost excludes funding for the Assembled 
     Chemical Weapons Assessment Program, whose goal is to study 
     the feasibility of disposal efforts for assembled chemical 
     weapons without use of incineration. Separation funding is 
     devoted to this effort.
     \5\ See Chemical Weapons Stockpile: Changes Needed in the 
     Management of the Emergency Preparedness Program (GAO/NSIAD-
     97-91, June 11, 1997) and Chemical Weapons: Army's Emergency 
     Preparedness Program Has Financial Management Weaknesses 
     (GAO/NSIAD-95-94, Mar. 15, 1995).
     \6\ An MIPR is a DOD financial form that is used by the 
     program office to transfer funds to other government 
     agencies, such as the Federal Emergency Management Agency 
     (FEMA) and the U.S. Army Corps of Engineers, for work or 
     services identified for the Chemical Demilitarization 
     Program. As required by DOD regulations, the program office 
     records these transfers as obligations.
     \7\ The $150.6 million represents 24.7 percent of the total 
     reported $610.5 million in unliquidated obligations for 
     fiscal years 1992-98, as identified in table 1.
     \8\ For information on DOD's overall financial status see 
     Financial Audit: 1998 Financial Report of the United States 
     Government (GAO/AIMD-99-130, Mar. 31, 1999).

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