Military Housing: Opportunities Exist to Better Explain Family
Housing O&M Budget Requests and Increase Visibility Over
Reprogramming of Funds (27-MAY-04, GAO-04-583).
The military services have owned and operated much housing on
their installations but increasingly are privatizing housing,
relying on the private sector to manage the renovation,
construction, and maintenance of existing and new homes for
military families. Funding to operate and maintain existing
government-owned housing is provided through the family housing
operation and maintenance (O&M) appropriations. The amount of
funding required varies based on a number of factors, including
how quickly privatization occurs to reduce requirements for
government-owned housing. As requested, this report discusses the
(1) services' assumptions and methods used to develop budget
requests and how well their budget justifications explain the
impact of privatization on family housing O&M funds and (2) the
extent to which Congress has visibility over the services'
reprogramming of family housing O&M funds.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-583
ACCNO: A10175
TITLE: Military Housing: Opportunities Exist to Better Explain
Family Housing O&M Budget Requests and Increase Visibility Over
Reprogramming of Funds
DATE: 05/27/2004
SUBJECT: Appropriation accounts
Congressional oversight
Defense economic analysis
Military appropriations
Military housing
Planning programming budgeting
Privatization
Reprogramming of appropriated funds
Budget requests
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GAO-04-583
United States General Accounting Office
GAO Report to Congressional Committees
May 2004
MILITARY HOUSING
Opportunities Exist to Better Explain Family Housing O&M Budget Requests and
Increase Visibility Over Reprogramming of Funds
a
GAO-04-583
Highlights of GAO-04-583, a report to congressional committees
The military services have owned and operated much housing on their
installations but increasingly are privatizing housing, relying on the
private sector to manage the renovation, construction, and maintenance of
existing and new homes for military families. Funding to operate and
maintain existing government-owned housing is provided through the family
housing operation and maintenance (O&M) appropriations. The amount of
funding required varies based on a number of factors, including how
quickly privatization occurs to reduce requirements for government-owned
housing. As requested, this report discusses the (1) services' assumptions
and methods used to develop budget requests and how well their budget
justifications explain the impact of privatization on family housing O&M
funds and (2) the extent to which Congress has visibility over the
services' reprogramming of family housing O&M funds.
GAO is making several recommendations to better explain the budget
requests for family housing O&M and increase visibility over service
reprogramming of funds between the accounts and a matter for congressional
consideration related to visibility of fund movements.
In written comments on a draft of this report, DOD agreed with the
recommendations.
May 2004
MILITARY HOUSING
Opportunities Exist to Better Explain Family Housing O&M Budget Requests and
Increase Visibility Over Reprogramming of Funds
Budget justification materials submitted to Congress for family housing
O&M funding do not clearly and consistently explain funding requirements
and how the housing privatization program impacts the services' budget
requests, frustrating congressional oversight. Various factors have
contributed to this situation. The services use similar assumptions and
methods to develop budget requests for family housing O&M, but they often
rely on assumptions established up to a year and a half before the budgets
are executed. While the services have the ability to revise and update
their budget requests, they typically choose not to because of the
difficulty of doing so related in part to other competing defense
priorities and the relatively small size of the family housing O&M budget.
Given these considerations, defense officials said that they are more
likely to make the needed funding adjustments through reprogrammings. In
addition, changes in the pace of expected privatization can affect funding
required for the nine family housing O&M accounts and subaccounts-although
not uniformly-but the effects of these changes are not well explained in
budget justifications submissions to Congress. Although, in many cases,
the services may have data that could result in better informed decision
making, they do not always include such information in budget
justifications.
Congress has limited visibility of the services' reprogramming of family
housing O&M funds. For example, Congress is not notified when
reprogrammings are below 10 percent of the initial funding amount or
result in a decrease. On the other hand, DOD provides congressional
decision makers with more information on reprogrammings for other
appropriations, such as regular O&M. In addition, compared with the other
services, the Navy and the Marine Corps' reporting of reprogrammings
provides even less visibility. For example, they did not report to
Congress reprogrammings for the four subaccounts-management, services,
furnishings, and miscellaneous-within the operations account. In addition,
the Defense Finance and Accounting Service's obligation reports for the
Navy and Marine Corps do not separate the four operations subaccounts, as
they do for the other services. Navy and Marine Corps officials were not
aware of the usefulness to separate the four operations subaccounts. Also,
the Navy and the Marine Corps obligation data reflecting reprogramming
actions do not always match comparable official obligation data produced
by the Defense Finance and Accounting Service. Even though the two
services have been working with the Defense Finance and Accounting
Service, officials told GAO that this has been a long-standing issue and
difficult to resolve. Collectively, this lack of visibility over the
reprogramming of funds and data inconsistencies hinder the ability of
congressional and DOD decision makers to evaluate family housing O&M
budget requests and obligations.
www.gao.gov/cgi-bin/getrpt?GAO-04-583.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Barry W. Holman at (202)
512-8412 or [email protected].
Contents
Letter
Results in Brief
Background
Services Do Not Clearly and Consistently Explain the Impact of
Privatization in Their Budget Justifications to Congress Congress Has
Limited Visibility Over the Reprogramming of Family
Housing O&M Funds Conclusions Recommendations for Executive Action Matter
for Congressional Consideration Agency Comments Scope and Methodology
1
3 4
9
12 16 17 17 17 18
Appendix I GAO Briefing Slides
Appendix II Family Housing Operation and Maintenance Budget Definitions
Appendix III Comments from the Department of Defense
Table
Table 1: Services' Reprogramming Amounts and Percentages Reprogrammed,
Fiscal Year 2003
Figure
Figure 1: Percentage of Funding for the Family Housing O&M Appropriations
by Account and Subaccount, Fiscal Year 2004 6
Abbreviations
DOD Department of Defense
OSD Office of the Secretary of Defense
O&M operation and maintenance
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separately.
United States General Accounting Office Washington, DC 20548
May 27, 2004
Congressional Committees
The military services own and operate much housing on their military bases
while at the same time they are increasingly moving to privatize their
housing. In doing so, they rely on the private sector to renovate and
operate privatized housing as well as build and maintain many new housing
units. Some funding to support both military-owned housing and
privatization is provided for in the family housing operation and
maintenance (O&M) portion of the military construction appropriation act.
The services' family housing O&M budget requests and resulting
congressional appropriations use a budget structure consisting of nine
accounts and subaccounts. Congress appropriated about $2.7 billion to
operate and maintain about 230,000 housing units for servicemembers and
their families in fiscal year 2004. The services use these funds to meet a
range of family housing requirements, such as managing property, providing
utilities, and maintaining and leasing housing units.
In 1998, the Department of Defense (DOD) estimated that 60 percent of its
family housing inventory in the United States was inadequate and in need
of renovation or replacement. In its Defense Planning Guidance for fiscal
years 2004 through 2009, DOD set a deadline of fiscal year 2007 to
eliminate inadequate family housing across DOD. Recognizing this
situation, Congress gave DOD new authorities to use private sector
investment capital and housing construction expertise to finance, own,
operate, and maintain military housing known as the Military Housing
Privatization Initiative.1 As the services privatize their housing,
reductions in their housing inventory will occur. A portion of family
housing O&M appropriation supports the privatization initiative, such as
funding environmental assessments and consultant fees.
The conference report2 accompanying the fiscal year 2004 military
construction appropriation bill directed us to conduct a study on the
assumptions and methods used by the services to develop their respective
1 The National Defense Authorization Act for Fiscal Year 1996 (Pub. L. No.
104-106, Feb. 10, 1996).
2 H.R. Conf. Rep. No. 108-342, page 16 (2003).
budget requests for the nine accounts and subaccounts3 that comprise the
family housing O&M appropriations and review the reprogramming of funds
between these accounts.4 We recently provided your offices with
information summarizing our preliminary findings in a briefing format (see
app. I). This report summarizes and updates our findings contained in the
briefing materials in the following two areas: (1) the services'
assumptions and methods used to develop individual budget requests and how
well their budget justifications explain the impact of privatization on
family housing O&M funds and (2) the extent to which Congress has
visibility over the services' reprogramming of family housing O&M funds.
To address these objectives, we interviewed Army, Navy, Marine Corps, and
Air Force family housing officials to obtain information on the
assumptions and methods used to develop the family housing O&M budget
requests, the impact of privatization on family housing O&M funds, and the
reprogramming of these funds. In addition, we reviewed the services'
budget justification submissions to assess how well the services explained
their assumptions, methodology, and the impact of privatization. We
assessed the reliability of the services' data and found some
inconsistencies between Navy and Marine Corps data and Defense Finance and
Accounting Service data. We believe the data gathered are sufficiently
reliable for the purposes of this report. We also discussed the results of
our work with officials from the Office of the Under Secretary of Defense
(Comptroller); the Housing and Competitive Sourcing Office within the
Office of the Under Secretary of Defense for Acquisition, Technology, and
Logistics; the Defense Finance and Accounting Service; and the military
services. We conducted our work from December 2003 through March 2004 in
accordance with generally accepted government auditing standards. Details
about our scope and methodology appear at the end of this letter.
3 The President's budget shows four family housing O&M appropriation
accounts, which are broken down into five program activities. However, for
budget justifications and committee reports, both Congress and DOD break
down these four appropriation accounts into nine accounts and subaccounts
that roughly correspond to the five program activities. This report
discusses the nine accounts and subaccounts.
4 The movement of funds from one appropriation account to another is a
"transfer." The movement of funds within the family housing O&M
appropriation accounts is referred to as a "reprogramming." Congress and
DOD refer to these reprogrammings as fund movements between the nine
family housing O&M accounts and subaccounts reported in budget
justifications and committee reports. The focus of this report is on
reprogrammings.
Results in Brief
Budget justification materials that the services submit to Congress for
family housing O&M funding do not clearly and consistently explain the
services' funding requirements and how the housing privatization program
impacts their budget requests, frustrating congressional oversight.
Various factors have contributed to this situation. The services often
rely on assumptions established up to a year and a half before the budgets
are executed to develop budget requests for family housing O&M. For
example, these budget requests are largely based on historical obligations
adjusted for pricing and program assumptions. While the services have the
ability to revise and update their budget requests, they typically choose
not to because of the difficulty of doing so related in part to other
competing defense priorities and the relatively small size of the family
housing O&M budget. For example, if a service anticipated a slippage in
the privatization initiative after the family housing O&M budget amounts
are programmed, service officials told us that the budget request may not
be revised to reflect the slippage. Defense officials said that they are
more likely to make the needed funding adjustments through reprogrammings.
In addition, changes in the pace of expected privatization can affect
funding required for individual accounts and subaccounts-although not
uniformly--but the effects of the changed pace are not well explained in
the services' budget justifications. Although in many cases the services
may have data that could better explain how the housing privatization
program impacts their budget requests, they do not always include such
information in budget justification submissions to Congress.
Congress has limited visibility of the services' reprogramming of family
housing O&M funds. While all services reprogram family housing O&M funds,
they are required to notify Congress of only those reprogrammings that are
10 percent or more of the initial funding levels for the nine accounts and
subaccounts. Congress is not notified when reprogrammings are below 10
percent or result in a decrease. For example, in fiscal year 2003, the Air
Force was not required to notify Congress of a $3.7 million increase in
the leasing account because it was below 10 percent or a $75 million
decrease in the maintenance account. Also, compared with the other
services, the Navy and the Marine Corps' reporting of reprogramming
actions provides even less visibility. For example, the Navy and the
Marine Corps did not report to Congress reprogrammings of 10 percent or
more for the four subaccounts-management, services, furnishings, and
miscellaneous-within the operations account. Furthermore, the Defense
Finance and Accounting Service's obligation reports for the Navy and the
Marine Corps do not separate the four operations subaccounts, as the
reports do for the other services. In addition, unlike the Army and the
Air Force, the Navy and the Marine
Corps obligation data reflecting reprogramming actions throughout the year
do not always match comparable official obligation data produced by the
Defense Finance and Accounting Service. DOD provides congressional
decision makers with more information on reprogrammings for other
appropriations, such as regular O&M,5 i.e., it provides a semiannual
summary of the initial funding levels, the amount of funds reprogrammed,
and the total funds obligated. Collectively, this lack of visibility over
the reprogramming of funds and data inconsistencies between the Navy and
the Marine Corps and the Defense Finance and Accounting Service hinder the
ability of congressional and DOD decision makers to evaluate family
housing O&M budget requests and obligations.
To provide Congress with sufficient data in the services' budget
justification submissions, we are making a recommendation that the
services better explain the data provided to Congress regarding the impact
of privatization on family housing O&M budget requests. We are also making
recommendations to improve congressional visibility of the Navy and Marine
Corps' reprogrammings of family housing O&M accounts and subaccounts and
to improve the consistency of the Navy and Marine Corps obligation data.
We also suggest that Congress may wish to consider further improving the
visibility of the services' reprogrammings by requiring DOD to provide
information covering the net movement of funds for each of the nine family
housing O&M accounts and subaccounts at the end of the fiscal year,
similar to what DOD now provides to Congress on other appropriations. In
written comments on a draft of this report, the Deputy Comptroller
(Program/Budget) within the Office of the Under Secretary of Defense
(Comptroller) agreed with our recommendations and commented favorably
about our matter for congressional consideration. The Deputy Comptroller
also stated that the department is taking steps to implement our
recommendations. DOD's comments are included in this report in appendix
III.
Background In fiscal year 2004, DOD owns and manages about 230,000
housing units for military families. At the same time, DOD is increasingly
moving to privatize its housing, relying on the private sector to renovate
and operate privatized housing as well as build and maintain many new
housing units.
5 For purposes of this report, regular O&M refers to operation and
maintenance other than family housing operation and maintenance, normally
provided in the DOD annual appropriations bill.
As of February 2004, DOD had privatized about 55,100 housing units and
expected to privatize about 160,000 housing units by the end of fiscal
year 2007, including construction of many new units. To operate and
maintain the government-owned infrastructure, the services use family
housing O&M funds to perform maintenance, pay utilities, provide services,
manage the family housing program, and fund various other family housing
requirements. Also, funding for military-owned and privatization support
costs6 is provided for in the family housing O&M portion of the annual
military construction appropriation. For fiscal year 2004, Congress
appropriated about $2.7 billion for family housing O&M in the military
construction appropriation. The services request these funds using a
budget structure comprised of nine accounts and subaccounts (see fig. 1).7
In turn, Congress, in its conference report accompanying the bill, uses
the same nine accounts and subaccounts to designate its understanding of
how the funds are to be used. As shown in figure 1, DOD groups the four
subaccounts-management, services, furnishings, miscellaneous-under the
operations account.8
6 Privatization support includes costs for consultants for advisory and
assistance activities such as individual project development, federal
civilian salaries and training activities, and for services such as
environmental assessments and land boundary surveys.
7 These nine accounts and subaccounts are within each of the four
appropriation accounts shown in the President's budget.
8 See app. II for definitions of the nine accounts and subaccounts that
comprise the family housing O&M appropriations.
Figure 1: Percentage of Funding for the Family Housing O&M Appropriations
by Account and Subaccount, Fiscal Year 2004
Note: May not add to 100 percent due to rounding.
Congressional conferees expressed several concerns about the services'
family housing O&M budget requests in the conference report accompanying
the 2004 military construction appropriation bill.9 Conferees stated
concerns about the services not adequately explaining the assumptions and
methods used to develop the family housing O&M budget requests and about
the services' reprogramming actions. Furthermore, conferees reduced each
of the services' fiscal year 2004 family housing O&M budget requests by
$10 million due to the way the services calculated their family housing
O&M requirements. Conferees further reduced the Navy's request by another
$7.7 million due to concerns
9 Conference Report (H.R. Conf. Rep. No. 108-342, page 16 (2003)),
accompanying H.R. 2559 (became Pub. L. No. 108-132 (2003)).
about how the Navy accounted for its housing privatization effort in its
family housing O&M budget request for fiscal year 2004.
Family Housing O&M Budget Process
As part of the President's budget request to Congress, the services
develop budget requests and justification submissions to fund family
housing O&M programs and activities. The process begins with the family
housing master plans, which provide a consolidated strategy for planning,
programming, and executing the family housing program and include funding
plans for maintaining government-owned housing and plans indicating a time
frame for privatization. The services' budget formulation process
translates the strategy from the family housing master plans into their
respective budget requests. In that process, assumptions about the future
requirements for family housing, including assumptions related to housing
privatization, are established and refined. The budget requests are based
largely on historical obligations adjusted for pricing and program
assumptions. The Office of the Secretary of Defense (OSD) provides inputs
on key pricing assumptions such as inflation, foreign currency rates, and
pay adjustments. OSD and the services determine program assumptions
including expected reductions in inventory due to housing privatization.
For example, when the services are developing the budget request for the
utilities account, they typically look at prior year costs per unit and
adjust the costs for anticipated inflation and expected changes in housing
unit inventory.
The family housing O&M budget requests are developed through a series of
scheduled steps as part of DOD's Planning, Programming, and Budgeting
System. The planning stage begins about one year before the budget request
is sent to Congress, as the family housing O&M requirements are defined
based on the family housing master plans (see app. I, slides 10 and 11).
Around the same time, OSD issues its Defense Planning Guidance, which may
provide broad planning assumptions for the services. For example, DOD's
requirement to eliminate inadequate housing by 2007 is derived from the
Defense Planning Guidance. In the programming phase, the services develop
their Program Objectives Memorandums, which are 6-year plans that define
service requirements. Program Objectives Memorandum budget targets,
including family housing O&M budget targets, are then matched against the
services' available resources. The programming phase concludes with
decisions that are documented in OSD's Program Decision Memorandums issued
about 3 to 4 months before the President submits the budget to Congress.
At the same time, the services are developing the family housing O&M
budget request. This request is included in the budget submission the
services
send to OSD for consideration. As the budgeting phase begins, changes to
the budget estimation submission are issued as Program Budget Decisions,
the last of which is generally issued 2 months before the President
submits the budget to Congress in February.
When submitting the budget requests to Congress, the services include
justification submissions to summarize the process by which the budget
request was derived. Typically, the justification submissions for family
housing O&M accounts include a definition of what the account funds, a
description of the prior fiscal year's appropriation, and expected pricing
and program changes to that account. The estimate for the budget year is
then developed based on those changes. In addition, the justification
submissions provide a brief statement about pricing and program changes.
Reprogrammings of Family Housing O&M Funds
During the budget execution year, reprogrammings may be necessary if
obligations for each account and subaccount do not match the initial
funding amount as specified in the conference report. Historically, the
services have reprogrammed family housing O&M funds to pay for unexpected
events such as natural disasters, utility rate increases, and foreign
currency differences. Delays in housing privatization have also caused
some of the services to reprogram funds to pay for expenses associated
with housing units they had expected to privatize, according to service
officials. Also, OSD and the services consider all family housing O&M
accounts, except maintenance, as "must-pay" accounts, meaning that such
programs and activities funded in these accounts must be paid even if the
obligations differ from the initial funding amount.
According to DOD's Financial Management Regulation, the services are
required to notify Congress of any reprogramming of family housing O&M
funds that are 10 percent or more of the initial funding level.10 The
conference report accompanying the 2004 Military Construction
Appropriations Act further states that the services are to notify Congress
when reprogrammings reach 10 percent in the family housing O&M accounts
and subaccounts.
10 DOD Financial Management Regulation 7000-14R, Volume 3, Chapter 7.
Housing Privatization Affects the Family Housing O&M Budgets
Services Do Not Clearly and Consistently Explain the Impact of
Privatization in Their Budget Justifications to Congress
Congress authorized DOD to establish the Military Housing Privatization
Initiative,11 to use private sector investment capital and housing
construction expertise to finance, own, operate, and maintain military
housing in an effort to help eliminate inadequate housing from DOD's
inventory. In 2002, OSD accelerated the goal of eliminating inadequate
military family housing from fiscal year 2010 to 2007, which has impacted
the services' ability to budget for family housing O&M. As the services
privatize their housing, reductions in their housing inventory will occur.
As such, funding levels for the family housing O&M accounts and
subaccounts are affected differently by privatization (see app. I, slide
15). Some accounts are more directly related to the inventory of
militaryowned housing and will therefore be expected to decrease generally
in proportion to the decrease in inventory due to privatization. These
accounts include costs for utilities, furnishings, and services (e.g.,
trash removal, snow clearing, and fire and police protection). Other
accounts, such as leasing, are based on specific anticipated requirements
independent from the housing inventory and pace of privatization. Some
accounts, primarily the management subaccount and maintenance of real
property account, are partially influenced by privatization-related
factors. The management subaccount, for example, covers mostly salary
costs for activities such as housing referrals, waiting lists, tenant and
landlord complaints, and basic housing allowance surveys in addition to
the administrative costs directly related to managing military-owned
housing. As a result, many of these costs remain regardless of
privatization since they are not related to the housing inventory.
Budget justification materials submitted to Congress for family housing
O&M funding do not clearly and consistently explain how the housing
privatization program impacts the services' budget requests. The services
use similar assumptions and methods to develop budget requests for family
housing O&M, but they often rely on assumptions established up to a year
and a half before the budgets are executed. While the services have the
ability to revise and update their budget requests, they typically choose
not to because of the difficulty of doing so when faced, in part, with
other competing defense priorities, and the relatively small size of the
family housing O&M budget. Furthermore, changes in the pace of expected
privatization can affect funding required for individual accounts and
11 The National Defense Authorization Act for Fiscal Year 1996 (Pub. L.
No. 104-106), Feb. 10, 1996.
subaccounts, although not uniformly, but the impact of privatization is
not well explained in the services' budget justifications.
Services Often Rely on Assumptions Established up to a Year and a Half
Before Budget Execution
The services use similar pricing and program assumptions and methods to
develop their family housing O&M budget requests and base their budget
requests largely on historical obligations adjusted for assumptions about
pricing (e.g., inflation, foreign currency rates, and pay adjustments) and
the housing program (e.g., expected reductions in inventory due to housing
privatization). For example, when the services are developing the budget
requests for the utilities account, they typically look at prior year
costs per unit and adjust the costs for anticipated inflation and expected
changes in housing unit inventory. Further, many of the pricing and
program assumptions for family housing O&M are established up to a year
and a half before the budget is executed. For example, service officials
told us that the fiscal year 2004 budget requests were largely determined
when the services' Program Objectives Memorandums were completed in May
2002. Similarly, many of the assumptions, such as the privatization rate,
used in preparing the fiscal year 2004 budget request were largely based
on the services' 2002 family housing master plans. Once these assumptions
are established, service officials told us that the budget requests are
less likely to be changed, even if newer information becomes available.
While the services have the ability to revise and update their budget
requests, service officials told us they typically do not revise the
requests because competing defense priorities and the relatively small
size of the family housing O&M budget request make revisions difficult.
For example, if a service anticipates a slippage in privatization after
the family housing O&M budget request is programmed, officials said that
revising the request becomes more complicated because previous assumptions
have already been reflected in funding shifts to the military personnel
appropriation budget request to pay for the expected increase in the
housing allowance for those servicemembers intended to be in privatized
housing. Rather, service officials said that they are more likely to make
the needed funding adjustments for family housing O&M during budget
execution through reprogrammings.
Services Are Unclear and Inconsistent in Explaining the Impact of
Privatization in Their Budget Justifications to Congress
The services' budget justification submissions to Congress are unclear and
inconsistent in explaining the impact of privatization on the family
housing O&M budget requests. More specifically, the submissions are not
clear in explaining how housing inventory reductions due to privatization
affect each of the nine family housing O&M accounts and subaccounts or the
extent to which a previously established privatization schedule is on
track or slipping. Service officials told us that slippage in the
privatization schedule can cause an increase in the cost for some
accounts, such as the utilities and maintenance of real property accounts
that primarily are influenced by the number of housing units still in
DOD's housing inventory and not yet privatized. While some decreases in
family housing O&M requests were credited to inventory reductions in
military-owned housing, the justification submissions accompanying the
requests did not fully explain how privatization led to those decreased
requests. For example:
o The Navy indicated a decrease in funds for most of the family housing
O&M accounts and subaccounts because of privatization in fiscal year 2004,
but it provided no additional information explaining how privatization
affected the request for each account.
o The Army indicated a decrease in funds for the management subaccount
because of privatization in fiscal year 2004, but it did not explain what
management activities the Army adjusted due to privatization.
In addition, the services did not consistently address the impact of
privatization for each of the family housing accounts and subaccounts
within a fiscal year, nor did they consistently address the impact of
privatization on a specific account from fiscal year to fiscal year. For
example:
o The Army indicated decreases in funds for most of the family housing
O&M accounts because of privatization in fiscal year 2003, but it did not
decrease funding in the management subaccount for privatization, as would
be expected. In contrast, the Army did indicate decreases in funds for the
management subaccount in fiscal years 2002 and 2004 due to privatization.
o The Air Force indicated decreases in funds for inventory reductions
due to privatization in its management subaccount request in fiscal years
2002 and 2003. In contrast, in fiscal year 2004, the Air Force's budget
request for the same subaccount had no discussion of the impact of
privatization. Nor did the request include a reduction in the
funding for the management subaccount in fiscal year 2004, as would be
expected.
Although the services' budget justification submissions to Congress are
unclear in explaining the impact that housing privatization is having on
the family housing O&M budget at the time the budget is prepared, all the
services have information that could help clarify how privatization
affects the family housing O&M accounts and subaccounts. For example, Army
officials recognized that clear information explaining the impact of
privatization is not always presented to Congress and, consequently, added
additional information explaining privatization impacts in its fiscal year
2005 family housing O&M budget justification submission. Also, the Army
and the Navy are currently conducting studies to better determine the
impact of housing privatization on their management costs. OSD officials
said that more experience with housing privatization is needed to properly
assess its impact on funding levels for the management subaccount. The
dynamics of trying to maintain government-owned housing while increasingly
moving to privatization means that early assumptions about when
privatization will actually occur for individual projects can change over
time and require changes in funding for selected accounts and subaccounts.
Congress has limited visibility of the services' reprogramming of family
housing O&M funds. Although the services are required to notify Congress
of reprogrammings to an account or subaccount by 10 percent or more,
notification of reprogrammings by less than 10 percent or a decrease in
funds to an account is not required. However, appropriations such as the
regular O&M do provide such information. Compared with the other services,
reporting for the Navy and the Marine Corps provides even less visibility
over their reprogramming actions because reprogrammings for the four
operations subaccounts were not reported to Congress. In addition, their
data reflecting reprogramming actions throughout the year do not always
match comparable official obligation data produced by the Defense Finance
and Accounting Service.
Congress Has Limited Visibility Over the Reprogramming of Family Housing
O&M Funds
Current Requirements on Current requirements provide congressional
decision makers with limited Reprogrammings Provide visibility of the
services' reprogrammings between the nine family housing Congress with
Limited O&M accounts and subaccounts. The services are required to report
to
Congress reprogrammings that are 10 percent or more to an account
orVisibility subaccount. However, Congress is not notified when
reprogrammings are below 10 percent or result in a funding decrease. Other
required
appropriations reporting, such as regular O&M, provides congressional
decision makers with more information.
Current reporting requirements do not provide Congress with complete
visibility of the services' reprogrammings between the family housing O&M
nine accounts and subaccounts. First, the services are not required to
inform Congress of reprogrammings below 10 percent. Due to the varying
sizes of the accounts within family housing O&M, a belowthreshold
reprogramming in a large account such as maintenance can be significant
when compared to smaller accounts or subaccounts. On the other hand,
smaller valued accounts may generate many more reprogramming actions
because of their smaller funding base. As shown in table 1, in fiscal year
2003, the Army reprogrammed 4.7 percent ($22.6 million) to the maintenance
account. Although the amount reprogrammed into the maintenance account was
below 10 percent, this amount represented 54.4 percent of the services
subaccount. In another example, the Air Force was not required to notify
Congress of a $3.7 million increase in the leasing account because it was
below 10 percent in fiscal year 2003. Second, the services are not
required to notify Congress of decreases to an account. Between fiscal
year 2001 and 2003, there were 14 instances involving decreases of 10
percent or more from an account. As shown in table 1 for example, the Air
Force reprogrammed 14.9 percent ($75 million) in fiscal year 2003 from the
maintenance account to fund expenses in other accounts.
Table 1: Services' Reprogramming Amounts and Percentages Reprogrammed, Fiscal
Year 2003
Dollars in thousands
Army Navy and Marine Corps Air Force Dollar Percent Dollar
Percent change
Dollar Percent
Account
amount change change amount change amount change change
Operations
Management -$7,103 -8.0 $16,063 19.7 $19,434
Services 3,083 7.4 7,276 11.7 5,380
Furnishings -3,857 -8.0 -8,059 -26.7 2,155
Miscellaneous -118 -9.0 -196 -21.6 441
Utilities -11,246 -5.3 8,602 5.0 28,029
Maintenance 22,605 4.7 -9,926 -2.7 -75,000 -14.9
Privatization 5,000 24.2 3,087 27.3 9,200
Leasing -19,718 -9.2 0 0.0 3,773
Mortgage insurance
premium 0 0.0 0 0.0 0
Source: GAO's analysis of service appropriation and obligation
information.
Note: A negative number means the services reprogrammed funds out of the
account or subaccount.
In other appropriations, DOD provides congressional decision makers with
more information on reprogrammings than in family housing O&M. For
example, the services are required to submit a Report of Programs to
Congress twice a fiscal year for regular O&M.12 The report provides
information tracking the movement of funds from initial appropriation
through final obligation, including supplementals, rescissions, transfers,
and reprogrammings. For the family housing O&M appropriation, DOD is not
required to provide such a report, thus limiting congressional visibility
over all reprogrammings. Service officials told us that such information
is already tracked at the headquarters level and could be provided to
Congress.
12 DOD Financial Management Regulation 7000-14R, Volume 3, Chapter 6.
Navy and Marine Corps' Reporting Provides Even Less Visibility Over
Reprogrammings
When compared to the other services, reporting on the Navy and the Marine
Corps' family housing O&M reprogrammings provides less visibility. The
reporting of the Navy and the Marine Corps' family housing O&M funds does
not always separate the operations account into the four subaccounts. In
addition, the Navy and Marine Corps obligation data reflecting
reprogramming actions during a fiscal year do not always match comparable
official obligation data produced by the Defense Finance and Accounting
Service.
The reporting of the Navy and the Marine Corps' family housing O&M funds
does not always separate the operations account into the four subaccounts.
While the other services notified Congress of reprogrammings that were 10
percent or more for the subaccounts within operations, until fiscal year
2004, the Navy and the Marine Corps combined the four subaccounts into the
operations account when reporting reprogrammings. For example, in fiscal
year 2003, the management and services subaccounts increased by 19.7
percent ($16.1 million) and 11.7 percent ($7.3 million), respectively.
Even though the reprogrammings exceeded the 10 percent threshold, no
notification was sent to Congress because when these reprogrammings were
combined with the other subaccounts, overall reprogrammings in the
operations account did not exceed 10 percent. Navy budget officials said
that with their fiscal year 2004 notifications to Congress, the Navy and
the Marine Corps will be reporting reprogrammings for each subaccount
individually, similar to the practices of the other services. In addition,
the Defense Finance and Accounting Service does not report obligations for
the four subaccounts individually for the Navy and the Marine Corps, as it
does for the other services.
Unlike the other services, Navy and the Marine Corps obligation data
reflecting reprogramming actions during a fiscal year do not always match
comparable obligation data produced by the Defense Finance and Accounting
Service. For example, in fiscal year 2002, the Defense Finance and
Accounting Service reported obligations for the Navy and Marine Corps'
maintenance account as $391.1 million. However, the Navy and the Marine
Corps reported fiscal year 2002 obligations of $368.5 million for
maintenance in their justification submission to Congress. According to
Navy and OSD officials, examples like this are part of long-standing
problems with ensuring the consistency of data between Navy, Marine Corps,
and Defense Finance and Accounting Service data systems. However, because
Defense Finance and Accounting Service obligation data are considered
official, OSD officials use that data when evaluating the budgets for the
family housing O&M program. Service officials told us
Conclusions
they are working with the Defense Finance and Accounting Service to
address these issues.
The services' budget justification submissions to Congress have not always
been clear in explaining funding requirements and the impacts of the
privatization initiative on the budget requests for each of the nine
family housing O&M accounts and subaccounts. Although the family housing
O&M budget requests are expected to decrease due to reductions in housing
inventory as the services privatize more housing, a continued lack of
clarity in explaining the impacts of privatization will not allow Congress
to determine the appropriateness of any decreases. Until the services
provide Congress with sufficient data in their budget justification
submissions explaining the impact of privatization, the services will
continue to hinder the ability of Congress to conduct its oversight
responsibilities. This also places the services at risk of having Congress
reduce their budgets, as was the case with their fiscal year 2004
appropriations for family housing O&M.
Reprogramming notifications provide Congress some visibility over the
movement of funds; however, complete information on all movement of funds
is not required to be provided to Congress for the family housing O&M
appropriation. In contrast, DOD is required to provide Congress with more
information on the movement of funds for other defense appropriations,
such as regular O&M. Until DOD provides Congress similar information on
the reprogramming of family housing O&M funds, Congress will continue to
receive an incomplete picture over the total movement of family housing
O&M funds. Lacking such aggregate information on all fund movements could
also limit Congress' ability to fully conduct oversight of family housing
O&M programs and activities. In addition, the Navy and the Marine Corps
provide even less visibility of reprogrammings of family housing O&M funds
because they do not report obligations for the four operations subaccounts
and, prior to fiscal year 2004, did not notify Congress of reprogrammings
for these subaccounts. Therefore, congressional and DOD decision makers
are not getting the same level of detail with regard to obligations for
the four subaccounts as they do for the other services. Also, the Navy and
the Marine Corps' family housing O&M obligation data have been
inconsistent with the comparable data produced by the Defense Finance and
Accounting Service. Until the Navy and the Marine Corps report obligation
data using the same structure that congressional conferees use to
designate funds for the four operations subaccounts and resolve data
inconsistencies between them and the Defense Finance and Accounting
Service, DOD and congressional decision
Recommendations for Executive Action
Matter for Congressional Consideration
makers will continue to lack sufficient budget visibility, hindering their
ability to evaluate Navy and Marine Corps budget requests with the same
degree of confidence and detail as those of the other services.
To provide Congress with sufficient data in the services' budget
justification submissions, we recommend that the Secretary of Defense
direct the Under Secretary of Defense (Comptroller) to work with the
services to better explain the impacts of the housing privatization
initiative on the budget requests for each of the nine family housing O&M
accounts and subaccounts.
To improve visibility over the Navy and the Marine Corps' reprogrammings
of family housing O&M funds, we recommend that the Secretary of Defense
direct the Secretary of the Navy to work with the Defense Finance and
Accounting Service to take the following two actions:
o Report obligation data using the same budget structure that
congressional conferees use to designate how funds are to be used for the
four operations subaccounts, similar to reporting done by the other
military services.
o Resolve long-standing data inconsistencies to ensure that obligation
data reported by the Defense Finance and Accounting Service match
obligation data reported by the Navy and the Marine Corps.
To improve visibility over reprogrammings of family housing O&M funds by
all services, Congress may wish to consider requiring the Secretary of
Defense to provide it information covering the movement of funds for the
family housing O&M appropriations in a report at the end of the fiscal
year, similar to what DOD now provides to Congress on other DOD
appropriations. This report should provide timely and accurate information
on movement of funds, which includes reprogrammings within the nine family
housing O&M accounts and subaccounts, along with other information on
other fund movements such as transfers and supplementals.
Agency Comments In written comments on a draft of this report, the Deputy
Comptroller (Program/Budget) within the Office of the Under Secretary of
Defense (Comptroller) agreed with our recommendations stating that the
department is taking steps to implement them. In reference to our
recommendation that the services better explain the data provided to
Congress regarding the impact of privatization on family housing O&M
budget requests, the department has already drafted changes to its
financial management regulation and expects to issue an update to these
regulations within the next 90 days. In reference to our two
recommendations to improve congressional visibility of Navy and Marine
Corps' reprogrammings of family housing O&M accounts and subaccounts and
to improve the consistency of Navy and Marine Corps obligation data, DOD
plans to provide written direction to the Secretary of the Navy and the
Defense Finance and Accounting Service within 30 days after the release of
our report to address these two recommendations.
In addition, the Deputy Comptroller (Program/Budget) within the Office of
the Under Secretary of Defense (Comptroller) responded favorably to our
matter for congressional consideration suggesting that Congress may wish
to consider further improving the visibility of the services'
reprogrammings by requiring DOD to provide information covering the net
movement of funds for each of the nine family housing O&M accounts and
subaccounts. DOD's comments, which are included in this report in appendix
III, also discusses the types of information DOD would provide to Congress
covering the net movement of funds for the family housing O&M accounts and
subaccounts.
To assess the services' assumptions and methods used to develop individual
budget requests and how well their budget justifications explain the
impact of privatization on family housing O&M funds, we reviewed and
analyzed the services' budget justification submissions covering fiscal
years 2002 through 2004. We evaluated how these justifications
incorporated the services' privatization schedule and the resulting
explanation in the budget requests. In addition, we interviewed Army,
Navy, Marine Corps, and Air Force family housing officials to obtain
information on the assumptions and methods used to develop the family
housing O&M budget requests. We identified statements in the services'
budget justification submissions to assess how well the services explained
their assumptions, methodology, and the impact of privatization.
To assess the extent to which Congress has visibility over the services'
reprogramming of family housing O&M funds, we compared the services'
initial funding levels with year-end obligations for the nine family
housing O&M accounts and subaccounts to determine the amount reprogrammed
by the services during fiscal years 2001 through 2003. To review the
reprogramming of funds between the family housing O&M accounts, including
amounts over and under established reprogramming thresholds,
Scope and Methodology
we analyzed the services' and the Defense Finance and Accounting Service's
budget data for the family housing O&M account. In addition, we compared
these reprogrammings with the congressionally mandated requirements for
the services to report reprogrammings to Congress and the execution data
in the services' justification submissions to the Defense Finance and
Accounting Service's reports to ensure that the information was
consistent. For the Army and the Air Force, we found that the obligation
amounts reported matched those reported by the Defense Finance and
Accounting Service. Based on our comparisons and speaking with Army and
Air Force officials, we were satisfied with the information. Consequently,
we determined the use of Army and Air Force justification materials and
Defense Finance and Accounting Service reports was sufficiently reliable
for meeting our objectives. For the Navy and Marine Corps, we found
inconsistencies between the services' justification submission and the
Defense Finance and Accounting Service's reports.
We discussed the results of our work with officials from the Office of the
Under Secretary of Defense (Comptroller); the Housing and Competitive
Sourcing Office within the Office of the Under Secretary of Defense for
Acquisition, Technology, and Logistics; the Defense Finance and Accounting
Service; and the military services. We have designated DOD's financial
management area-including funding and cost data-as high risk due to
long-standing deficiencies in DOD's systems, processes, and internal
controls.13 However, as discussed, we determined the data we used during
our review of the services' reprogramming of family housing O&M funds were
sufficiently reliable for this report.
We are sending copies of this report to the Secretaries of Defense, the
Army, the Navy, and the Air Force; the Commandant of the Marine Corps; and
the Director; Office of Management and Budget. We will also make copies
available to others upon request. In addition, the report is available at
no charge on GAO's Web site at www.gao.gov.
13 U.S. General Accounting Office, Major Management Challenges and Program
Risks: Department of Defense, GAO-03-98 (Washington, D.C.: January 2003)
and U.S. General Accounting Office, High-Risk Series: An Update,
GAO-03-119 (Washington, D.C.: January 2003).
Please contact me on (202) 512-8412, or my Assistant Director, Mark
Little,
at (202) 512-4673 if you or your staff have any questions regarding this
report. Major contributors to this report were Laura Talbott, James
Reynolds, Daniel Chen, and Jane Hunt.
Barry W. Holman, Director
Defense Capabilities and Management
Congressional Committees
The Honorable John W. Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate
The Honorable Kay Bailey Hutchison
Chairman
The Honorable Dianne Feinstein
Ranking Minority Member
Subcommittee on Military Construction
Committee on Appropriations
United States Senate
The Honorable Duncan Hunter
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives
The Honorable Joe Knollenberg
Chairman
The Honorable Chet Edwards
Ranking Minority Member
Subcommittee on Military Construction
Committee on Appropriations
House of Representatives
Appendix I: GAO Briefing Slides
Briefing�
DOD's Military Family Housing�Operation and Maintenance
Budget�
Appendix I: GAO Briefing Slides
Objectives: Engagement Stems from Congressional Mandate�
o In the conference report accompanying the fiscal year 2004 Military
Construction Appropriations Act, Congress expressed its concerns about the
family housing operation and maintenance (O&M) budget:
o Congress concerned that the assumptions and methods underlying the
budget request for family housing O&M accounts are not adequately
explained by the services.
o Congress concerned about movement of funds between the various family
housing O&M subaccounts.
o Congress directed us to
o conduct a study on the assumptions and methods underlying the services'
budget requests for the family housing O&M budget and
o review the movement of funds between the family housing O&M budget
accounts and subaccounts.
Appendix I: GAO Briefing Slides
Results in Brief�
o Services' budget requests are built on historical pricing and program
assumptions. However, their budget justification materials do not provide
a sufficient explanation of how the housing privatization program has
affected budget requests for family housing O&M.
o Justification materials often rely on historic data and assumptions.
o Services use similar assumptions and methods to develop budgets, but
approaches among the services differ that lead to inconsistencies.
o Justification materials present an unclear and inconsistent picture in
explaining the impact of inventory reductions from housing privatization
on the services' budget requests to Congress.
o As a result, unclear budget requests
o hinder Congress' ability to conduct oversight responsibilities and
o continue to place the services at risk of having their budgets reduced
by Congress, as was the case with their fiscal year 2004 appropriations.
Appendix I: GAO Briefing Slides
Results in Brief (con't)�
o Congress has limited visibility of the reprogramming of military
familyhousing O&M funds.
o Congress is getting a partial picture with regard to the reprogramming
of family housing O&M funds because (1) the services are not required to
inform Congress of reprogrammings that decrease an account or a subaccount
and (2) until last year, Navy did not notify Congress of specific
reprogrammings in its four operations subaccounts.
o The services are not required to report to Congress all movement of
funds for the family housing O&M appropriations, although such reporting
is required for other DOD appropriations, such as in procurement.
o Without such reporting it could limit congressional oversight.
Appendix I: GAO Briefing Slides
Results in Brief (con't)�
o Navy and Marine Corps provide even less visibility of activities
associated with operating their military family housing O&M program.
o Unlike the other services, Navy and Marine Corps do not report
obligations for the four operations subaccounts and, prior to fiscal year
2004, did not notify Congress of their reprogramming actions for these
subaccounts.
o Navy and Marine Corps family housing O&M obligation data does not
always match comparable official obligation data produced by Defense
Finance and Accounting Service for the last several years.
o This lack of budget visibility and accountability hindered the ability
of decisionmakers to evaluate Navy and Marine Corps budget requests with
the same degree of confidence and detail as those of the other services.
Appendix I: GAO Briefing Slides
Appendix I: GAO Briefing Slides
Appendix I: GAO Briefing Slides
Background: Congress Designates Its Expected Use of Military Family
Housing O&M Funds by Account and Subaccount
Fiscal Year 2004 Military Family Housing O&M Appropriations by Account and
Subaccount
Note: May not add up to 100 percent due to rounding.
8
Appendix I: GAO Briefing Slides
Background: Maintenance Account Generally Has Spending Flexibility Because
Maintenance Requirements Can Be Deferred
Must pay accounts
o Management o Services
o Furnishings
o Miscellaneous o Utilities
o Leasing
o Privatization
o Mortgage Insurance Premium
Discretionary account
o Maintenance
Must pay accounts must be paid, even if the amounts
differ from the budget estimate.
Appendix I: GAO Briefing Slides
Appendix I: GAO Briefing Slides
Appendix I: GAO Briefing Slides
Assumptions and Methods: Services Use Similar Assumptions and Methods to
Develop Their Budget Request but Differ in Overall Approach
o Army emphasizes fully funding its must pay accounts to minimize
reprogrammings from its maintenance account and prevent maintenance
disruptions during budget execution year.
o Navy and Air Force said that to cover dollar shortfalls for must pay
accounts, they would reprogram funds from the maintenance account during
budget execution year.
o All services have different housing privatization rates that affect
their budget estimates:
o OSD expects to privatize over 60 percent of its military family housing
inventory by the end of fiscal year 2007.
12
Appendix I: GAO Briefing Slides
Assumptions and Methods: Budget Request Based Largely on Historical Costs
Adjusted for Pricing and Program Assumptions
o Key pricing assumptions-OSD provides input for
o inflation factors,
o foreign currency rates,
o pay adjustments, and
o reductions through energy conservation initiatives.
o Key program assumptions-OSD and services provide input for anticipated
pace of housing privatization:
o Projects are being privatized at different pace by service.
o Inventory of family housing units decreasing at different amounts by
service.
o When assumptions used to build the budget request are not fully
realized, reprogrammings are needed to adjust to reality during the budget
year.
13
Appendix I: GAO Briefing Slides
Appendix I: GAO Briefing Slides
Appendix I: GAO Briefing Slides
Assumptions and Methods: Many Considerations Go into the Services'
Justification Materials to Support Their Budget Requests
o As the services translate family housing master plans into requests for
appropriations, the budget materials provided to Congress often rely on
pricing and program assumptions made up to a year and a half before
services execute their budgets.
o Acceleration of services' housing privatization plans is having a
significant influence on estimating budget needs, (e.g., OSD moved up its
goal of eliminating inadequate military family housing from fiscal year
2010 to 2007).
o Budget adjustments due to privatization schedule slippages could take 2
to 3 years to be remedied.
o Services often use maintenance accounts to move funds with the least
disruption because maintenance can be deferred.
o Any of these considerations can complicate the budget execution process
if they are not estimated accurately.
16
Appendix I: GAO Briefing Slides
Assumptions and Methods: Justification Materials Lack Clarity as to How
Privatization Affects the Family Housing O&M Budget Request
o Justification materials are unclear as to how the services'
privatization schedules affect O&M accounts and subaccounts:
o Justification materials do not fully explain the impact of
privatization on family housing O&M budget, particularly for management
activities.
o Material contains many inconsistencies when the budget data are
analyzed from year to year for the same service or are analyzed for the
same account across the services for the same year (e.g., showing how
inventory reductions decreased the budget estimates one year, then showing
no budget reductions the next year although inventory reductions
occurred).
o Justification materials summarize the assumptions and methods used to
develop the budget request:
o Services have additional information that could help clarify the
request.
o For example, the Army added additional budget justification information
in its fiscal year 2005 budget request to better explain privatization
impacts.
17
Appendix I: GAO Briefing Slides
Assumptions and Methods: Services Remain Uncertain as to How Housing
Privatization Will Affect Housing Management Costs
o Some costs for managing housing activities will remain regardless of
privatization:
o Housing management covers mostly salary costs for activities such as
housing referrals, waiting lists, waivers for rental and utility deposits,
tenant and landlord complaints, and basic housing allowance surveys.
o Army and Navy are currently conducting studies to better determine
impact of housing privatization on their management costs (e.g., whether
some of these activities could be contracted out or conducted by the
housing privatization developer).
o OSD housing officials said more experience with housing privatization
is needed to properly assess its impact on housing management activities.
18
Appendix I: GAO Briefing Slides
Reprogramming of Funds: Services Reprogram Military Family Housing O&M
Funds under Certain Controls
o DOD's financial management regulations state that services are to
o seek congressional approval prior to reprogramming funds for specified
accounts (e.g., Housing Privatization Support Costs) and items reduced by
Congress in appropriation and
o notify Congress when reprogrammings cumulatively reach or exceed 10
percent of the adjusted appropriated amount.
o Reprogramming data generally reflect the sum of hundreds of small
actions.
o DOD's financial management regulations do not allow the services to
transfer funds between appropriations without OSD's involvement (i.e.,
foreign currency):
o No evidence that unauthorized transfers were made.
19
Appendix I: GAO Briefing Slides
Reprogramming of Funds: Congress Has Limited Visibility over the
Reprogramming of Family Housing O&M Funds
o Under current controls, congressional notification is not required when
o an account is increased by less than 10 percent or
o an account is reduced by any amount.
o Services are not required to report to Congress the aggregate movement
of military family housing O&M funds as they are for other accounts, such
as procurement and regular O&M. This report is called a Report of
Programs.
o Navy and Marine Corps provide even less information:
o Unlike the other services, Navy and Marine Corps do not report
obligations for the four operations subaccounts and, prior to fiscal year
2004 did not notify Congress of their reprogramming actions for these
subaccounts.
o Navy and Marine Corps family housing O&M obligation data does not
always match comparable official obligation data produced by Defense
Finance and Accounting Service for the last several years.
20
Appendix I: GAO Briefing Slides
Reprogramming of Funds: No Distinct Pattern or Trend in Reprogramming
Funds among the Family Housing O&M Accounts
o We found 33 examples where the military family housing O&M accounts had
changed by more than 10 percent from fiscal years 2001 to 2003:
o 19 showed fund increases of 10 percent or more, of which the services
were required to notify Congress.
o 14 showed fund decreases of 10 percent or more, of which the services
were not required to notify Congress.
o Many reasons for reprogramming funds such as
o fact-of-life changes (e.g., foreign currency, utility rates, and
natural disasters) and
o a lot of flux in the housing privatization program (e.g., the recent
acceleration of the pace of privatization and housing privatization
schedule slippages).
o Smaller accounts are more likely to have larger percentage changes.
21
Appendix I: GAO Briefing Slides
Appendix I: GAO Briefing Slides
Appendix I: GAO Briefing Slides
Appendix II: Family Housing Operation and Maintenance Budget Definitions
Department of Defense's Financial Management Regulation1 defines the
accounts and subaccounts that Congress uses to designate its understanding
of funds within the family housing operation and maintenance appropriation
as follows:
Operations account. This is a summary account for consolidating costs
accumulated in the following subordinate accounts:
o Management account. Accumulates costs of management, administrative,
and support type services at installation level involving (1)
administration costs for installation housing offices including management
office personnel, supplies, equipment, and utilities pertaining to the
functions of a family housing office and costs for administrative support
services provided in supply, comptroller, maintenance, and other
installation offices when the costs for such services are attributable to
family housing; (2) costs for housing referral administration pertaining
to private housing, including rental guarantee projects and the provision
of referral services, and assistance in locating and inspecting privately
owned family housing for DOD personnel; (3) requirements surveys and
preliminary family housing studies or engineering construction plans made
before Secretary of Defense project approval, which also includes planning
for improvement and rental guarantee projects and inspection of
construction of rental guarantee housing; and (4) other identifiable
management costs that directly support the family housing program.
o Services account. Accumulates costs for authorized services such as
(1) refuse collection and disposal-includes costs of family housing for
collecting garbage, trash, ashes and debris, and for refuse disposal, such
as the operation and maintenance of incinerators, sanitary fill, and
regulated dumps. Also included are costs for acquisition, maintenance and
repair of garbage and trash containers, and operation of can washing
facilities; (2) fire protection-includes costs for protection and
prevention of family housing facilities; (3) police protection-includes
costs for law enforcement, traffic control, and protection of family
housing facilities, (4) entomological services-includes costs of all
control measures against fungi, insects, and rodents within family housing
dwellings, facilities, and areas; (5) custodial services-includes
1 DOD Financial Management Regulation 7000-14R, Volume 6, Chapter 9.
Appendix II: Family Housing Operation and Maintenance Budget Definitions
costs of janitorial and custodial services performed in common service
areas and the cost of elevator operation in family housing facilities; (6)
snow removal-includes costs of removing, hauling, and disposal of snow,
the cost of ice alleviation, and erection, maintenance, repairs and
removal of snow fences for family housing areas; (7) street
cleaning-includes costs of cleaning streets comprised of sweeping,
flushing, and picking up litter; (8) municipal type services-includes
costs of miscellaneous municipal type services not identifiable to other
listed accounts; and (9) other services-includes costs of all other
authorized services for family housing.
o Furnishings account. Accumulates costs for initial acquisition,
maintenance, repair, and replacement of furnishings, furniture, movable
household equipment, and authorized miscellaneous items. Also includes
control, handling, record keeping, moving of government-owned furnishings
into and out of dwelling units and charges for connecting and
disconnecting equipment, as well as handling costs incident to storage.
o Miscellaneous account. Accumulates costs for (1) lease rents and
permit payments for housing and trailer spaces leased by the government
from private sources or provided by the Federal Housing Administration or
the Department of Veterans Affairs as well as reimbursement costs for
dwellings provided by state, municipal, or foreign governments or by other
federal agencies, (2) German land taxes paid to the Federal Republic of
Germany under the North Atlantic Treaty Organization Status of Forces
Agreement for local taxes on land and improvements of family housing
property, (3) fire insurance charges paid to the Federal Republic of
Germany to cover fire damage to family housing dwelling units, (4) United
Kingdom accommodation charges paid in accordance with the
country-to-country agreement for housing provided to U.S. Forces, (5)
other miscellaneous operations costs not covered elsewhere.
Utility operations account. This is a summary account for accumulating
costs for utilities consumed in family housing. This account excludes the
costs of maintenance and repair of utility systems identified to the
family housing property covered under the Maintenance of Real Property
Facilities Account. Electricity, water, sewage, gas fuel oil or other
heating fuels are the types of utilities reported in this account.
Appendix II: Family Housing Operation and Maintenance Budget Definitions
Maintenance of real property facilities account. This is a summary account
for accumulating costs for the following: (1) Dwellings-costs of
maintenance and repair of all family housing buildings as defined in DOD
Instruction 4165.3 including all interior utilities and installed
equipment (typically this involves (a) service calls for minor work
including emergency and temporary repairs normally not in excess of 16
work hours, (b) routine maintenance for occupancy work and other
maintenance usually scheduled annually or more frequently, (c) repairs and
replacements for rehabilitations and replacement of major components and
installed equipment, (d) interior and exterior painting and the necessary
preparation, and (e) contract cleaning between occupancy, where
authorized); (2) exterior utilities-costs of maintenance and repair of
electric, gas, water, sewage and other utility distribution, collection,
or service systems assigned to family housing (street and area lighting
systems are included in exterior utilities beginning at a point 5 feet
from the house line and ending at a point where the utility system joins a
common use main or terminates); (3) other real property-costs for (a)
maintenance, care, and repair of improved and unimproved grounds, storm
sewerage, and drainage structures and costs of acquisition, maintenance,
and repair of government-owned minor equipment, such as hand-operated lawn
mowers used for grounds maintenance by occupants, (b) maintenance and
repair of paved or stabilized streets, roads, walks, driveways, utility,
service, and parking areas, as well as curbs, gutters, signs, and other
road appurtenances, and (c) maintenance and repair of facilities other
than dwellings, such as fences when the facility is dedicated to housing,
athletic and recreation facilities, community buildings, and service
facilities (also included are the costs of maintenance of trailer sites
including outlets); and (4) alterations and additions-costs for incidental
additions, expansions, extensions, and alterations to the existing real
property (also includes the payments made to military personnel for
telephone reconnection charges when maintenance or repair work
necessitates government-directed nonpermanent change of station moves and
charges resulting from improvement or repair projects funded in part from
the family housing construction account).
Leased housing account. This is a summary account for accumulating costs
for the following: (1) lease cost-foreign account; costs for charges and
other payments specified in the lease agreement for housing in foreign
countries; (2) lease cost-foreign account government rental guarantee
program; costs for charges and other payments specified in the lease
agreement for housing in Europe under the Army's foreign account
government rental guarantee program; (3) lease cost-domestic account;
costs for charges and other payments specified in the lease agreement for
Appendix II: Family Housing Operation and Maintenance Budget Definitions
housing in the United States including U.S. possessions and territories;
(4) lease cost-section 801 account; costs for charges and other payments
specified in the lease agreement for section 801-type housing; (5) other
operation and maintenance cost-foreign account; costs for maintenance,
utilities, and contracted services not provided by the lessor for housing
in foreign countries (also includes initial make-ready costs, costs of
government-owned furnishings, any pro rata share of the costs of
installation services, and administrative costs such as assignment,
travel, and inspection by installation personnel, and reimbursements to
the Department of State for foreign affairs administrative support costs);
(6) other operation and maintenance cost-foreign account government rental
guarantee program; costs for maintenance, utilities, and contracted
services not provided by the lessor for housing in foreign countries (also
includes initial make-ready costs, costs of government-owned furnishings,
any pro rata share of the costs of installation services, and
administrative costs such as assignment, travel, and inspection by
installation personnel, and reimbursements to the Department of State for
foreign affairs administrative support costs); (7) other operation and
maintenance cost-domestic account; costs for maintenance, utilities, and
contracted services not provided by the lessor for housing in the United
States (also includes initial make ready costs, costs of government-owned
furnishings, any pro rata share of the costs of installation services, and
administrative costs such as assignment, travel, and inspection by
installation personnel); and (8) other operation and maintenance
cost-Section 801 account; costs for maintenance, utilities, and contracted
services not provided by the lessor for Section 801-type housing (also
includes initial make ready costs, costs of government-owned furnishings,
any pro rata share of the costs of installation services, and
administrative costs such as assignment, travel, and inspection by
installation personnel).
Servicemen's mortgage insurance premiums account. This is a summary
account for accumulating the costs for servicemen's mortgage insurance
premium payments.
Privatization support cost account.2 This account is for accumulating the
costs that the government incurs in direct support of the family housing
2 DOD has better defined costs for privatization support in response to a
prior GAO recommendation (U.S. General Accounting Office, Military
Housing: Better Reporting Needed of the Status of the Privatization
Program and the Costs of Its Consultants,
GAO-04-111 (Washington, D.C.: Oct. 9, 2003). At the time of this report,
DOD's definition of privatization support costs had not been incorporated
into DOD's Financial Management Regulation.
Appendix II: Family Housing Operation and Maintenance Budget Definitions
privatization program with the exception of those costs that will be
included as part of the privatization project. These costs include all
administrative, planning, development, solicitation, award, transition,
construction oversight, and portfolio management activities associated
with military housing privatization and specifically for: (1) site
assessment costs which includes the costs in direct support of the family
housing privatization program for environmental baseline assessments,
environmental assessments, environmental impact statements, and any
efforts required to be accomplished by the government prior to
privatization for environmental mitigation, site surveys, or real estate
costs; (2) project costs which includes all costs in direct support of the
family housing privatization program for project feasibility studies,
concept development, consultant fees, solicitation, procurement,
contracting, execution, transition, construction management (supervision,
inspection, and overhead), post award management and monitoring, and
portfolio management, and (3) administrative costs which includes all
costs in direct support of the family housing privatization program for
civilian pay, travel, training, supplies, equipment, and for any services
provided by a defense agency in support of the privatization program.
Appendix III: Comments from the Department of Defense
Appendix III: Comments from the Department of Defense
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