Information Technology: Improvements Needed in the Reliability of
Defense Budget Submissions (19-DEC-03, GAO-04-115).
The Department of Defense (DOD) spends more on information
technology (IT) annually than any other department or agency,
accounting for about half of the $59 billion governmentwide IT
budget in fiscal year 2004. It is thus important that consistent,
accurate, and complete DOD IT budget information is available to
the Congress and the Office of Management and Budget (OMB) so
that they can make informed decisions among competing demands for
funds. Accordingly, GAO reviewed the department's fiscal year
2004 IT budget submission to determine whether it was reliable,
including identifying opportunities for future improvement.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-115
ACCNO: A09033
TITLE: Information Technology: Improvements Needed in the
Reliability of Defense Budget Submissions
DATE: 12/19/2003
SUBJECT: Congressional oversight
Cost analysis
Data integrity
Defense budgets
Information technology
Reporting requirements
Appropriated funds
Funds management
Policies and procedures
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
******************************************************************
GAO-04-115
United States General Accounting Office
GAO Report to the Subcommittee on Terrorism, Unconventional Threats, and
Capabilities, Committee on Armed Services, House of Representatives
December 2003
INFORMATION
TECHNOLOGY
Improvements Needed in the Reliability of Defense Budget Submissions
a
GAO-04-115
Highlights of GAO-04-115, a report to the Subcommittee on Terrorism,
Unconventional Threats, and Capabilities, Committee on Armed Services,
House of Representatives
The Department of Defense (DOD) spends more on information technology (IT)
annually than any other department or agency, accounting for about half of
the $59 billion governmentwide IT budget in fiscal year 2004. It is thus
important that consistent, accurate, and complete DOD IT budget
information is available to the Congress and the Office of Management and
Budget (OMB) so that they can make informed decisions among competing
demands for funds. Accordingly, GAO reviewed the department's fiscal year
2004 IT budget submission to determine whether it was reliable, including
identifying opportunities for future improvement.
To improve the consistency, accuracy, and completeness of future DOD IT
budget submissions, GAO is making recommendations to the Secretary of
Defense that are aimed at establishing appropriate policies, procedures,
and supporting systems to avoid repeating the same problems that GAO found
in the department's submission for fiscal year 2004.
December 2003
INFORMATION TECHNOLOGY
Improvements Needed in the Reliability of Defense Budget Submissions
DOD's IT budget submission for fiscal year 2004 contains material
inconsistencies, inaccuracies, or omissions that limit its reliability.
For example:
o Two primary parts of the submission-the IT budget summary report and
the detailed Capital Investment Reports on each IT initiative-are
inconsistent. In particular, 15 initiatives that appear in the budget
summary do not appear in the Capital Investment Reports, and discrepancies
exist between the two types of reports in the amounts requested for 73
major initiatives. These discrepancies total about $1.6 billion. (The
table below shows the portion of this total difference that is
attributable to various DOD organizations.)
o Major initiatives do not consistently use the same type of
appropriations to fund the same activities. That is, to fund the same
types of activities, some DOD organizations used the Research,
Development, Test, and Evaluation appropriations and others used the
Operation and Maintenance appropriations.
o The IT budget summary does not include all the costs of the IT
initiatives, which is contrary to federal guidance. For example, the IT
budget reports do not always include the costs of military personnel
working on the initiatives.
These problems are largely attributable to insufficient management
attention and limitations in departmental policies and procedures, such as
guidance in DOD's Financial Management Regulation, and to shortcomings in
systems that support budget-related activities. The result is that OMB and
the Congress are constrained in their ability to make informed IT funding
decisions and conduct effective oversight and control, which could cause
decision makers to approve or deny funding for programs that they might
otherwise have treated differently, as well as increasing the chances of
funds in an appropriation not being sufficient to cover obligations.
Discrepancies between Funding Totals from DOD IT Budget Summary and
CapitalDOD either agreed or partially Investment Reports for Fiscal Year
2004
agreed with GAO's Dollars in millions recommendations, and it described
actions that it plans to take to DOD component Discrepancy improve the
reliability of its IT Department of the Air Force $362.81
budget submissions. Department of the Army 55.57
Department of the Navy 581.89
Seven agencies and activities and the Office of the Secretary of Defense 88.96
Multiple organizationsa 530.61
Total $1,619.84
www.gao.gov/cgi-bin/getrpt?GAO-04-115.
Source: GAO analysis of DOD data.
To view the full product, including the scope a Of 30 cross-service
initiatives, 27 had differences, but these differences could not be
attributed to a
and methodology, click on the link above.
For more information, contact Randolph C. single component because more
than one component reported funding for each initiative.
Hite at (202) 512-3439 or [email protected].
Contents
Letter 1
Results in Brief 2
Background 3
DOD's Fiscal Year 2004 IT Budget Submission
Contains Unreliable
Information 6
Conclusions 21
Recommendations 22
Agency Comments and GAO Evaluation 23
Appendix
Appendix I: Objective, Scope, and Methodology
Tables Table 1: Table 2:
Table 3:
Table 4:
Table 5:
Information Included in Budget Justification Reports 4
Comparison of Total Funding for Three Groupings of Major
Initiatives 9
Stratified Funding Differences among 176 Initiatives in
Exhibit 300 and IT-1 Reports 10
Net Differences, Total Differences, and Number of
Initiatives with Differences, by DOD Component 11
Discrepancies between Sum of Line Items and Total
Amount Reported on Exhibit 300s, by DOD Component 14
Contents
Abbreviations
CFO Chief Financial Officer
CIO Chief Information Officer
DOD Department of Defense
FMR Financial Management Regulation
IT information technology
O&M Operation and Maintenance
OMB Office of Management and Budget
OSD Office of the Secretary of Defense
RDT&E Research, Development, Test, and Evaluation
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
A
United States General Accounting Office Washington, D.C. 20548
December 19, 2003
The Honorable Jim Saxton
Chairman
The Honorable Martin T. Meehan
Ranking Minority Member
Subcommittee on Terrorism, Unconventional Threats, and Capabilities
Committee on Armed Services House of Representatives
To make informed funding decisions among competing demands for federal
funds, the Congress and the Office of Management and Budget (OMB) need
federal departments and agencies to provide consistent, accurate, and
complete budget information. This is particularly important in the case of
the information technology (IT) budget for the Department of Defense
(DOD), because the department spends more on IT annually than any other
department or agency, accounting for about half of the roughly $59 billion
governmentwide IT budget in fiscal year 2004. Among other things, the
department's IT funding is to provide for modernization, operation, and
maintenance of thousands of information systems that support such
important business functions as accounting, acquisition, logistics, and
personnel management. DOD's IT funding is also to provide for
modernization, operation, and maintenance of the department's technology
infrastructure, such as its telecommunication networks.
Because of the importance of DOD's IT budget information to the Congress,
we evaluated the department's fiscal year 2004 IT budget submission. Our
objective was to determine whether the submission was reliable, including
identifying opportunities for improving the reliability of future
submissions. To do so, we assessed the funding information in DOD's
primary IT budget reports to determine whether the information reported
was consistent between reports, whether the reports included all
information that OMB requires, whether the correct appropriations and
budget categories were used, and whether the reports included all relevant
costs. Our objective, scope, and methodology are discussed in detail in
appendix I.
Results in Brief DOD's fiscal year 2004 IT budget submission includes
inconsistencies, inaccuracies, and omissions that limit its reliability.
For example, the Capital Investment Reports, which provide detailed
information on each major IT initiative, are inconsistent with DOD's IT
budget summary report.1 In particular, 15 major initiatives that appear in
the budget summary report do not appear in the Capital Investment Reports,
and discrepancies exist between the amounts that the two types of reports
included for 73 major initiatives. These discrepancies total about $1.6
billion. The Capital Investment Reports also contain omissions and errors,
such as missing life cycle phase information and errors in calculations.
Also, the Capital Investment Reports' amounts for planning and acquisition
activities for major initiatives are not always classified as
development/modernization, which is the budget category that OMB requires
for such activities, and these reports do not consistently use the same
appropriations to fund the same activities. Additionally, the IT budget
summary does not include all the costs of the IT initiatives, which is
contrary to guidance in federal accounting standards and the Federal
Financial Management Improvement Act of 1996.2 For example, the budget
submission does not always include the costs of military personnel working
on the initiatives. These inconsistencies, inaccuracies, and omissions are
largely attributable to limitations in departmental regulations and
guidance and to shortcomings in the systems that support the development
of the budget submission, as well as to insufficient management attention.
The result is that OMB and the Congress are forced to make IT funding
decisions on the basis of information whose reliability is limited, which
could cause decision makers to approve or deny funding for programs that
they might otherwise have treated differently and increases the chances of
funds in an appropriation not being sufficient to cover obligations.
To improve the reliability of DOD's future IT budget submissions, we are
making eight recommendations to the Secretary of Defense aimed at raising
the level of management attention to IT budget submission reliability and
strengthening the associated management processes and supporting systems.
In commenting on a draft of this report, DOD either
1According to OMB Circular A-11, Capital Investment Reports, also known as
Exhibit 300s, are required for initiatives that OMB defines as major: that
is, those initiatives that require special management attention because of
their importance to an agency's mission or that have significant program
or policy implications.
2Public Law 104-208, section 803(a).
agreed or partially agreed with our recommendations and described actions
that it plans to take to improve the reliability of its IT budget
submissions.
Background DOD's IT budget submission for fiscal year 2004 totaled about
$28 billion. Of this, about $9.1 billion was for what the department
termed national security systems, such as telecommunications networks and
systems that perform command and control functions. The remaining
approximately $18.8 billion was for business initiatives, such as finance
and accounting systems, military and civilian personnel systems, and
logistics systems. The roughly $28 billion included about $17.4 billion
for operating and maintaining existing systems and infrastructure and
about $10.5 billion for modernizing systems and infrastructure. Examples
of major initiatives included in this budget submission are the following:
o the Global Command and Control System, a joint program intended to
provide the information resources needed by warfighters to accomplish
their command and control missions;
o the Defense Information System Network, a communications infrastructure
initiative that is intended to connect DOD's mission support and armed
forces using a combination of government and private infrastructure; and
o the Defense Integrated Military Human Resources System, a military
personnel and pay system that is expected to integrate personnel and pay
functions for all military services.
DOD's IT budget submission consists of three basic reports:3
3In addition to the three basic reports, the budget submission includes a
report called All Departments Information Technology/National Security
Systems, which presents the budget information by DOD organization.
o Capital Investment Reports, also called Exhibit 300s, which are used by
OMB to determine whether an IT initiative meets budgetary guidelines for
funding. These reports provide detailed information on major IT
initiatives, including budget information by appropriation type and life
cycle phase. They are required for every major IT initiative, according to
OMB Circular A-11.4 The Exhibit 300 is submitted to OMB, and a subset of
the information contained in it is submitted to the Congress.
o The IT budget summary, also known as the IT-1 spreadsheet, which is
intended to capture DOD's entire IT budget, including both major and
nonmajor initiatives, as well as information on which of two OMBdefined
budget categories each initiative's funding falls into-
development/modernization or current services. (The Exhibit 300 does not
provide information on budget category.) The IT-1 spreadsheet is submitted
to the Congress.
o The Exhibit 53 provides a high-level summary of information that is in
the IT-1 spreadsheet; thus, it does not include all the information that
is in the IT-1 spreadsheet. This exhibit is provided to OMB.
Table 1 describes the types of budget information provided in these three
reports.
Table 1: Information Included in Budget Justification Reports
Type of Report in which
information Information Descriptiona information
subtype appears
Among other things, those
initiatives that require Exhibit 300,
System Major special IT-1
classification management attention because of spreadsheet,
their importance to an Exhibit 53
agency's mission, or that have
significant program or policy
implications (OMB definition)
Investments or initiatives that
Nonmajor do not meet the criteria for
major initiatives (DOD
classification)
An additional DOD
classification for certain
All other initiatives
4OMB Circular A-11, Preparation, Submission, and Execution of the Budget.
(Continued From Previous Page)
Type of Report in which
information Information Descriptiona information
subtype appears
Funds for the acquisition
Appropriation Procurement of such items as Exhibit 300,
type hardware, IT-1
used to fund IT b infrastructure, software, spreadsheet
and services
Funds for research,
Research, development, test, and
Development, evaluation
Test, and activities
Evaluation
Funds for military
Military personnel who are
Personnel planning, acquiring,
developing, or
maintaining IT
initiatives
Generally, funds for
operating and maintaining
Operation and IT systems
Maintenance or infrastructure
Funds for developing new
IT systems or making IT-1
Budget category Development/ major spreadsheet,
modernization enhancements to existing Exhibit 53
systems
Steady state (referred to by Funds for operating and maintaining systems
at current DOD as "current services") levels (i.e., without major
enhancements)
Life cycle phase Planning Funds for planning IT initiatives Exhibit 300
Acquisition Funds for acquiring or developing IT systems
Maintenance Funds for operating and maintaining IT systems
Sources: OMB, DOD.
aDescriptions of budget information are based on OMB Circular A-11, DOD's
Financial Management Regulation, Exhibit 53, Exhibit 300s, and IT-1
spreadsheet for fiscal year 2004.
bIn addition, some IT initiatives are funded through working capital
funds, which may be used for any type of cost by organizations that are
financed in this way. (Working capital fund organizations sell goods or
services-e.g., network services or financial services-to other DOD
organizations and use the income from these sales to fund the production
of their respective goods or services.)
The types of information in these budget justification reports are
interrelated. For example, according to an official from the DOD
Comptroller's office, the life cycle phase in which a cost is to be
incurred is key to determining the proper appropriation type for funding
that cost, as well as to determining the proper budget category
(development/modernization or current services). Similarly, Circular A-11
states that funding for all activities that occur during the planning or
acquisition phases should be placed in the development/modernization
budget category.
The DOD Chief Information Officer (CIO), who is also the Assistant
Secretary of Defense for Networks and Information Integration, is
responsible for compiling and submitting the department's IT budget
reports to OMB and the Congress. The CIOs and Comptrollers for DOD's
component organizations are responsible for the reliability of the
information about their respective initiatives in the submission.5 Because
of the importance of the budget submission, these officials are required
to certify in writing as to their reliability. According to a DOD CIO
official, the information in the submission is initially prepared by
component program offices and processed through the CIO and Comptroller
chains of command for the components. The information is then forwarded to
the DOD CIO office, where it is consolidated before being sent to OMB and
the Congress.
DOD's Fiscal Year 2004 The House Report6 on the Bob Stump National Defense
Authorization Act
IT Budget Submission Contains Unreliable Information
for Fiscal Year 2003 emphasized the need for reliable IT budget
information. Specifically, the report stated:
"In the past, the [Armed Services Committee] has received information
technology documents that describe the various information technology
initiatives and provide budget data on these initiatives. These documents,
however, are too often inaccurate, misleading, and incomplete. The
Department must provide the committee accurate and precise information and
data on information technology systems. The committee will rely on the
documents, submitted pursuant to this provision, when making
recommendations."
5DOD components consist of the military services and DOD agencies and
activities, such as the Defense Information Systems Agency and the Defense
Human Resources Activity.
6H.R. Rep. No. 107-436, at 298 (May 3, 2002).
Federal agencies also need reliable IT budget information to comply with
the requirements of the Clinger-Cohen Act, which specifies that agencies
should design capital planning and investment control processes for
selecting, controlling, and evaluating IT investments and should integrate
those processes with the agencies' processes for making budget-related
decisions.7 IT investment management best practices, as well as OMB
guidance, recognize the importance of reliable information, including the
correct use of budget categories and the consistent use of appropriation
types, to support these processes and decisions.8
DOD's fiscal year 2004 IT budget submission includes inconsistent,
inaccurate, and incomplete information, as follows:
o The Exhibit 300 Capital Investment Reports and the IT-1 spreadsheet
contain different numbers of major initiatives, and the reports' funding
amounts for major initiatives also differ significantly.
o The Exhibit 300s contain omissions and errors, such as missing life
cycle phase information and errors in calculations.
o The Exhibit 300s contain funding amounts for planning and acquisition
activities that do not use the correct budget category-
development/modernization.
o The Exhibit 300s do not consistently use the same appropriation types
to fund the same IT development and modernization activities.
o The IT-1 spreadsheet does not include all the direct and indirect costs
required to fund IT initiatives, such as the direct costs of military
personnel working on the initiatives and the indirect costs of resources
that are jointly used by multiple initiatives or organizations.
740 U.S.C. S: 11312.
8U.S. General Accounting Office, Information Technology Investment
Management: A Framework for Assessing and Improving Process Maturity,
GAO/AIMD-10.1.23 (Washington, D.C.: May 1, 2000).
These inconsistencies, inaccuracies, and omissions are attributable in
part to insufficient management attention to the reliability of the
reports as well as ambiguities in DOD's Financial Management Regulation
(FMR)9 and a lack of supporting systems and control processes for ensuring
consistency between reports. Without accurate and complete IT budget
information, OMB and the Congress are not provided with sufficient
information to make informed decisions about DOD's portfolio of competing
IT investment options or to adjust the level of funding devoted to IT.
Without sufficient information, decision makers could approve or deny
funding for programs that might otherwise have been treated differently.
Moreover, inconsistency in how DOD uses appropriation accounts reduces
congressional and departmental oversight and control of how the department
uses the accounts. Further, this inconsistency increases the risk of
violations of the Anti-deficiency Act, which can occur when funds that
have been apportioned from an appropriation are insufficient to cover
obligations.10
DOD's Exhibit 300s Are Not Consistent with Its IT-1 Budget Spreadsheet
Information in DOD's Exhibit 300 Capital Investment Reports, reported for
its major IT initiatives as part of the fiscal year 2004 budget
submission, is not consistent with funding information in DOD's fiscal
year 2004 IT budget summary, which DOD submits to the Congress in the form
of the IT-1 spreadsheet and to OMB in the form of the Exhibit 53.
Discrepancies were evident in the number of major initiatives that appear
in these two reports, as well as in the amounts for 41 percent of the
major initiatives that appear on both reports. DOD reported 191 major
initiatives in the IT-1 spreadsheet and 179 major initiatives in the
Exhibit 300s. While the two reports have 176 major initiatives in common,
the IT-1 spreadsheet includes 15 initiatives that are not in the Exhibit
300s, and the Exhibit 300s classify 3 initiatives as major that the IT-1
spreadsheet classifies as nonmajor.11 Table 2 compares the total amounts
reported for these three groupings of major initiatives.
9DOD's Financial Management Regulation includes rules on the use of
appropriations and definitions of development/modernization and current
services.
1031 U.S.C. S:S: 1341(a), 1517(a). These sections of the Anti-deficiency
Act prohibit obligations or expenditures in excess of available funds.
11The IT-1 spreadsheet classifies each initiative as major, nonmajor, or
all other. OMB requires that an Exhibit 300 be prepared for each major
initiative, but not for the other categories.
Table 2: Comparison of Total Funding for Three Groupings of Major Initiatives
Dollars in millions
Funding
IT-1
Major initiatives spreadsheet Exhibit 300s Differencea
176 on both Exhibit 300 and IT-1
spreadsheet $14,527 $14,823 -$296
15 on IT-1 spreadsheet only 83 -
3 classified as nonmajor on IT-1
spreadsheet - 57 -57
Total $14,610 $14,880 -$270
Sources: GAO, DOD.
Note: GAO analysis of DOD's Exhibit 300s and IT-1 spreadsheet.
aDifference is the IT-1 spreadsheet total amount minus the Exhibit 300
total amount.
DOD officials cited various reasons why 15 major initiatives on the IT-1
spreadsheet did not have Exhibit 300s. For example, an official
representing the Department of the Army's CIO office told us that one of
the Exhibit 300s was omitted because responsibility for the initiative was
not assigned to the Army in time to prepare the report. The same official
told us that another was omitted because after preparing the IT-1
spreadsheet, senior DOD officials decided not to fund the initiative.12
However, the root cause of these omissions is that DOD does not provide
sufficient management attention to IT budget submission reliability.
Additionally, DOD does not have the management processes (e.g., policies
and procedures) and support systems needed to ensure that the two reports
are consistent.
Significant discrepancies also appear in the total dollar amounts reported
in the Exhibit 300s and the IT-1 spreadsheet for the 176 major initiatives
that were included in both reports. Specifically, DOD's IT-1 spreadsheet
totals about $14.5 billion for these initiatives. For the same major IT
initiatives on DOD's Exhibit 300s, the total dollar amount is about $14.8
billion, about a $300 million difference. This discrepancy can be traced
to 73 of the 176 initiatives (41 percent), of which 44 (25 percent) had
12For 5 of the 15 initiatives without Exhibit 300s, no funding was
included for fiscal year 2004. However, for 9 other initiatives, Exhibit
300s were submitted even though no funding was included for fiscal year
2004.
differences over $1 million, and 4 had differences of more than $100
million. Table 3 provides a summary of funding totals for the 176
initiatives stratified by differences between the initiatives' funding on
the IT-1 spreadsheet and Exhibit 300s.
Table 3: Stratified Funding Differences among 176 Initiatives in Exhibit
300 and IT-1 Reports
Initiatives Amount of difference (thousands) Number Percent
More than $100,000 4
$50,001 to $100,000 1
$10,001 to $50,000 14
$1,001 to $10,000 25
Subtotal: differences over $1 million 44 25
$501 to $1,000 9
$101 to $500 9
$51 to $100 5
$1 to $50 6
No difference 103
Total 176 100
Sources: GAO, DOD.
Note: GAO analysis of 176 initiatives that appear both in DOD's Exhibit
300 and in IT-1 spreadsheet budget reports.
The net difference between the total amount reported for all major
initiatives on the IT-1 spreadsheet and that reported on the Exhibit 300s
is around $296 million.13 A much greater value results when we sum the
differences for each initiative between the IT-1 spreadsheet and the
Exhibit 300s: about $1.6 billion.14 Of the 73 initiatives that account for
these differences, the Army and the Department of the Air Force each had
12, and the Department of the Navy had 6. The Navy accounts for the
largest share of the total dollar difference, followed by the Air Force.
About 95 percent of Navy's total dollar difference can be attributed to
the Navy Marine Corps Intranet program.15
Table 4 breaks down the 73 initiatives by component, showing both the
different amounts on the two reports and the difference between the total
amounts reported.
Table 4: Net Differences, Total Differences, and Number of Initiatives with
Differences, by DOD Component
Initiatives with Difference
Total number differences (millions)
DOD component of initiatives Number Percent Neta Totalb
Air Force 22 12 55 $357.99 $362.81
Army 28 12 43 54.37 55.57
Navy 32 6 19 -559.13 581.89
American Forces 1 1 100 18.01 18.01
Information Service
Defense Commissary Agency 1 0 0 0
Defense Finance and 16 2 13 1.09
Accounting Service
Defense Human Resources 3 0 0 0
Activity
13We computed the net difference between the total amounts reported for
176 major initiatives on both reports by subtracting the total amount
reported for all major initiatives on the IT-1 spreadsheet from the total
amount reported for all major initiatives on the Exhibit 300s.
14We computed the sum of the differences between the amounts for each
initiative in the two reports by first finding the difference between the
amounts for each of the 176 major initiatives in the two, converting any
negative differences to positive values, and then summing all the
differences. The sum of the differences is larger than the difference
between the IT-1 spreadsheet and Exhibit 300 total amounts because for
this calculation, the positive and negative differences between the two
reports do not cancel each other out.
15The Navy Marine Corps Intranet is to provide the Navy with a single,
secure network for all Navy and Marine Corps military and civilian
personnel, including deployed forces.
(Continued From Previous Page)
Initiatives with Difference
Total number differences (millions)
DOD component of initiatives Number Percent Neta Totalb
Defense Information 14 4 29 -0.09
Systems Agency
Defense Logistics Agency 5 1 20 -0.17
Defense Security Service 1 1 100 -12.89 12.89
Office of the Secretary of 4 3 75 7.00 11.14
Defense
Transportation Command 9 0 0 0
TRICARE c 7 3 43 37.22 37.22
Washington Headquarters 3 1 33 0.07
Service
Multiple-component 30 27 90 -199.52 530.61
initiatives d
-$296.05
Total 176 73 41 $1,619.84
Sources: GAO, DOD.
Note: GAO analysis of Exhibit 300s and IT-1 spreadsheet.
aNet is the IT-1 spreadsheet total amount minus the Exhibit 300 total
amount.
bThe total difference was calculated by computing the difference between
the amounts for each of the 176 major initiatives in the two reports,
converting any negative differences to positive values, and then summing
all the differences.
cTRICARE is a regionally managed health care program for active duty and
retired members of the uniformed services and their families and
survivors.
dOf the 30 cross-service initiatives, 27 had differences, but these
differences could not be attributed to a single component because more
than one component reported funding for each initiative.
These inconsistencies among initiatives on the IT-1 spreadsheet and the
Exhibit 300s occurred in part because DOD's management attention to its
budget submission has not been sufficient, and because it does not have
the management processes (e.g., policies and procedures) and support
systems that are needed to ensure consistency. For example, the DOD CIO
official who is responsible for compiling the IT budget submission said
that the department does not have support systems that allow funding
information to be input once and then used to create both the IT-1
spreadsheet and Exhibit 300s. Rather, DOD's budgeting systems require that
similar, but not identical, information be input into multiple databases,
in different formats. According to program offices, this practice
contributes to inaccuracies and inconsistencies in the budget submission.
Additionally, DOD does not have management processes to ensure the
accuracy of changes made to the exhibits by component-and departmentlevel
officials after the exhibits are prepared by program offices. For example,
officials from two of the six program offices that provided information
about this matter told us that information that they reported on the
Exhibit 300s was changed when it was incorporated into the IT-1
spreadsheet by their component CIO offices, and that program offices were
not consulted to ensure that the changes were accurate. Furthermore, these
officials said that the component CIO offices did not inform program
offices of changes made to the IT-1 spreadsheets, and that they did not
have access to the information needed to update Exhibit 300s to reflect
changes.
DOD's Exhibit 300s Contain Omissions and Errors
DOD's fiscal year 2004 Exhibit 300 Capital Investment Reports contain
three types of omissions or errors. First, the reports do not include
complete information on the life cycle phase of the major initiatives, as
required by Circular A-11. According to this circular, Exhibit 300s must
summarize funding data by life cycle phase: that is, planning,
acquisition, or maintenance. OMB officials stated that this information is
used to determine whether IT initiatives have an appropriate balance of
planning, acquisition, and maintenance activities. However, of the 197 DOD
Exhibit 300s for fiscal year 2004 (representing 179 initiatives),16 20
exhibits did not classify the funds by life cycle phase.
Second, the total dollar amount reported on 45 Exhibit 300s does not equal
the sum of their respective line items. As shown in table 5, the Navy
accounts for the majority of these cases-about 69 percent of the 45
exhibits and almost all of the total dollar difference. The discrepancies
can be traced to a variety of causes. For example, among the 31 Navy
Exhibit 300s with differences, 13 erroneously treated the fiscal year
(2004) as a value and added $2,004 million to the funding total. That is,
the numeral "2004" was incorrectly treated as a line of funding in the
summary of spending. These 13 errors account for about $26 billion of the
Navy's approximately $39 billion difference.
16For major initiatives that involve two or more components, each
component may submit a separate Exhibit 300 for the same initiative. As a
result, components collectively submitted 197 Exhibit 300s for 179
initiatives.
Table 5: Discrepancies between Sum of Line Items and Total Amount Reported
on Exhibit 300s, by DOD Component
Fiscal year 2004 amounts (millions) Number of Exhibit
Sum of line items
Total amount reported
DOD component
Total differencea
300s with differences
Air Force $435.3 $445.8 $10.6
Army 336.0 214.5 121.5
Navy 1,934.6 40,791.2 38,856.6
Defense Finance and
Accounting Service 8.3 8.8 0.5
Defense Logistics Agency 8.0 7.8 0.2
Transportation Command 44.9 - 44.9
Total $2,767.1 $41,468.1 $39,034.3
Sources: GAO, DOD.
Note: GAO analysis of Exhibit 300s and IT-1 spreadsheet.
aWe computed the total difference by first calculating the actual sum of
the Exhibit 300 line items, subtracting DOD's reported total for the
Exhibit 300 from it, converting any negative differences to positive
values, and then summing the differences.
Third, although OMB requires an Exhibit 300 for each major initiative and
specifies a defined format to use to present funding information for each
initiative, DOD components did not consistently adhere to this format. For
example, the Defense Information Systems Agency combined the funding
information for seven initiatives in a format that did not clearly provide
OMB and congressional decision makers with the funding amounts for each
initiative. This inconsistency occurred because the Office of the
Secretary of Defense (OSD) does not have clearly defined and consistently
applied management controls to ensure that organizations adhere to a
specified format for displaying funding information in the Exhibit 300.
Some Development/ Modernization Activities Were Improperly Categorized
Circular A-11 requires planning and acquisition activities to be
categorized as development/modernization and activities related to
operation and maintenance of existing systems to be categorized as steady
state, which DOD refers to as current services. Using the appropriate
budget categories is important, according to Circular A-11, because it
permits understanding, and thus informed decision making, about the
relative amounts being spent on developing and modernizing IT versus
operating and maintaining the status quo IT environment. Moreover, OMB
officials stated that using the
proper budget category is also important because it triggers the
appropriate OMB review process for an initiative. If
development/modernization activities are miscategorized as current
services, the required OMB review process will not be invoked.
DOD's fiscal year 2004 IT budget submission incorrectly categorized the
funding reported for some initiatives' planning and acquisition activities
as current services, rather than as development/modernization. This
incorrect categorization affected both DOD's Operation and Maintenance
(O&M) and its Military Personnel appropriation accounts. For example, the
budget submission for the department's new integrated personnel and pay
system included about $14 million to fund program office costs from the
O&M appropriation and categorized these costs as current services.
However, because DOD intends to perform planning and acquisition
activities for this program during fiscal year 2004, a portion of the
funding should have been categorized as development/modernization. This
means that the development/modernization funding amount for this
initiative is understated and the current services amount is overstated.
As another example, the IT-1 spreadsheet shows that every major initiative
that included funding from the Military Personnel appropriation
categorized the amount as current services, regardless of the activities
the military personnel were to perform. The DOD CIO official who is
responsible for compiling the IT budget submission acknowledged that such
miscategorization occurs, but stated that information is not readily
available to determine the total number of initiatives and the associated
amount of funding that is miscategorized departmentwide.
Officials representing the Navy CIO office stated that the Navy
categorizes all IT funding from the O&M appropriation as current services,
even if the funding is to be used for development/modernization
activities. This miscategorization occurs, in part, because the FMR does
not provide clear guidance on categorizing activities as either
development/modernization or current services. Specifically, the FMR
states that budgeted costs funded from the O&M and Military Personnel
appropriations are to be considered expenses, and it defines expenses
similarly to current services, in that both refer to the costs of
operating and maintaining systems. However, Circular A-11 states that
funding for activities that occur during either the planning or
acquisition phases of a new IT initiative must be classified as
development/modernization. This means that costs budgeted for planning or
acquisition activities should be classified as development/modernization,
regardless of whether the O&M, Military Personnel, or another
appropriation is used to fund the activities. Further, a
DOD Comptroller official who is responsible for advising components on IT
budgeting told us that if appropriations are used to fund the planning or
acquisition of a system, the costs should be classified as
development/modernization, rather than current services.
Our analysis of the FMR confirmed that it does not clearly distinguish
between development/modernization and current services costs. More
specifically, it defines the two terms as follows:
o development/modernization costs are those for "new applications and
infrastructure capabilities" and for "any change or modification to an
existing [information system] program, and/or initiative that results in
improved capability or performance of the baseline activity," and the
definition includes "personnel costs for Project Management" and
o current services costs are those required to maintain "operations at a
current capability and performance level" and include "certain overhead
costs associated with PM [program management] offices."
The FMR definitions are confusing regarding the classification of project
management costs because current services costs include "certain overhead
costs associated with PM [program management] offices," and
development/modernization includes "personnel costs for Project
Management." Also, the definitions do not clearly state that for new IT
initiatives, all funding for planning or acquisition activities should be
classified as development/modernization. Furthermore, for modifications of
existing systems, the definitions do not provide sufficient criteria for
determining whether modifications will result in "improved capability or
performance" (development/modernization) or will maintain "operations at a
current capability and performance level" (current services).
OSD and Navy CIO officials stated that decisions regarding the amounts
that should be categorized as development/modernization or current
services for an individual initiative are complicated by the practical
fact that the same personnel and equipment are sometimes used to perform
both development/modernization and current services activities for the
initiative. This occurs because DOD uses a generally accepted system life
cycle management practice that involves sequentially developing and
deploying subsystems, rather than waiting until the system is completely
developed to deploy it. As a result, at various points in the system's
life cycle, some subsystems may be in the maintenance phase while others
are in the planning or acquisition phases. In these cases, these officials
stated
that most DOD program offices do not have process controls and supporting
systems to enable them to accurately estimate the amount that should be
budgeted for development/modernization and current services activities.
IT Budget Submission Does Not Use Appropriation Accounts Consistently
Appropriations provide the legal authority for federal agencies to
obligate funds and make payments from the Treasury for specified purposes.
In the report of the House Committee on Appropriations17 accompanying the
Department of Defense Appropriations Bill, 1999, the Congress expressed
concern about DOD's inconsistent use of appropriation accounts to fund IT
development/modernization activities. In response, DOD acknowledged the
inconsistencies and took steps to correct them by transferring funds from
the incorrect appropriation accounts to the correct accounts and by
issuing clarifications to its FMR guidelines. Additionally, DOD's Office
of the Comptroller issued a memorandum on this issue stating that
"Cross-Service and Agency consistency is important.... In determining what
appropriation to use, the purpose of the funding must fall logically
within the appropriation's purpose and conform with the expense and
investment criteria."
However, the inconsistent use of appropriation accounts is continuing to
occur. DOD's fiscal year 2004 IT budget submission does not consistently
use the same appropriations accounts to fund the same types of activities.
That is, defense components used two different appropriations-the
Research, Development, Test, and Evaluation (RDT&E) and O&M-to fund the
same types of activities (the cost of civilian personnel and other costs
for performing or managing development/modernization activities).
According to officials representing 7 of the 10 major initiatives that
provided information on this topic, their respective budget reports
included funding from the O&M appropriation for civilian personnel costs
and other costs for performing or managing development/modernization
activities, while according to officials representing 3 other initiatives,
their budget reports included funding for these activities from the RDT&E
appropriation. Officials from the DOD Comptroller's office stated that the
O&M appropriation is the correct one to fund these costs, but that
research and development organizations are allowed to use RDT&E
appropriations for these costs, because such organizations do not receive
O&M appropriations. However, according to a representative of the Army
CIO's
17H.R. Rep. No. 105-591, at 173-174 (June 22, 1998).
office, two of the three organizations that used RDT&E appropriations were
not research and development organizations (both were Army programs) and,
according to the DOD Comptroller official, should have used O&M
appropriations.
A representative of the Army CIO's office explained that the reason the
Army program offices used the RDT&E appropriation to fund the cost of
civilian personnel and other costs for performing or managing
development/modernization activities was that his office advised them to
do so. He stated that this advice was based on the Army CIO office's
interpretation of the FMR and on an October 1999 memorandum from the DOD
Comptroller containing the following language:
"The RDT&E funds are typically used for developing new capability.
Expenses-the resources used to operate and maintain organizations and
current services-are generally budgeted in the O&M appropriations.
Investments are costs to acquire capital assets and have a long-term
benefit...."
This official further stated that FMR sections, as well as the language in
this memorandum, indicate that the costs to develop new IT capabilities,
including the costs of civilian personnel and other costs for managing and
performing IT development and modernization activities, should be funded
with the RDT&E appropriation. However, the official added that the FMR is
ambiguous on this matter because other sections indicate that the O&M
appropriation may be the correct one to use to fund these costs.
Our analysis of the FMR shows that the FMR is ambiguous regarding the
proper appropriation types for funding the costs for
development/modernization activities-specifically, the cost of civilian
personnel and other costs for managing and performing these activities.
The following excerpts from the FMR illustrate its ambiguity in this area.
The section on "Budgeting for Information Technology and Automated
Information Systems" supports the Army CIO's position that the RDT&E
appropriation should be used to fund these activities:
"In general, all developmental activities involved in bringing a program
to its objective system[18] are to be budgeted in RDT&E."
18DOD's FMR states that bringing a program to its objective system means
developing the system to the point that it meets the requirements defined
in the system's requirements documents.
However, other sections of the regulation support the DOD Comptroller
officials' position that the O&M appropriation is the correct
appropriation for funding the cost of civilian personnel and other costs
for managing and performing development/modernization activities. For
example, the section on funding policies states that
"Costs budgeted in the Operation and Maintenance (O&M) and Military
Personnel appropriations are considered expenses....
"The following guidelines shall be used to determine expense costs: Labor
of civilian, military, or contractor personnel....
"The cost of civilian personnel compensation and other direct expenses
(i.e., travel, office equipment leasing, maintenance, printing and
reproduction) incurred in support of procurement and/or production
programs by departmental headquarters staff, contracting offices, contract
audit offices, system project offices, and acquisition managers are
expenses."
These FMR sections provide conflicting guidance regarding which
appropriation should be used to fund civilian personnel and other costs
for development/modernization activities, which can result in the
inconsistent use of appropriations. As we have previously reported,19 use
of the wrong appropriation account constitutes a violation of the Purpose
Statute20 and can lead to a violation of the Anti-deficiency Act.21 For
example, we reported that the Navy incorrectly purchased component parts
for IT systems with the O&M appropriation account rather than with the
Procurement appropriation. Subsequent actions to correct the improper use
of the O&M appropriation account resulted in an overobligation of the
amount that had been apportioned from Procurement appropriations, thereby
violating the Anti-deficiency Act. Further, we reported that the
violations resulted from misunderstanding, confusion, or misapplication of
financial management regulations and guidance regarding procurement and
fund management.
19U.S. General Accounting Office, Navy Anti-Deficiency Act Training,
GAO/AIMD-96-53R (Washington, D.C.: Apr. 12, 1996).
2031 U.S.C. S: 1301(a) is commonly referred to as the Purpose Statute.
21Anti-deficiency Act (31 U.S.C. S: 1517(a)).
DOD's Submission Does Not Include All Relevant Project Costs
Contrary to federal accounting guidance, DOD's budget submission does not
include all the costs required to fund IT initiatives. Federal accounting
standards and guidance from the Chief Financial Officers (CFO) Council
both support the preparation of budget submissions that include the full
cost of initiatives-including all direct costs, such as military personnel
costs-and those indirect costs that can be allocated or traced to an
initiative. Further, the Federal Financial Management Improvement Act of
1996 requires federal agencies to comply with federal accounting
standards,22 including the Statement of Federal Financial Accounting
Standard Number 4, "Managerial Cost Accounting Concepts and Standards for
the Federal Government." According to this statement, organizations should
report full costs in general purpose financial reports, including the
salaries and other benefits of employees who work directly on producing
outputs (such as IT initiatives), as well as indirect costs that can be
allocated to producing outputs. The statement continues that the cost data
in the organization's budget should be consistent with the full cost data
reported in the financial reports. Also, the CFO Council's Cost Accounting
Implementation Guide states that preferably, the cost of all significant
inputs that can be traced to the achievement of a program's outputs and
intended outcomes should be included in the program's budget.
DOD's fiscal year 2004 IT-1 spreadsheet, which summarizes the IT budget
and provides information on the budget submission for each major
initiative, does not include all the direct costs of the initiatives.
Specifically, for numerous initiatives, the spreadsheet did not
consistently include IT funding for military personnel who are part of
DOD's IT workforce. On the basis of the average pay and benefits for
military personnel, we estimated that the total amount of these workers'
salary and benefits is about $4 billion annually. In its fiscal year 2004
budget submission, DOD's IT-1 spreadsheet included about $1 billion from
the Military Personnel appropriation, meaning that the department's fiscal
year 2004 IT budget is potentially understated by as much as $3 billion.
According to the DOD CIO official responsible for assembling the IT budget
submission, a portion of this $3 billion might have been included in the
IT-1 spreadsheet as either reimbursable costs or working capital funds,
and some of the costs associated with DOD's IT military personnel are not
included in the IT budget submission because these personnel work on
embedded or satellite system programs, which are not in DOD's IT budget.
The official also stated
22Public Law 104-208, section 803(a).
that information is not readily available to determine the number or cost
of IT military personnel erroneously omitted from the IT budget reports.
However, officials from five of the six program offices that provided
information about this matter told us that they planned to use military
personnel during fiscal year 2004, but they did not include these costs in
their respective IT budget reports because the military services, rather
than the initiatives, are responsible for budgeting and accounting for
these personnel.
Further, program offices did not include all indirect costs of the
initiatives-that is, costs that are used jointly with other initiatives or
DOD component organizations-in their fiscal year 2004 IT budget reports.23
Officials of both the Army and Navy CIO offices stated that program
offices generally do not include all indirect costs in their IT budget
reports, because these costs are budgeted by the other DOD organizations
that may be stakeholders in the respective initiatives, and the program
offices are not generally provided with information on the amount of these
shared costs that can be attributed to their respective initiatives. These
officials also stated that with a few exceptions, department organizations
have neither cost accounting systems nor cost estimating processes in
place to determine the amount of indirect costs that should be allocated
to each IT initiative.
Conclusions DOD has not devoted sufficient management attention and it
does not have adequate management controls and supporting systems in place
to ensure that its IT budget submissions provide consistent, accurate, and
complete cost information for major IT initiatives. The result is that
DOD, OMB, and congressional decision makers are forced to make IT funding
decisions for major IT initiatives on the basis of conflicting, uncertain,
and inaccurate information regarding the cost of these initiatives.
Without reliable budget information, decision makers are unnecessarily
impaired in their ability to execute effective departmental control and
oversight by linking budgetary inputs to outputs and outcomes, to compare
full budgeted and actual costs of IT initiatives, and to make decisions on
the relative merits of competing initiatives.
23Indirect costs include such shared costs as those for general
administrative services; general research and technical support; security;
employee health and recreation facilities; and operation and maintenance
of buildings, equipment, and utilities.
Recommendations To improve the consistency, accuracy, and completeness of
future DOD IT budget submissions, we recommend that the Secretary of
Defense direct the OSD and component CIOs, in consultation with the OSD
and component Comptrollers, to increase management attention and establish
the appropriate management controls and supporting systems to avoid the
weaknesses described in this report, including revising the FMR and other
guidance for preparing the DOD IT budget to clearly reflect these policies
and procedures. At a minimum, we recommend that revisions to policies,
procedures, and supporting systems ensure that
o Exhibit 300s and IT-1 spreadsheets are consistent in terms of (1) the
major initiatives that are included in each report (unless otherwise
explained) and (2) the funding reported for each of these initiatives;
o Exhibit 300s are complete, accurate, and internally consistent, in that
(1) funding information is provided for each life cycle phase for each
initiative; (2) total amounts reported for each initiative equal the sum
of the individual line items for the initiative; and (3) the format used
to display the funding information clearly shows the total funding amount
for each initiative;
o amounts are properly categorized as development/modernization or
current services in the IT budget submission, so that OMB and
congressional decision makers are provided with accurate information on
the funding required to (1) develop new systems or significantly improve
existing systems and (2) operate and maintain existing systems;
o budget submissions are consistent in the costs that are funded with the
RDT&E appropriation and those that are funded with the O&M appropriation;
and
o budget submissions fully account for all relevant costs, including
military personnel costs and indirect costs, to the extent that these
costs can be identified and properly allocated to each initiative, so that
OMB and congressional decision makers are provided with complete budget
information for each initiative.
We further recommend that the OSD and component CIO offices, in
consultation with the OSD and component Comptroller offices,
o assess the costs and benefits of alternative approaches for
establishing cost accounting systems or cost estimating processes to
determine the amount of indirect costs attributable to each IT initiative
and the amounts that should be categorized as development/modernization
and current services, and implement the more cost-effective approach;
o assess approaches to reduce or eliminate requirements for duplicative
manual entry of information by program offices and components into systems
supporting the preparation of the IT budget reports; and
o review the IT budget submission for fiscal year 2004 and the IT budget
submission for fiscal year 2005 from the O&M and RDT&E appropriations and
transfer, as necessary, the amounts for civilian personnel and other costs
associated with IT planning or acquisition activities to the proper
appropriation account, to ensure consistent use of these accounts, provide
for congressional and departmental oversight of DOD's use of
appropriations accounts, and reduce the risk of violations of the
Anti-deficiency Act.
Agency Comments and GAO Evaluation
DOD provided what it termed "official oral comments" on a draft of this
report from the CIO, OSD, who is also the Assistant Secretary of Defense
for Networks and Information Integration. In commenting, DOD either agreed
or partially agreed with our recommendations and described actions that it
plans to take to establish the appropriate controls and systems needed to
correct many of the weaknesses described in this report, including
revising the FMR. Examples of DOD's planned actions include
o providing the Congress with a list of initiatives for which Exhibit
300s were provided to OMB, but not to the Congress, along with
explanations for differences;
o negotiating with OMB a later submission date for DOD's exhibits, to
provide additional time to ensure that exhibits are reliable;
o establishing a common, consistent data source to use in producing
Exhibit 300s and the IT-1 spreadsheets;
o modifying the process for producing Exhibit 300s to ensure that correct
funding amounts are captured;
o using a standardized format for Exhibit 300s;
o working with OMB to ensure the use of consistent definitions of and
terminology for development/modernization and current services;
o updating the FMR to clarify areas of concern or inconsistencies in (1)
the information presented in Exhibit 300s, (2) the use of
development/modernization and current services categories, and (3) the
categorization of costs as RDT&E or O&M;
o assessing, on a departmentwide basis, the establishment of a cost
accounting system;
o evaluating approaches to reduce or eliminate duplicative data entry;
and
o considering appropriations realignments during the fiscal year 2006
budget cycle.
Notwithstanding DOD's agreement with our recommendations, as well as its
planned actions to improve its submissions' consistency, accuracy, and
completeness, DOD also provided mitigating reasons for the discrepancies
and problems that we reported. For example, DOD stated that Exhibit 300s
and IT-1 spreadsheets are not consistent in terms of the major initiatives
included in each report because DOD does not necessarily report all major
initiatives in the Exhibit 300s. Instead, DOD and OMB agree as to which
major initiatives are to be reported in the Exhibit 300s based on a goal
of reporting a dollar percentage of all initiatives. Similarly, DOD stated
that its IT-1 spreadsheet does not include all relevant costs, such as
military personnel costs and indirect costs, because the spreadsheet is an
extract of the budget justification documents and does not include full
life cycle costs or total cost of ownership. Nevertheless, DOD added that
it will assess its guidance on reporting the cost of military personnel
and other relevant costs.
While we do not question the information that DOD provided to explain the
discrepancies and problems discussed in our report, this information does
not eliminate the need to provide congressional decision makers with
reliable information upon which to make informed decisions. Thus, for DOD
to fully respond to our recommendations, it will need to take additional
actions beyond those provided in its comments. For example, it will need
to provide the Congress with a list of major initiatives included in the
IT-1 spreadsheet that are not included in Exhibit 300 (with an
explanation of these differences). Also, beyond modifying the FMR, it will
need to revise related guidance and implement controls to ensure that
costs are correctly categorized as (1) development/modernization or
current services and (2) RDT&E or O&M.
We are sending copies of this report to other interested congressional
committees and the other Members of the Senate and House Committees
on Armed Services; the House and Senate Committees on Appropriations,
Subcommittees on Defense; the Director, Office of Management and
Budget; the Secretary of Defense; the Assistant Secretary of Defense
(Networks and Information Integration)/Chief Information Officer; the
Under Secretary of Defense (Comptroller); and the Under Secretary of
Defense (Acquisition, Technology, and Logistics). We will also provide
copies to others on request. This report will also be available at no
charge
on our Web site at http://www.gao.gov.
If you have any questions concerning this report, please contact me at
(202)
512-3439 or by e-mail at [email protected]. Other key contributors to this
letter
are Barbara Collier, Alison Jacobs, George L. Jones, Nick Marinos, Daniel
Wexler, and Robert Williams, Jr.
Randolph C. Hite
Director, Information Technology Architecture
and Systems Issues
Appendix I
Objective, Scope, and Methodology
Our objective was to determine whether the fiscal year 2004 information
technology (IT) budget submission for the Department of Defense (DOD) was
reliable, including identifying opportunities to improve its reliability
in the future. To do so, we assessed the funding information in DOD's
primary IT budget reports to determine whether the information reported
was consistent between reports, whether the reports included all the
funding information that the Office of Management and Budget (OMB)
requires, whether the correct budget categories and consistent
appropriation types were used to fund the initiatives, and whether the
submission included all costs of the initiatives.
We reviewed OMB Circular A-11 to obtain requirements and guidelines for
preparing budget submissions and confirmed our understanding of the
guidelines through interviews with OMB officials. We also assessed DOD's
Financial Management Regulation (FMR) and its budget submission guidance,
and we interviewed DOD departmental and component officials to determine
DOD's criteria for budget submissions. Finally, we reviewed federal
accounting standards to determine additional guidance for budget
preparation.
To identify inconsistencies between the reports, we assessed the Exhibit
300 Capital Investment Reports and the IT-1 budget summary spreadsheet. We
compared the Exhibit 300s with the IT-1 spreadsheet and not with the
Exhibit 53 because the Exhibit 53 presents essentially the same
information as the IT-1 spreadsheet, but in less detail. We counted the
number of major initiatives that appeared in both reports, as well as the
number appearing in only one of the reports. We also calculated the
differences in the funding amounts between the Exhibit 300s and the IT-1
spreadsheet and made comparisons among the initiatives and components, as
well as between totals, for each report. We interviewed departmental,
component, and program officials to determine causes for the
inconsistencies.
To select which program officials to contact, we chose a cross section of
DOD's organizations, including the Office of the Secretary of Defense; the
Departments of the Air Force, Army, and Navy; and seven agencies and
activities (the American Forces Information Service, Defense Contract
Management Agency, Defense Human Resources Activity, Defense Information
Systems Agency, Defense Security Service, TRICARE, and Washington
Headquarters Service). From each program office, we obtained explanations
of its funding submission related to one or more of the following issues:
inconsistencies between the reports, omissions and errors
Appendix I
Objective, Scope, and Methodology
in Exhibit 300s, improper categorization of development/modernization
activities, inconsistent use of appropriations, and costs that were not
included in the submission.
To determine whether the reports included all information required by OMB,
we analyzed the Exhibit 300 Capital Investment Reports to identify
omissions and inconsistencies in the information for each initiative. We
tallied the number of initiatives that omitted life cycle information. We
also identified initiatives with total funding amounts that were not equal
to the sum of the amounts reported for individual line items and
calculated the totals by component. To determine causes for these
inconsistencies, we interviewed departmental, component, and program
officials.
To determine whether the correct budget categories were used to fund the
initiatives, we examined programs that included activities for development
and modernization and determined how their funding amounts were
categorized. We interviewed program officials to determine what activities
were planned and then assessed whether the budget categories were
consistent with OMB criteria. We also interviewed component and
departmental officials to determine the guidance they were providing to
program officials, and we assessed DOD's FMR to determine whether its
guidance was clear and consistent with OMB guidelines.
To determine whether consistent appropriation types were used to fund
initiatives, we determined what appropriation types were included for
funding development and modernization activities. We identified three
program offices that were using the Research, Development, Test, and
Evaluation appropriation for these purposes and seven that were using the
Operation and Maintenance appropriation, and contacted them to determine
the reasons that they selected these appropriations. We reviewed DOD's
prior actions to correct similar inconsistencies. We also analyzed the
language in the FMR for its clarity on these issues.
To determine whether the submission included all costs of the initiatives,
we assessed the appropriation activities reflected in the IT-1
spreadsheet. From this assessment and interviews with program officials,
we determined that many programs did not include funding for military
personnel. To confirm that such costs should be included, we interviewed
officials representing OMB, the DOD Comptroller, and the DOD Chief
Information Officer, and we reviewed the FMR and budgeting guidance in the
Statement of Federal Financial Accounting Standard Number 4, "Managerial
Cost Accounting Concepts and Standards for the Federal
Appendix I
Objective, Scope, and Methodology
Government." We also interviewed program officials to determine why they
did not include funding for military personnel costs in their budget
reports. We used Defense Manpower Data Center information to estimate the
potential amount that military personnel costs are understated in the
fiscal year 2004 IT budget submission. To do this, we calculated the
difference between the cost of military personnel performing IT functions
and the amount of funding in DOD's IT budget submission that was to be
funded using the Military Personnel appropriations. To estimate the cost
of IT military personnel, we used Defense Manpower Data Center information
on the number of military personnel performing IT work in each of the four
services-Air Force, Army, Navy, and the U.S. Marine Corps-and multiplied
the number at each rank for each service by the respective average annual
pay and benefits. We included only active military personnel in IT duty
positions in our estimate. We also assessed federal accounting standards
and interviewed program officials to determine the requirements and
practices for including indirect costs in budget reports.
We conducted our work at GAO and at DOD headquarters during June to
October 2003 in accordance with generally accepted government auditing
standards.
GAO's Mission The General Accounting Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony
The fastest and easiest way to obtain copies of GAO documents at no cost
is through the Internet. GAO's Web site (www.gao.gov) contains abstracts
and fulltext files of current reports and testimony and an expanding
archive of older products. The Web site features a search engine to help
you locate documents using key words and phrases. You can print these
documents in their entirety, including charts and other graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its
Web site daily. The list contains links to the full-text document files.
To have GAO e-mail this list to you every afternoon, go to www.gao.gov and
select "Subscribe to e-mail alerts" under the "Order GAO Products"
heading.
Order by Mail or Phone The first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out
to the Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are discounted 25
percent. Orders should be sent to:
U.S. General Accounting Office 441 G Street NW, Room LM Washington, D.C.
20548
To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061
To Report Fraud, Contact: Web site: www.gao.gov/fraudnet/fraudnet.htm
Waste, and Abuse in E-mail: [email protected]
Federal Programs Automated answering system: (800) 424-5454 or (202)
512-7470
Public Affairs Jeff Nelligan, Managing Director, [email protected] (202)
512-4800 U.S. General Accounting Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
Presorted Standard
Postage & Fees Paid
GAO
Permit No. GI00
United States
General Accounting Office
Washington, D.C. 20548-0001
Official Business
Penalty for Private Use $300
Address Service Requested
*** End of document. ***