Year 2000 Computing Crisis: Costs and Planned Use of Emergency Funds
(Letter Report, 04/28/99, GAO/AIMD-99-154).

Pursuant to a congressional request, GAO provided information on year
2000 costs and funding at 41 federal agencies and organizations,
focusing on the: (1) agency-reported year 2000 costs through fiscal year
(FY) 1998 and the agency processes used to track these costs; (2)
reported status of FY 1999 obligations for year 2000 activities; (3)
estimated year 2000 costs for FY 1999 and the planned uses of emergency
funds; and (4) estimated year 2000 costs for FY 2000.

GAO noted that: (1) the estimated year 2000 costs by the 24 major
federal agencies have more than tripled during the last 2 years to a
total of about $7.5 billion, according to the agencies' February 1999
quarterly status reports to the Office of Management and Budget (OMB);
(2) the agencies reported that less than half of these costs had been
incurred prior to FY 1999; (3) however, these reported costs were
generally estimates and not actual costs; (4) of the 24 major agencies,
only 7 reported that they separately tracked actual costs of year 2000
activities and 5 reported that they tracked some actual costs and
estimated other costs; (5) the lack of tracking was also reflected in
the reported obligations for the first quarter of FY 1999; (6)
obligations of $68.4 million for year 2000 costs were reported by 24
organizations, including 2 organizations that reported only obligations
of emergency funds; (7) however, 8 organizations did not know what their
obligations of appropriated and emergency funds were for the quarter and
the remaining 9 organizations, including 5 major agencies, did not
provide obligation information; (8) the estimated year 2000 costs
reported by the 24 major agencies for FY 1999 have increased during the
last year from about $1.1 billion in February 1998 to $2.8 billion in
February 1999, according to their quarterly reports to OMB; (9)
beginning in November 1998, the agencies requested emergency year 2000
funds for some of these costs; (10) the civil agencies plan to use the
emergency funds for a variety of activities, including renovation,
validation, and implementation of systems, replacement of personal
computers and network hardware and software, outreach, and independent
verification and validation; (11) the Department of Defense plans to use
emergency funds for testing, operational evaluations, and contingency
planning; (12) according to their justification submissions,
organizations requested emergency funds because they identified new
requirements such as outreach activities and decisions to replace
personal computers and networks; had increased costs of ongoing year
2000 activities; or regular appropriations were not available for
planned year 2000 activities; (13) for FY 2000, the major agencies
estimate that year 2000 activities will cost about $1.1 billion,
according to their February 1999 quarterly reports to OMB; and (14) only
one major agency--the Department of Health and Human Services--reported
to GAO that it expected to have year 2000 costs beyond those projected
in its budget submission.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-99-154
     TITLE:  Year 2000 Computing Crisis: Costs and Planned Use of
	     Emergency Funds
      DATE:  04/28/99
   SUBJECT:  Y2K
	     Future budget projections
	     Reporting requirements
	     Systems conversions
	     Funds management
	     Computer software verification and validation
	     Cost analysis
	     Appropriated funds
IDENTIFIER:  Y2K

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AI99154.book GAO United States General Accounting Office

Report to the Majority Leader, House of Representatives

April 1999 YEAR 2000 COMPUTING CRISIS

Costs and Planned Use of Emergency Funds

GAO/AIMD-99-154

  GAO/AIMD-99-154

United States General Accounting Office Washington, D. C. 20548
Lett er

Page 1 GAO/AIMD-99-154 Year 2000 Emergency Funds

GAO

Accounting and Information and Management Division

B-282567. 1 Letter April 28, 1999 The Honorable Richard Armey
Majority Leader House of Representatives

Dear Mr. Armey: At your request, we obtained information on Year
2000 (Y2K) costs and funding at 41 federal agencies and
organizations. Our objectives were to identify agency- reported
Y2K costs through fiscal year 1998 and the agency processes used
to track these costs; determine the reported status of fiscal year
1999 obligations for Y2K activities; identify the estimated Y2K
costs

for fiscal year 1999 and the planned uses of emergency funds; and
identify the estimated Y2K costs for fiscal year 2000. On April 9,
1999, we briefed your office on the results of our work. The
briefing slides are included in appendix I.

This report provides a high- level summary of the information
presented at that briefing including background information,
reported Y2K costs prior to fiscal year 1999 and cost tracking
processes identified by the agencies, status of fiscal year 1999
obligations, estimated costs for fiscal year 1999

and proposed use of emergency funds, and agency estimates of Y2K
costs for fiscal year 2000.

Results in Brief According to the February 1999 quarterly status
reports to OMB, the total estimated Y2K cost for the 24 major
federal agencies is about $7.5 billion.

This estimate has more than tripled from the $2. 3 billion
estimate in February 1997. The agencies reported to us that less
than half of the $7. 5 billion in Y2K costs had been incurred
prior to fiscal year 1999. However, these reported costs were
generally estimates and not actual costs. Of the 24 major
agencies, only 7 reported that they separately tracked actual
costs of Y2K activities and 5 reported that they tracked some

actual costs and estimated other costs. The lack of tracking of
Y2K costs was also reflected in the reported obligations for the
first quarter of fiscal year 1999. Obligations of $68.4 million
for Y2K costs were reported by 24 organizations, including 2
organizations that reported only obligations of emergency funds.
However, eight organizations did not know what their obligations
of appropriated and emergency funds were for the quarter and the
remaining nine

B-282567.1 Page 2 GAO/AIMD-99-154 Year 2000 Emergency Funds

organizations, including five major agencies, did not provide
obligation information.

The estimated Y2K costs reported by the 24 major agencies for
fiscal year 1999 have increased during the last year from about
$1.1 billion in February 1998 to $2.8 billion in February 1999,
according to their quarterly reports to OMB. Beginning in November
1998, the agencies requested emergency Y2K

funds for some of these costs. The civil agencies plan to use the
emergency funds for a variety of activities including renovation,
validation, and implementation of systems; replacement of personal
computers and network hardware and software; outreach; and
independent verification and validation. The Department of Defense
plans to use emergency funds for testing, operational evaluations,
and contingency planning. According

to their justification submissions, organizations requested
emergency funds because they identified new requirements such as
outreach activities and decisions to replace personal computers
and networks; had increased

costs of ongoing Year 2000 activities; and/ or regular
appropriations were not available for planned Y2K activities. For
fiscal year 2000, the major agencies estimate that Y2K activities
will cost about $1.1 billion, according to their February 1999
quarterly reports to OMB. Only one major agency-- the Department
of Health and Human Services-- reported to us that it expected to
have Y2K costs beyond those

projected in its budget submission. Objectives, Scope, and
Methodology

As requested, our objectives were to (1) identify agency- reported
Y2K costs through fiscal year 1998 and the agency processes used
to track these costs, (2) determine the reported status of fiscal
year 1999 obligations for Y2K activities, (3) identify estimated
Y2K costs for fiscal year 1999 and the planned uses of the
emergency allocations, and (4) identify the estimated Y2K costs
for fiscal year 2000.

In October 1998, we requested documentation from the Office of
Management and Budget (OMB) on federal agencies' required
submissions of comprehensive plans and associated funding
requirements for achieving

Year 2000 computer compliance. We made follow- up contacts in an
attempt to obtain this information. OMB did not respond to our
request for documentation; therefore, we requested the necessary
information directly from agencies.

B-282567.1 Page 3 GAO/AIMD-99-154 Year 2000 Emergency Funds

We requested documentation from 29 of the 33 federal agencies that
provide quarterly reports to OMB (information was not requested
from 4 agencies 1 that are government sponsored enterprises and
did not receive emergency funds) and an additional 12 agencies and
organizations that received emergency Y2K funds. A list of
organizations included in the

review is contained in appendix II. To identify agency- reported
Y2K costs through fiscal year 1998, we obtained agencies'
descriptions and sample reports of the processes and systems used
to track and manage actual or estimated costs of Y2K activities.
To determine the reported status of fiscal year 1999 obligations
for Y2K activities, we collected data from the agencies on the
first quarter

fiscal year 1999 obligations for Y2K activities. To identify
estimated Y2K costs for fiscal year 1999 and the planned uses of
the emergency allocations, we analyzed the emergency allocation
justifications that agencies provided to the Office of Management
and Budget and Congress. We analyzed projected costs for mission
critical and non- mission critical systems by type of Y2K
activity. To identify the estimated Y2K costs for fiscal year
2000, we collected

information on agencies' budget requests. We also collected
information from the agencies on additional Y2K costs that are not
included in agencies' current projections for fiscal year 2000 .

Background The estimated Y2K costs by the 24 major federal
agencies have more than tripled during the last 2 years to a total
of about $7.5 billion, according to the agencies' February 1999
quarterly status reports to OMB. In addition,

last year the Congress passed The Omnibus Consolidated and
Emergency Supplemental Appropriations Act, 1999, (P. L. 105- 277)
that appropriated $2. 25 billion for civilian agencies and $1.1
billion for the Department of Defense for emergency expenses
related to Year 2000 conversion of federal

information technology systems. OMB made three allocations
totaling $1. 468 billion to civil agencies (65 percent of their
emergency funds) and one allocation of $935 million to the
Department of Defense (85 percent of its funds) through February
1999. On March 5, 1999, OMB submitted a fourth civil agency
allocation of $61.8 million for the District of Columbia.

1 We did not request information from the Federal Housing Finance
Board, National Labor Relations Board, Tennessee Valley Authority,
and Postal Service.

B-282567.1 Page 4 GAO/AIMD-99-154 Year 2000 Emergency Funds

In addition, on April 2, 1999, OMB submitted to Congress a fifth
proposed civil agency allocation of about $199 million for 20
agencies.

Reported Y2K Costs for Fiscal Years 1996 1998 Have Increased
Dramatically But Agencies Generally Do Not Track Actual Y2K Costs

Reported Year 2000 costs have increased dramatically over the
prior 3 fiscal years. They have gone from about $74 million for
fiscal year 1996, to $837 million for fiscal year 1997, to $2.745
billion for fiscal year 1998 for the 24 major agencies and 10
other organizations included in our review (7 additional
organizations did not provide information on prior Year 2000

costs). The reported costs for these prior years represent less
than half of the $7. 5 billion total Y2K costs estimated by the 24
major agencies. Of the 24 major agencies, only 7 agencies reported
separately tracking actual Y2K costs for fiscal years 1996 through
1998. Five additional major agencies said they tracked some actual
costs such as contract costs but estimated other Y2K costs such as
labor costs. Nine of the other major agencies reported that they
did not separately track actual Y2K costs for fiscal years 1996
through 1998 and three agencies did not provide information on Y2K
cost tracking. 2 Of the seven major agencies tracking actual
costs, three agencies used financial management systems and four
used reports from component entities to track costs.

Appropriations Obligated for Y2K Activities in the 1 st Quarter of
Fiscal Year

1999 Were About $70 Million

In the first quarter of fiscal year 1999, obligations for Y2K
activities totaled about $68.4 million, as reported by the 22
organizations that provided their total obligation data and 2
organizations that provided data only on

obligations of emergency funds. Nine organizations, including five
major agencies, did not provide information on first quarter
fiscal year 1999 obligations. 3 Eight organizations in the review
did not know what their Y2K obligations of appropriated and
emergency funds were in the quarter.

2 The major agencies that did not track actual costs for fiscal
years 1996 through 1998 were the Departments of Commerce, Defense,
Energy, the Interior, Justice, and Veterans Affairs, and Federal
Emergency Management Administration, National Aeronautics and
Space Administration, and Office of

Personnel Management. Information on Y2K cost tracking was not
provided by the Departments of Agriculture, State, and the
Treasury.

3 Information on obligations was not provided by the Departments
of Agriculture, the Interior, State, and the Treasury, and the
Small Business Administration, U. S. Trade Representative, U. S.
Information Agency, Overseas Private Investment Corporation, and
the District of Columbia.

B-282567.1 Page 5 GAO/AIMD-99-154 Year 2000 Emergency Funds

Agencies Requested Emergency Funds for a Variety of Activities

The estimated Y2K costs reported by the major agencies for fiscal
year 1999 have increased by 148 percent during the past year. In
their February 1998 quarterly status reports to OMB, the 24 major
agencies estimated their fiscal year 1999 Y2K costs to be $1.138
billion, but their estimates of these costs increased to $2.824
billion in the February 1999 reports. The agencies have received
emergency Y2K funds for some of the costs.

The civil agencies plan to use these funds for a variety of
activities including  $607 million of the emergency funds on
renovation, validation, and

implementation;  $87 million for outreach activities;  $86 million
for independent verification and validations;  $50 million for
contingency planning;  $32 million for assessing and replacing
embedded systems; and  $571 million for other activities primarily
replacement of noncompliant

personal computers and network hardware and software. The
Department of Defense is targeting use of $524.5 million of its
emergency funds for testing, $148 million for operational
evaluations, and $262.4 million for contingency planning.

According to their justification submissions to Congress and OMB,
organizations cited three categories of reasons for requesting
emergency funds-- new requirements that had not been planned for
fiscal year 1999,

increases in costs to complete ongoing Year 2000 activities, 4 and
regular appropriations not being available for planned Y2K
activities. Concerning new requirements, 22 organizations cited
new requirements for outreach activities and independent
verifications and validations as reasons for requesting emergency
funding. In addition, 18 organizations requested emergency funds
because of decisions to replace personal computers and network
hardware and software. 5 There were 21 organizations that
requested funding for increased costs of ongoing activities, such
as

renovation, validation, and implementation. 4 The organizations
cited several reasons for the increased costs including
underestimates of the level of effort needed, increased contract
costs, and the need to accelerate schedules. 5 In their
justification, some organizations said they determined that the
personal computers and network hardware and software could not be
upgraded to become Y2K compliant and in other cases they
determined that it would not be economical to upgrade equipment
that was obsolete.

B-282567.1 Page 6 GAO/AIMD-99-154 Year 2000 Emergency Funds

In addition, seven organizations reported that emergency funds
were necessary because regular appropriations were not available
for planned activities. For example, the Departments of the
Treasury, State, and Justice said that their budget requests were
reduced by $253 million, $38 million, and $20 million,
respectively, and that the Congress expected them to

obtain emergency funds to cover these costs. Included in
Treasury's $253 million was $92 million for non- Y2K information
technology investments.

Agencies Y2K Activities Estimated to Cost $1.1 Billion In

Fiscal Year 2000 According to agency quarterly reports to OMB, the
Y2K cost estimates of the 24 major agencies for fiscal year 2000
have increased substantially

from $124 million in February 1998, to about $1.1 billion in
February 1999. Thirty- nine organizations responded to our
questions on fiscal year 2000 Y2K costs. Twenty- eight told us
that they expected to have some Y2Krelated costs in fiscal year
2000. The remaining 11 did not expect to have any costs. Of the 28
agencies that expected to have costs, 13 specified the

type of activity that required the funds-- such as remediation,
testing, and business continuity and contingency planning. Two
organizations specified the systems on which the funds would be
expended, and three identified the funding required for each
component agency. Ten organizations provided only a total
estimated dollar amount but did not provide a

breakdown of costs. With the exception of the Department of Health
and Human Services (HHS), no agencies reported that they expect to
have costs beyond those that were projected in their budgets. HHS
said it had begun to identify possible Y2K funding needs of
grantees and was discussing this possibility with OMB.

As agreed with your office, unless you publicly announce the
contents of this report earlier, we will not distribute it until
30 days from its date. At that time we will send copies to Senator
Ted Stevens, Chairman, and Senator Robert C. Byrd, Ranking
Minority Member, Senate Committee on Appropriations;
Representative C. W. Young, Chairman, and David R. Obey, Ranking
Minority Member, House Committee on Appropriations; John Koskinen,
Chairman of the President's Council on Year 2000 Conversion; The
Honorable Jacob J. Lew, Director, Office of Management and Budget;
and other interested parties. Copies will also be made available
to others

upon request.

B-282567.1 Page 7 GAO/AIMD-99-154 Year 2000 Emergency Funds

If you have any questions on matters discussed in this letter,
please contact me at (202) 512- 6253, or James R. Hamilton,
Assistant Director, at (202) 512- 6271. Other major contributors
to this report are listed in appendix III. Sincerely yours,

Joel C. Willemssen Director, Civil Agencies Information Systems

Page 8 GAO/AIMD-99-154 Year 2000 Emergency Funds

Contents Letter 1 Appendix I Briefing on Year 2000 Costs

10 Appendix II Federal Agencies and Organizations Included in the
Review

32 Appendix III Major Contributors to This Report

34

Contents Page 9 GAO/AIMD-99-154 Year 2000 Emergency Funds
Abbreviations

HHS Department of Health and Human Services OMB Office of
Management and Budget Y2K year 2000

Page 10 GAO/AIMD-99-154 Year 2000 Emergency Funds

Appendix I Briefing on Year 2000 Costs Appendi x I

Accounting and Information Management Division

Briefing for the Office of the House Majority Leader

Y2K Costs

April 9, 1999

Appendix I Briefing on Year 2000 Costs

Page 11 GAO/AIMD-99-154 Year 2000 Emergency Funds

2

Briefing Purpose & Outline

 Purpose - present results of our review of reported federal
agency costs to address the Year 2000 (Y2K) computing challenge.

 Outline:  Objectives & Scope  Background  Prior Year Costs and
Tracking Systems  Status of Fiscal Year 1999 Obligations
Estimated Costs for FY 1999 and Use of

Emergency Allocations  Estimated Y2K Costs for Fiscal Year 2000

Appendix I Briefing on Year 2000 Costs

Page 12 GAO/AIMD-99-154 Year 2000 Emergency Funds

3

Objectives & Scope

The review objectives were to  identify agency- reported Year 2000
costs through

fiscal year (FY) 1998 and the agency processes used to track these
costs

 determine the reported status of FY 1999 obligations for Year
2000 activities

 identify estimated Year 2000 costs for FY 1999 and the planned
uses of emergency allocations

 identify the estimated Year 2000 costs for FY 2000

Appendix I Briefing on Year 2000 Costs

Page 13 GAO/AIMD-99-154 Year 2000 Emergency Funds

4

Objectives & Scope (continued) In October 1998, we requested
documentation from the Office of Management and Budget (OMB) on
federal agencies' required submissions of comprehensive plans and
associated funding requirements for achieving Year 2000 computer
compliance. We made follow- up contacts in an attempt to obtain
this information.

OMB has not responded to our request for documentation; therefore,
we requested the necessary information directly from agencies.

Appendix I Briefing on Year 2000 Costs

Page 14 GAO/AIMD-99-154 Year 2000 Emergency Funds

5

Objectives & Scope (continued) We requested documentation from 29
federal agencies that provide quarterly reports to OMB
(information was not requested from 4 agencies that are government
sponsored enterprises) and an additional 12 agencies and
organizations that received emergency funds.

Appendix I Briefing on Year 2000 Costs

Page 15 GAO/AIMD-99-154 Year 2000 Emergency Funds

6

Background

The estimated total reported costs of Year 2000 for 24 major
federal agencies activities have more than tripled during the last
2 years.

2.3 2.8

3.8 3.9 4.7 5.0

6.3 7.2 7.5

0 1

2 3

4 5

6 7

8 Feb-

97 May-

97 Aug-

97 Nov-

97 Feb-

98 May-

98 Aug-

98 Nov-

98 Feb-

99

Source: February 1997 data is from OMB's report Getting Federal
Computers Ready for 2000, February 6, 1997. May 1997 to May 1998
data are from OMB's quarterly reports. The August 1998, November
1998, and February 1999 data are from the quarterly reports of the
24 major federal departments and agencies.

Note: OMB's quarterly reports issued on December 8, 1998 and March
18, 1999, did not include $81.3 million and $91. 7 million in
Transportation and Treasury costs, respectively, that they stated
were non- Y2K costs funded from emergency supplemental funds.

Appendix I Briefing on Year 2000 Costs

Page 16 GAO/AIMD-99-154 Year 2000 Emergency Funds

7

Background (continued) The Omnibus Consolidated and Emergency
Supplemental Appropriations Act, 1999, appropriated funds for
emergency expenses related to Year 2000 conversion of federal
information technology systems in the amounts of

 $2. 25 billion for civilian departments and agencies  $16. 873
million was designated for the Legislative

Branch  $13. 044 million was designated for the Judiciary  $1. 1
billion for the Department of Defense

Appendix I Briefing on Year 2000 Costs

Page 17 GAO/AIMD-99-154 Year 2000 Emergency Funds

8

Background (continued)

By February 1999, OMB had made three allocations of the emergency
funds totaling $1.468 billion (65%) to civil agencies and one
allocation of $935 million (85%) to the Department of Defense. On
March 5, 1999, OMB submitted to Congress a 4th civil agency
allocation for $61.8 million for the District of Columbia. The
largest allocations to civil agencies were

 $570 million to Treasury  $282 million to HHS  $159 million to
Transportation  $84 million to Justice

On April 2, 1999, OMB submitted to Congress a 5th proposed
allocation of about $199 million for 20 agencies.

Note: The total allocation includes about $14 million that was
allocated but not transferred to the Department of Energy.

Appendix I Briefing on Year 2000 Costs

Page 18 GAO/AIMD-99-154 Year 2000 Emergency Funds

9

Year 2000 Costs Prior to Fiscal Year 1999

Agencies' reported Y2K costs escalated dramatically from FY 1996
to FY 1998.

We could not obtain this information from 7 organizations.

 The Federal Trade Commission and the African Development
Foundation did not collect Y2K cost information.

 The Smithsonian, the U. S. Information Agency, Overseas Private
Investment Corporation, U. S. Holocaust Memorial Council, and the
District of Columbia did not provide information on Y2K costs.

73,532 837,234

2,745,589

0 500,000

1,000,000 1,500,000

2,000,000 2,500,000

3,000,000 FY 1996 FY 1997 FY 1998

Source: Data reported by 34 agencies. In 11 cases, these reports
were the agencies' February 1999 quarterly reports.

Agencies Reported Y2K Costs for Fiscal Years 1996 - 1998

Note: One organization did not have FY 1996- 1998 costs and
another reported costs in FY 1996 that included prior years costs.

Appendix I Briefing on Year 2000 Costs

Page 19 GAO/AIMD-99-154 Year 2000 Emergency Funds

10

Year 2000 Cost Tracking Systems

24 Major Agencies 9 of the 24 major agencies reported that they
did not track FY 1996- 1998 actual costs (they used estimates) and
3 agencies did not provide us information on Y2K cost tracking.

7 of the major agencies reported that they tracked actual costs of
Year 2000 activities for FY 19961998. Also, 5 major agencies
reported that some costs were actual while others were estimates
(e. g., contract costs were actual but labor costs were estimates
or that actual costs were not captured for all years).

Agencies reported tracking actual Year 2000 costs through

 financial management systems - 3 agencies  reports from component
entities - 4 agencies

7 5 9

3 Actual Some actual, some estimates Estimates Not provided

Appendix I Briefing on Year 2000 Costs

Page 20 GAO/AIMD-99-154 Year 2000 Emergency Funds

11

Year 2000 Cost Tracking Systems

Other Organizations Of the 17 other organizations reviewed, 5
reported that they did not track FY 1996- 1998 actual costs (2
used estimates and 3 did not collect Y2K costs) and 3 agencies did
not provide us information on Y2K costs tracking.

5 of the other organizations reported that they tracked actual
costs of Year 2000 activities for FY 1996- 1998. Also, 4
organizations reported that some costs were actual while others
were estimates (e. g., contract costs were actual but labor costs
were estimates or that actual costs were not captured for all
years).

Organizations reported tracking actual Year 2000 costs through

 financial management systems - 4 agencies  project tracking
systems at the Department

level - 1 agency

5 4 2 3

3 Actual Some actual, some estimates Estimates Did not collect Y2K
costs Not provided

Appendix I Briefing on Year 2000 Costs

Page 21 GAO/AIMD-99-154 Year 2000 Emergency Funds

12

Obligations of Appropriations and Emergency Funds in FY 1999

24 organizations reported obligating about $68. 4 million in the
1st quarter of FY 1999.

10 organizations did not know what their total Y2K obligations
were in the first quarter of 1999, but 2 provided data on
obligations of emergency funds (these obligations are included in
the above total)

9 organizations, including 5 major agencies, did not provide this
information.

Appendix I Briefing on Year 2000 Costs

Page 22 GAO/AIMD-99-154 Year 2000 Emergency Funds

13

Year 2000 Costs

Increased Estimates for FY 1999 FY 1999 Y2K estimated costs
reported by the 24 major agencies have increased by 148 percent
from February 1998 to February 1999.

1,138 1,243

1,691 2,470

2,824

0 500

1,000 1,500

2,000 2,500

3,000 Feb-98 May-98 Aug-98 Nov-98 Feb-99

Source: Agency quarterly reports to OMB Estimated Y2K Costs
Reported

by 24 Major Agencies for FY 1999

Appendix I Briefing on Year 2000 Costs

Page 23 GAO/AIMD-99-154 Year 2000 Emergency Funds

14

Use of Year 2000 Emergency Funds

By Type of Activity Civil agencies most frequently specified
renovation, validation, and implementation of systems as the
planned use of emergency funds.

In the other category, a primary use of funds is the purchase of
replacement personal computers and network hardware and software.

Defense plans to use $524. 5 million for testing, $148 million for
operational evaluations, and $262. 4 million for contingency
planning.

571 607

50 87

32 86

0 200 400 600 800

Other Renovation, validation,

implementation Contingency planning

Outreach Embedded systems

Independent verification & validation

$ millions

Civil Agencies Proposed Use of Emergency Funds

Note: This chart does not include one or more allocations to Dept.
of Energy, Small Business Administration, Smithsonian Institution,
District of Columbia, and African Development Foundation because
they did not provide the justification documentation. The
justification data from four organizations did not equal the total
allocations reported by OMB.

Appendix I Briefing on Year 2000 Costs

Page 24 GAO/AIMD-99-154 Year 2000 Emergency Funds

15

Reasons Organizations Requested Emergency Funds

According to their justification submissions to Congress and OMB,
organizations requested emergency funds for a variety of reasons

 new requirements  increased costs of ongoing Y2K activities
activities for which regular appropriations were

not available

Appendix I Briefing on Year 2000 Costs

Page 25 GAO/AIMD-99-154 Year 2000 Emergency Funds

16

Reasons Organizations Requested Emergency Funds (continued)

 New outreach and independent verification and validation (IV& V)
requirements were cited by 22 organizations

 For example, Commerce requested $31. 6 million for IV& V
activities and $25 million for outreach activities that it did not
have in its plans for FY 1999

 Decisions to replace personal computers and network hardware and
software were cited by 18 organizations

 For example, Agriculture requested $8.5 million for Rural
Development to accelerate the replacement of personal computers
Emergency funds were requested for a variety of

new requirements:

Appendix I Briefing on Year 2000 Costs

Page 26 GAO/AIMD-99-154 Year 2000 Emergency Funds

17

Reasons Organizations Requested Emergency Funds (continued)

Funds were requested for increased costs of ongoing activities:

 21 organizations cited costs for ongoing activities, such as
validation and implementation, had increased beyond the
projections for the FY 1999 budget requests. For example,

 Energy requested $13.8 million because its Y2K costs had
increased since April 1998 to accelerate renovation, validation,
and implementation activities that were behind schedule

 HHS' Health Care Financing Administration requested $28.3 million
for IV& V activities because they had increased beyond the level
planned for FY 1999

Appendix I Briefing on Year 2000 Costs

Page 27 GAO/AIMD-99-154 Year 2000 Emergency Funds

18

Reasons Organizations Requested Emergency Funds (continued)
Emergency funds requested for activities for which regular
appropriations were not available:

 According to their emergency fund justifications, Treasury,
State, and Justice had their FY 1999 budget requests reduced by
$253 million, $38 million, and $20 million, respectively. The
agency justifications stated that Congress expected them to obtain
emergency funds to cover these costs. Included in Treasury's $253
million was $92 million for non- Y2K information technology
investments, according to information in OMB's March 1999
quarterly report.

We are aware of no explicit legislative or statutory provision
directing the use of emergency funds as an alternative to general
appropriations for Y2K compliance. The conference report on
Treasury and State appropriations for FY 1999, however,
acknowledges that additional funds would be required in FY 1999
for Treasury and State for Y2K compliance. Further, Section 513 of
the Treasury and General Government Appropriations Act, 1999,
permitted use of Treasury funds to achieve Y2K compliance until
such time as supplemental appropriations are made available for
that purpose.

Appendix I Briefing on Year 2000 Costs

Page 28 GAO/AIMD-99-154 Year 2000 Emergency Funds

19

Reasons Organizations Requested Emergency Funds (continued)
Emergency funds requested for activities for which regular
appropriations were not available:

 Four agencies (Commerce, Executive Office of the
PresidentAdministration, Federal Communications Commission, and
National Archives and Records Administration) told us they
received emergency funds for Y2K activities which, according to
their submissions to OMB, they assumed would be funded by the
regular FY 1999 appropriations. Because these agencies do not have
a separate budget line item for Y2K costs, we are not sure whether
their FY 1999 budget requests were reduced for these activities.

Appendix I Briefing on Year 2000 Costs

Page 29 GAO/AIMD-99-154 Year 2000 Emergency Funds

20

Estimated Y2K Costs for FY 2000

Estimated costs of Y2K activities for FY 2000 have increased by
over 700 percent during the last year. 39 organizations responded
to our questions on FY 2000 costs.

28 organizations reported they would have Y2K costs in FY 2000 and
11 organizations do not expect to have any costs

 13 organizations specified the type of Y2K activity requiring the
funds  2 organizations specified the systems  3 organizations
could only provide

information on which component would receive the funds  10
organizations did not provide a

breakdown of costs

124 303

1,126 1,182

1,093

0 500 1,000 1,500 Feb-98 May-98

Aug-98 Nov-98

Feb-99 $ millions

Source: Agency quarterly reports to OMB Estimated Y2K Costs
Reported by

24 Major Agencies for FY 2000

Appendix I Briefing on Year 2000 Costs

Page 30 GAO/AIMD-99-154 Year 2000 Emergency Funds

21

Estimated Y2K Costs for FY 2000

Reported Costs by Agency Note: Agencies Y2K cost estimates
reported to us may vary from the amounts in their quarterly
reports to OMB.

295,625 165,168

99,150 15,733 12,600 11,300 10,200 9,292 6,791 6,600 3,835 3,200
3,035 1,812 1,706 1,200 1,000 900 892 44

0 50,000

100,000 150,000

200,000 250,000

300,000 350,000

($ 1000s) 20 of the 24 major agencies provided us with estimates
of their Y2K costs for FY 2000, 3

agencies said that they do not expect to have such costs, and 1
did not respond to our request for this information. In addition,
8 other organizations reported estimated Y2K costs ranging from
$50,000 to $8. 3 million.

Appendix I Briefing on Year 2000 Costs

Page 31 GAO/AIMD-99-154 Year 2000 Emergency Funds

22

Estimated Y2K Costs for FY 2000

Uncertainties Associated with Estimates Very little documentation
was provided to us for budget requests

 12 agencies reported that they listed Y2K costs in their FY 2000
budget request

 Only 4 agencies provided documentation on their requirements for
FY 2000

No agencies, except for HHS, expected to have Y2K costs- such as
Y2K costs of grantees or local governments-- beyond those
projected in their budgets. HHS has begun to identify possible Y2K
needs of grantees.

Page 32 GAO/AIMD-99-154 Year 2000 Emergency Funds

Appendix II Federal Agencies and Organizations Included in the
Review Appendi x I I

Agencies that Provide Y2K Status Reports to OMB

Department of Agriculture Department of Commerce Department of
Defense Department of Education Department of Energy Department of
Health and Human Services Department of Housing and Urban
Development Department of the Interior Department of Justice
Department of Labor Department of State Department of
Transportation Department of Treasury Department of Veterans
Affairs Environmental Protection Agency National Aeronautics and
Space Administration Agency for International Development Federal
Emergency Management Agency General Services Administration
National Science Foundation Nuclear Regulatory Commission

Appendix II Federal Agencies and Organizations Included in the
Review

Page 33 GAO/AIMD-99-154 Year 2000 Emergency Funds

Office of Personnel Management Small Business Administration
Federal Communications Commission National Archives and Records
Administration Office of Administration, Executive Office of the
President Peace Corps U. S. Trade Representative, Executive Office
of the President Social Security Administration

Organizations Receiving Emergency Allocations

African Development Foundation Corporation for National and
Community Service District of Columbia Federal Trade Commission
Office of Special Counsel Overseas Private Investment Corporation
Railroad Retirement Board Securities and Exchange Commission
Selective Service System Smithsonian Institution United States
Holocaust Memorial Council United States Information Agency

Page 34 GAO/AIMD-99-154 Year 2000 Emergency Funds

Appendix III Major Contributors to This Report Appendi x I I I

Accounting and Information Management Division, Washington, D. C.

Linda J. Lambert, Assistant Director Daniel K. Wexler, Senior
Information Systems Analyst Michael A. Tovares, Senior Information
Systems Analyst James C. Houtz, Senior Information Systems Analyst

(511725) Let t er

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