Cooperative Threat Reduction: DOD Has Improved Its Management and
Internal Controls, but Challenges Remain (30-JUN-05, GAO-05-329).
                                                                 
Section 3611 of the National Defense Authorization Act for Fiscal
Year 2004 mandates that GAO assess the Department of Defense's	 
(DOD) internal controls for the Cooperative Threat Reduction	 
(CTR) program and their effect on the program's execution. In	 
addressing the mandate, we assessed DOD's management and internal
controls over implementing CTR projects since 2003 by using the  
control standards for the federal government as criteria. In	 
response to the mandate, we focused on those management and	 
internal control areas considered most relevant to CTR project	 
implementation: (1) building a management structure, (2) risk	 
assessments, (3) performance measures, (4) program reviews, (5)  
communications, and (6) project monitoring. The Congress also	 
mandated that GAO describe the status of DOD's implementation of 
legislative mandates covering the CTR program.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-329 					        
    ACCNO:   A28578						        
  TITLE:     Cooperative Threat Reduction: DOD Has Improved Its       
Management and Internal Controls, but Challenges Remain 	 
     DATE:   06/30/2005 
  SUBJECT:   Arms control agreements				 
	     Defense cost control				 
	     Foreign governments				 
	     Internal controls					 
	     International cooperation				 
	     Performance measures				 
	     Program evaluation 				 
	     Program management 				 
	     Risk management					 
	     Risk assessment					 
	     Strategic planning 				 
	     Lessons learned					 
	     DOD Cooperative Threat Reduction Program		 
	     Russia						 

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GAO-05-329

                 United States Government Accountability Office

                     GAO Report to Congressional Committees

June 2005

COOPERATIVE THREAT REDUCTION

  DOD Has Improved Its Management and Internal Controls, but Challenges Remain

                                       a

GAO-05-329

[IMG]

June 2005

COOPERATIVE THREAT REDUCTION

DOD Has Improved Its Management and Internal Controls, but Challenges Remain

                                 What GAO Found

Through the CTR program, DOD provides assistance to help the former states
of the Soviet Union secure and eliminate their weapons of mass
destruction. Since 2003, DOD has improved its management and internal
controls over the CTR program. Prior to 2003, DOD had problems managing
the program and ensuring that the program was meeting its objectives.
These inadequacies became apparent in 2003 following two project failures
in Russia that cost the CTR program almost $200 million, including the
never used liquid rocket fuel disposition facility. Following these
incidents, DOD implemented a more structured approach to managing the CTR
program. In July 2003, DOD filled vacancies in the office responsible for
managing the program, providing a level of leadership and oversight that
did not previously exist. Once in place the new leadership made important
improvements to the program's internal controls in the areas of
organizational structure, risk assessments, performance measures, program
reviews, and communication. For example, DOD now assesses and balances
risks with project requirements and measures project performance at each
phase. DOD also conducts semi-annual meetings to review commitments and
responsibilities of CTR-recipient governments and to minimize risk.
Although enhancing its internal controls helps mitigate the risks that
stem from having to rely on the cooperation of CTR-recipient governments,
DOD can never fully eliminate the project risks associated with recipient
governments' cooperation. Furthermore, while DOD's enhancements are an
improvement over previous internal controls, current mechanisms do not
include a separate review of CTR projects upon their completion. As such,
DOD lacks a system for evaluating projects upon their completion and
applying lessons learned to future projects.

Facility to Destroy Liquid Rocket Fuel Cost $95 Million but Was Never Used

                         Source: Department of Defense.

                 United States Government Accountability Office

Contents

Letter                                                                   1 
                                  Results in Brief                          3 
                                     Background                             6 
            DOD Has Improved Its Management and Internal Controls over the 
                                     CTR Program                            8 
                                     Conclusion                            23 
                         Recommendation for Executive Action               24 
                         Agency Comments and Our Evaluation                24 

Appendixes

                                  Appendix I:

                    Appendix II: Appendix III: Appendix IV:

                                  Appendix V:

Appendix VI: Appendix VII:

Two Project Failures Cost the CTR Program Nearly $200 Million

Legislative Mandates Covering the CTR Program

Scope and Methodology

Current CTR Program Areas

DOD's Current Management and Internal Controls for the CTR Program
Compared with Internal Control Standards

Comments from the Department of Defense

GAO Contact and Staff Acknowledgments

25 28 37 39

42 46 47

Table Table 1: Internal Control Standards and Factors Compared with DOD
Internal Controls

                                  DOD Management Structure for the CTR        
Figures Figure 1: Figure 2:    Program Russian SS-24 Missile Engine      7
                                               Undergoing                  
                                              Dismantlement                13 
                     Figure 3:  CTR Program Legislative Mandates (Fiscal   
                                                  Years                    
                                               1992-2004)                  31 
                     Figure 4:      CTR Program Area Descriptions and      
                                            Obligations as of              
                                               April 2005                  40 

Contents

Abbreviations

AT&L Office of the Under Secretary of Defense for Acquisition,

Technology, and Logistics CT Cooperative Threat Reduction Directorate CTR
Cooperative Threat Reduction program DOD Department of Defense DTRA
Defense Threat Reduction Agency GAO Government Accountability Office IG
Inspector General JRIP Joint Requirements and Implementation Plans MDA
Milestone Decision Authority TRSC Threat Reduction Support Center

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 Government Accountability Office Washington, D.C. 20548

June 30, 2005

The Honorable John Warner Chairman The Honorable Carl Levin Ranking
Minority Member Committee on Armed Services United States Senate

The Honorable Duncan Hunter Chairman The Honorable Ike Skelton Ranking
Minority Member Committee on Armed Services House of Representatives

Since 1992, Congress has authorized the Department of Defense (DOD) to
provide more than $5 billion for the Cooperative Threat Reduction (CTR)
program to help the former states of the Soviet Union1 secure and
eliminate their weapons of mass destruction and prevent their
proliferation. Through the CTR program, the United States has supported
activities such as eliminating nuclear missiles, building storage
facilities for nuclear materials, eliminating chemical weapons, securing
biological pathogens, and employing former weapons scientists. Recent
project failures in Russia, however, have raised congressional concerns
about the program's management. Specifically, from 1993 through 2003, DOD
spent nearly $200 million to construct a liquid rocket fuel disposition
facility that was never used and to design a solid rocket motor
elimination facility that was never constructed. In 2003, as a result of
these incidents, DOD began to revise its management and internal controls
over the CTR program. (For more detailed information on these CTR project
failures, see app. I.)

The Deputy Assistant to the Secretary of Defense for Chemical
Demilitarization and Threat Reduction within the Office of the Under

1CTR recipient states of the former Soviet Union include Russia, Ukraine,
Belarus, Kazakhstan, Uzbekistan, Azerbaijan, Moldova, and Georgia.

Secretary of Defense for Acquisition, Technology, and Logistics (AT&L)2 is
responsible for developing CTR implementation plans and making sure that
CTR contractual obligations are met. Concurrently, the CTR Policy Office,
within the Office of the Under Secretary of Defense for Policy, is
responsible for developing and coordinating CTR policy guidance and
defining CTR program objectives. The Defense Threat Reduction Agency
(DTRA) reports to the Deputy Assistant to the Secretary of Defense for
Chemical Demilitarization and Threat Reduction and oversees the execution
of CTR projects on a daily basis.

Section 3611 of the National Defense Authorization Act for Fiscal Year
2004 mandates that GAO assess DOD internal controls for the CTR program
and their effect on the program's execution.3 The mandate specifies that
our analysis focus on controls intended to ensure that projects are being
executed consistent with the program's objectives. In addressing the
mandate, we evaluated DOD's management and internal controls for
implementing CTR projects since 2003 by using the applicable control
standards for the federal government.4 To respond to the mandate, we
identified those management and internal control areas most relevant to
CTR project implementation: (1) program management, (2) risk assessments,
(3) performance measurement, (4) program reviews, (5) communications, and
(6) project monitoring. Congress also mandated that we describe the status
of DOD's implementation of legislative mandates covering the CTR program.
(See app. II for information on CTR legislative mandates.)

In reviewing DOD's management and internal controls for implementing the
CTR program, we collected and analyzed DOD documents and developed a
semi-structured interview guide and questioned 30 DOD

2For the purposes of this report, we are using the acronym AT&L to refer
to the office of the Deputy Assistant to the Secretary of Defense for
Chemical Demilitarization and Threat Reduction within the Office of the
Under Secretary of Defense for Acquisition, Technology, and Logistics.

3Public Law 108-136 also requires GAO to assess the management and
coordination activities of the threat reduction and nonproliferation
programs of the Departments of Defense and Energy. See GAO, Weapons of
Mass Destruction: Nonproliferation Programs Need Better Integration,
GAO-05-157 (Washington, D.C.: Jan. 28, 2005). GAO is also assessing the
Department of Energy's management of its nonproliferation programs.

4GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1999); and Internal Control
Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.: Aug.
2001).

officials responsible for managing and implementing the CTR program. We
met with other DOD officials, reviewed DOD documents including DOD
acquisition management guidance, and analyzed legislation. In addition, we
traveled to Russia and Kazakhstan to observe CTR project implementation
and to obtain information from American, Russian, and Kazakhstani
government officials and contractor personnel. To determine the
reliability of the data we used in this report, we reviewed relevant
agency documents and obtained information from agency officials to ensure
that the data used are sufficiently reliable for our work. We performed
our work from April 2004 through May 2005 in accordance with generally
accepted government auditing standards. (See app. III for more details on
our scope and methodology.)

Results in Brief	Since 2003, DOD has improved its management and internal
controls over the CTR program. Previously, DOD had problems managing the
CTR program and ensuring that CTR program objectives were being met.
Following two project failures in Russia, DOD implemented a series of new
measures in 2003 that provided a more structured approach to managing the
CTR program. DOD's goal is to mitigate risks to an appropriate level.
Despite the introduction of new and revised management approaches and
controls, DOD cannot fully mitigate the risks involved in cooperating with
CTR recipient governments. In addition, DOD's current procedures and
controls do not include final reviews of CTR projects upon their
completion. Therefore, DOD has no systematic or formal mechanism to
document and apply the lessons learned from such evaluations to new and
ongoing projects.

To improve management of the CTR program, DOD has addressed five key
areas.

o 	Program management. DOD's original management plan for the CTR program
called for AT&L to oversee planning, issue written guidance on how
projects should be implemented, and develop processes to ensure that
projects were meeting objectives. However, DOD did not have officials in
key positions in this office from 1998 through 2003. CTR policy and DTRA
officials attempted to fill this void but lacked expertise and training in
acquisition and project management. In July 2003, following the heptyl and
Votkinsk project failures, DOD filled these vacancies within AT&L. AT&L
officials now actively participate in program risk assessments,
performance measurement, ongoing

program reviews, and regular communication regarding details on project
status.

o 	Risk assessments. DOD uses several new methods to assess and mitigate
the risks associated with CTR projects. DOD designates one official with
overall management responsibility to balance the requirements of each
project with potential risks. DOD divides CTR projects into three phases
and requires management approval that the project is on track to meet its
objectives before the project enters its next phase and additional funds
are obligated. DOD also instituted periodic meetings with stakeholders5 to
evaluate and minimize risk associated with CTR projects. With these new
methods in place, all stakeholders are now cognizant of CTR project risks
and managers are required to develop concrete strategies for addressing
identified risks.

o 	Performance measurement. DOD devised and implemented new written
guidelines on developing and reporting CTR project objectives, schedules,
and cost estimates. In a new training course required for all CTR program
and project managers, managers are instructed on developing measures for
how, when, in what sequence, and at what cost, specific project tasks will
be completed. According to CTR project managers, the current guidance on
performance measurement is clearer and more consistent than in the past
and helps with the review of ongoing projects.

o 	Ongoing program reviews. DOD introduced a new process to more
systematically and consistently review CTR projects. In quarterly and
other meetings, a designated manager, in consultation with all
stakeholders, oversees the project's performance measures including cost,
schedule, and performance objectives, and determines whether the project
proceeds to its next phase or whether corrective actions need to be taken.
According to CTR managers, the new program review system has resulted in
more consistently conducted program evaluations that provide management
with significant project details not previously included in program
reviews.

5Stakeholders include all CTR management, acquisition, and policy decision
makers as well as other government agency officials who are involved with
implementing a particular CTR project.

o 	Communication. Communication among the DOD offices involved in the CTR
program is more structured. All stakeholders communicate project issues
and problems through daily email, weekly reports, and quarterly meetings.
Through ongoing program reviews and new reporting requirements
stakeholders and managers now have regular opportunities to learn about
project developments and provide input on project implementation. DOD has
also improved its external communications with CTR-recipient countries by
more clearly defining the responsibilities and expectations of all
parties, including the recipient countries involved in each project. These
controls provide assurance that each party is held accountable for its
responsibilities.

Despite the introduction of new and revised internal controls, DOD
continues to face the challenge of gaining the cooperation of
CTR-recipient governments to jointly implement projects and ensure that
assistance is used to meet program objectives. Successful projects require
signed agreements between DOD and CTR recipient countries, as well as U.S.
access to sites to ensure that program goals are being achieved. However,
reaching agreement on project issues and obtaining necessary access can
involve lengthy negotiations. For example, after more than 10 years of
discussion, Russia and DOD have yet to negotiate an agreement that would
allow U.S. personnel access to monitor the loading of the CTR-funded
fissile material storage facility at Mayak. Such an agreement would assure
DOD that the facility is being used as intended.

DOD also lacks internal controls that would provide a system for
monitoring projects upon their completion and applying lessons learned to
future projects. According to internal control standards, monitoring
includes assessing both ongoing activities and separate evaluations of
completed activities and should assess the quality of performance over
time. By conducting final reviews of completed CTR projects and addressing
the findings of such reviews, DOD can further improve its current and
future management of the program.

To further improve DOD internal controls for the CTR program, we are
recommending that the Secretary of Defense conduct final reviews of CTR
projects at their completion to evaluate whether projects were conducted
in an efficient manner or were effectively meeting the objectives of the
program. Such reviews would provide a mechanism for documenting lessons
learned and applying them to future project planning and implementation.

DOD concurred with our recommendation to conduct evaluations of CTR
projects upon their completion. DOD also provided technical comments that
we incorporated as appropriate.

Background	Congress created the CTR program in 1991 to help the states of
the former Soviet Union secure and eliminate their weapons of mass
destruction and prevent their proliferation. Through the CTR program, the
United States has supported activities to eliminate nuclear missiles,
build a storage facility for nuclear materials, eliminate chemical
weapons, secure biological pathogens, and employ former weapons
scientists. As of January 2005, the CTR program has assisted in the
elimination of about 570 intercontinental ballistic missiles and nearly 30
nuclear powered ballistic missile submarines. In 2004, Congress authorized
DOD to expand the scope of the CTR program to countries outside the former
Soviet Union. For example, beginning in 2005, CTR assistance will help
Albania destroy its chemical weapons stockpile.

Figure 1 shows the DOD management structure for the CTR program. Within
the Office of the Under Secretary of Defense for Policy, the CTR Policy
Office is responsible for developing and coordinating policy guidance,
defining program objectives for the CTR program, and negotiating
agreements with CTR recipients. The CTR Policy Office works with the
office of the Under Secretary of Defense for Acquisition, Technology, and
Logistics through the Deputy Assistant to the Secretary of Defense for
Chemical Demilitarization and Threat Reduction. DTRA reports to the
Assistant to the Secretary of Defense for Nuclear and Chemical and
Biological Defense Programs. The Deputy Assistant to the Secretary of
Defense for Chemical Demilitarization and Threat Reduction provides
strategic implementation guidance on and oversight of CTR projects, and
interacts daily with DTRA on CTR matters. Within DTRA, the Cooperative
Threat Reduction (CT) directorate manages the program's daily operations.
The directorate is organized into five program areas: Biological Weapons
Proliferation Prevention, Chemical Weapons Elimination, Nuclear Weapons
Safety and Security, Strategic Offensive Arms Elimination, and Weapons of
Mass Destruction (WMD) Proliferation Prevention.6 (For a more detailed
description of these program areas, see app. IV.) The directorate is
located at Ft. Belvoir, Virginia, and several

6The CT directorate also has a program integration component and an
executive language service to support program implementation.

DTRA offices throughout the former Soviet Union provide in-country support
for CTR program implementation.7

Figure 1: DOD Management Structure for the CTR Program

Formal DTRA Embassy Informal Operations

Source: DOD.

7Currently, the CTR program has offices in Moscow, Russia; and Kiev,
Ukraine; and has plans to establish permanent offices in Tashkent,
Uzbekistan; Almaty, Kazakhstan; Baku, Azerbaijan; and Tbilisi, Georgia.

At the beginning of the program in 1992, DOD primarily purchased and
provided equipment such as cranes, cutting tools, and vehicles to
recipient countries. As the program matured, CTR assistance provided more
services, such as hiring U.S. contractors who helped recipient countries
dismantle nuclear delivery systems and missiles. Currently, CTR provides
most assistance to recipient countries through contracts with American
firms. DOD executes, manages, and reviews the contracts according to DOD
and federal acquisition requirements. Specifically, in 2001, the CTR
program began using special contracts with prime contractors who, with
their teams of supporting subcontractors, implement the majority of CTR
projects in the recipient countries. These five contractors are known as
CTR Integrating Contractors.8 DTRA has also contracted with the Science
Applications International Corporation's Threat Reduction Support Center
(TRSC). TRSC staff provide support to CTR program and project managers in
the areas of operations, logistics, engineering, financial, and program
management.

DOD Has Improved Its Management and Internal Controls over the CTR Program

Since 2003, DOD has improved its management and internal controls over the
CTR program. Prior to 2003, DOD's internal controls over the program were
limited and did not ensure that CTR program objectives were being met.
Following two project failures in Russia, DOD implemented a series of new
measures in 2003 that provided a more structured approach to managing the
CTR program. Most importantly, in July 2003, DOD filled vacancies within
AT&L, the office responsible for ensuring that DTRA's implementation of
CTR projects was meeting cost, schedule, and performance goals. After DOD
filled these positions, the new leadership worked closely with DTRA
officials to introduce important enhancements to the program's internal
controls. For example, DOD adopted several new methods to assess and
mitigate the risks involved in cooperating with CTRrecipient governments.
Although these methods attempt to reduce risk to an acceptable level, DOD
cannot fully mitigate the risks involved in working jointly with
CTR-recipient governments. While DOD's enhancements are an improvement
over the previous management and internal controls for the program, CTR
procedures do not include final reviews of CTR projects upon their
completion. As such, DOD has no

8The five CTRIC contractors are Parsons Delaware, Inc.; Bechtel National,
Inc.; Raytheon Technical Services Company; Kellogg, Brown, & Root; and
Washington Group International, Inc.

mechanism for assessing the success of completed projects and applying
lessons learned to future projects.

Improved Program Management and Internal Controls Allow for Improved
Implementation of CTR Program

Key Leadership and Oversight Vacancies Filled for CTR Program

Beginning in 2003, DOD implemented several new and enhanced management
processes to allow program managers to better assess the progress of CTR
projects and address program implementation weaknesses to reduce the risk
of program failures. For example, DOD filled vacant AT&L positions;
developed specific guidance for project managers on reporting objectives,
schedules, and cost estimates; and improved communication within the
program and with recipient countries. (For a comparison of DOD's CTR
internal controls with selected control standards for the federal
government, see app. V.) DOD developed a training course that all CTR
project and program managers are required to complete, which provides
detailed instruction on incorporating the new requirements of the internal
control framework into all CTR projects. According to 24 of the 30 CTR
program, policy, and acquisition officials responding to our structured
interview, the new framework has helped improve CTR project
implementation. For example, CTR officials stated that now the program
management review system is more rigorous and project managers know what
is expected of them in reporting on the cost, schedule, and performance of
their projects.

In July 2003, DOD filled AT&L vacancies, closing a critical gap in the
department's ability to ensure that the CTR program was meeting cost,
schedule, and performance goals. Previously, DOD had not been carrying out
its own management plans for ensuring that CTR projects were meeting
stated goals. Specifically, in May 1994, the Deputy Secretary of Defense
approved a plan to strengthen the implementation of CTR projects. Under
this plan, the CTR policy office was responsible for negotiating
agreements with recipient countries, establishing policy guidance, working
on the CTR budget, and notifying Congress of developments in the program.
After CTR policy approved a project and signed an agreement to begin work,
AT&L was responsible for developing detailed implementation plans,
monitoring ongoing work, and ensuring that work was meeting cost,
schedule, and performance goals. However, DOD left several AT&L positions
vacant until 2003, leaving a critical gap in oversight over the CTR
program. The CTR policy office began managing daily CTR project activities
to fill this leadership gap. However, according to the director of the
policy office, staff in that office were not qualified to manage the
activities of the program because they were not familiar with DOD
acquisition guidelines nor did they have the technical expertise necessary
to manage CTR programs.

According to a 2004 DOD Inspector General (IG) report on the management of
the CTR program, if the AT&L positions had been filled, those officials
might have identified some of the risks involved in the two failed CTR
projects that cost DOD nearly $200 million.

Since the AT&L positions were filled in July 2003, the office now
participates in CTR program planning and review, overseeing program review
meetings, and providing guidance on issues such as performance measurement
and reporting requirements. The Deputy Assistant Secretary of Defense for
Chemical Demilitarization and Threat Reduction attends informal monthly
meetings with CTR program managers to be updated on the status of projects
and other management issues. He also serves as the program reviewer for
several CTR projects, making him responsible for overseeing the cost,
schedule, and performance of each of those projects and approving them at
the end of each project phase. For example, in July 2004, he approved a
biological weapons proliferation prevention project's acquisition program
baseline and authorized the program manager to move the project into the
demonstration phase. CTR officials stated that it is now clear who they
need to report to and when.

DOD Uses Several New Methods DOD uses several new methods to assess and
mitigate risks associated

to Assess CTR Project Risk 	with CTR projects. DOD identifies a senior
official responsible for ensuring the potential risks to meeting
objectives are evaluated for each project, requires stakeholders on each
project to meet regularly to conduct specific risk management activities,
and implements each project in three phases. According to DOD's risk
management guide, risk is defined as a measure of the potential inability
of a program to achieve its overall program objectives within defined
cost, schedule, and technical constraints.9

DOD's approach to assessing program risks was limited prior to 2003. In
September 1996, we reported that the CTR multiyear plan did not indicate
whether program officials had omitted risk and contingencies from project
cost estimates.10 In addition, a 2003 DOD IG report found that DOD did not
identify risks or have adequate controls in place to mitigate risk when

9DOD, Risk Management Guidebook for DOD Acquisition, Fifth Edition, June
2003.

10GAO, Weapons of Mass Destruction, Status of the Cooperative Threat
Reduction Program, GAO/NSIAD-96-222 (Washington, D.C.: Sept. 27, 1996).

managing projects.11 According to a CTR official, CTR program and project
managers periodically included risk assessments in planning their
projects, but did not include actions to control the risks identified if
problems occurred. The DOD IG reported that the CTR program management's
failure to fully assess project risks contributed to DOD spending nearly
$200 million on projects in Russia to construct a liquid rocket fuel
disposition facility that was never utilized and to design a solid rocket
motor elimination facility that was never constructed.

In an effort to improve assessments of the risks associated with CTR
projects, DOD began designating an official, known as the Milestone
Decision Authority (MDA), to be responsible for ensuring that project
managers, with assistance from project stakeholders, assess the risks to
meeting project objectives and formulate plans to mitigate these risks.
MDAs are assigned to projects based on several factors, including the
project's risk and expected cost. According to an AT&L official, the
Deputy Assistant to the Secretary of Defense for Chemical Demilitarization
and Threat Reduction is usually assigned as the MDA for high-cost or
high-risk projects. For projects with less risk or expense, the MDA is
usually the director of the DTRA/CT directorate. MDAs review the risks
identified by the project managers and evaluate the plans they have
developed to mitigate these risks.

In addition, DOD instituted periodic stakeholders meetings to assess and
minimize risks associated with CTR projects and to discuss major project
issues and milestones. In these meetings, project managers present
assessments of potential risks that could impact their ability to meet
project objectives. For example, a risk identified for the Russian SS-24
missile elimination project was that political or economic developments in
Russia might unexpectedly affect the project's costs. After the project
managers present their assessments, the stakeholders provide input to
address these risks and consider additional problems that may arise during
project implementation. According to CTR management officials, this team
approach to risk assessment ensures consensus early in each phase of the
project. It has resulted in more informed decision making because
stakeholders meet regularly to receive updates on project status and make
decisions on the next phase of project implementation based on the facts
presented during those meetings. Of the 30 DOD and CTR officials we

11DOD, Office of the Inspector General, Cooperative Threat Reduction:
Solid Rocket Motor Disposition Facility (D-2003-131), Sept. 11, 2003.

interviewed using our structured interview guide, 9 said that this new
process of stakeholder involvement was one of the most important new
internal controls for the CTR program.12

Furthermore, DOD now uses a new phased-contract approach that divides each
CTR project into three phases. These phases can vary according to project,
but usually include phases covering project development, project
execution, and project maintenance, according to a CTR official. This
approach helps to minimize risk by allowing managers to make the
appropriate changes, delay, or stop a project if a problem occurs. For
example, in 2003, in the development phase of a Ukrainian SS-24 missile
elimination project, DOD decided not to proceed with the project because
the risks associated with the missile destruction method that the
Ukrainians wanted to use were too high. Project managers are required to
develop exit criteria for each project phase that clearly state under what
conditions the project will be permitted to move into the next phase and
under what conditions DOD will stop the project. For example, for a CTR
project tasked with eliminating Russia's SS-25 missiles, one of the exit
criteria for moving into the project's maintenance phase is that DOD
complete negotiations on the contract to maintain the missile elimination
facility that is being constructed.

DOD Has New Guidelines for In 2003, DOD devised and implemented new
guidelines that provide CTR

Reporting Project Performance	project managers with written instructions
on developing and reporting project objectives, schedules, and cost
estimates. According to the internal control guidelines for the federal
government, it is important for an organization to establish measures to
gauge its performance on critical activities and determine if the
organization is meeting its objectives. CTR program area and project
managers we interviewed stated that prior to 2003 there were no
established procedures for developing performance measures, evaluating
project performance, or reporting (either orally or in writing) on project
implementation to management. In addition, project

12Using our structured interview guide, we asked DOD officials what they
believed the most important new internal controls for the CTR program are.
This was an open-ended question and each official could provide multiple
answers. We obtained the following responses from the 30 officials we
interviewed as to which new internal controls are the most important: 19
said the MDA review process, 9 said periodic meetings with stakeholders, 9
said the involvement of the AT&L office in the program, 8 said new
reporting requirements, 7 said the new methods for communicating with and
documenting the responsibilities of recipient government officials, and 7
said the program's new focus on the acquisition process.

plans were not comprehensive and lacked established baselines against
which to measure performance.

According to CTR project managers, the current guidance on performance
measurement is clearer and more consistent than in the past. For example,
in a training course required for all CTR program and project managers,
project managers are instructed on developing measures for how, when, in
what sequence, and at what cost specific project tasks will be completed.
Our fieldwork included a site visit to a CTR project in Russia that had
developed such measures. One measure used to gauge performance on that
project is whether the elimination of Russian SS-24 missiles complies with
arms control treaty requirements. For each measure, project managers
develop objectives - the indicator's desired outcome - and thresholds -
the minimum acceptable performance for that measure. For example, one
objective for the SS-24 missile elimination project is to eliminate
Russia's SS-24 missiles by March 2008. However, if the missiles cannot be
eliminated by then, they must be eliminated by the threshold date of
August 2008. (Figure 2 shows the elimination of an SS-24 engine.)

Figure 2: Russian SS-24 Missile Engine Undergoing Dismantlement

Source: DOD.

If the threshold is not met at the end of a particular project phase, the
project manager and DOD management officials may consider stopping the
project. When an indicator is in danger of not being met, the project
manager is required to submit a warning report to the project's MDA to
ensure that management is aware of potential delays and that the project
manager is addressing the problem. If the indicator is not met, DOD
management officials may stop the project until a plan is in place to
bring the indicator up to the threshold level.

DOD Has More Systematic and In 2003, DOD introduced a new process to
review projects and programs to Consistent Tools to Review provide a more
systematic and consistent structure to management's

Programs

review of CTR projects. According to the internal control guidelines for
the federal government, program reviews are important for program
management because they provide comparisons of actual performance to
planned or expected results and help management assess its programs.
Program reviews lacked the detail that allowed senior management to
evaluate projects and risks consistently. However, according to CTR
program managers we interviewed, before 2003 there was no standardized
guidance to assist program managers on developing program reviews or
implementing their programs. For example, CTR program area and project
managers did not receive any guidance on how to report on the daily
management of program operations or on the type of information that status
reports should include.

Under the new program review system, the designated MDA conducts reviews
of a project's cost, schedule, and performance objectives. During program
reviews, which take place periodically throughout the course of a project,
project managers report to their MDAs on the status of their projects and
whether the objectives are being met. In addition, these review meetings
are more detailed than they were before the new system was in place. For
example, a project review in 2004 for a CTR project tasked with installing
nuclear detection devices in Uzbekistan included details on the project's
schedule over the next 3 years, with specific dates for completion of
certain milestones. It also included a detailed breakdown of funding for
the project over the next 3 years and a thorough discussion of project
risks. The information was not included in the project's 2003 review.
According to several CTR project managers, the new program review system
has resulted in more consistently conducted project evaluations. Of the 30
DOD officials we interviewed, 19 said the program review process,
conducted by the MDA, was one of the most important new

internal controls for the CTR program.13 They reported that, with the
introduction of the MDA, program reviews are occurring at the same
intervals for each project and that project managers report cost,
schedule, and performance data in the same format to their MDAs during the
reviews. Through the course of work we reviewed copies of various MDA
project review documents.

Communication Is More According to DOD officials, communication within the
CT directorate and

Structured	among the DOD offices involved in the CTR program, has improved
with the introduction of new internal controls. DOD also has improved its
external communications with CTR-recipient countries. Internal control
guidelines for the federal government state that communication mechanisms
should exist within an organization to allow the easy flow of information
down, across, and up the organization. However, before 2003, internal
communications within the CTR program office were not clear, according to
DOD officials. For example, all CTR stakeholders were not present during
project development meetings nor were they involved in early decision
making about project risks. Communications between DOD and CTR recipient
governments also were not clear. DOD assumed, without getting written
documentation that CTR recipient countries would carry out the
responsibilities and commitments to which they agreed.

Since 2003, communication among the DOD offices working on the CTR program
has improved. Stakeholders on specific projects meet more frequently now
than in the past to discuss project issues and problems. Project managers
involve stakeholders in the earliest stages of project development on
through to the final phase of project completion to assure that
stakeholders and managers have regular opportunities to learn about
project developments and provide input on project implementation. This
system has now been institutionalized and all CTR project managers are
instructed in a new training course to convene meetings with stakeholders
throughout the life of their projects. In addition, new reporting
requirements help ensure that all stakeholders are informed of project
developments. All of the 30 DOD officials we interviewed said that they
are required to report on the cost, schedule, and performance of their
programs and projects periodically, including daily, weekly, monthly, and
quarterly. For example, DOD now requires program managers to submit
monthly project status reports to ensure that potential problems are
documented and stakeholders are informed of them. In addition, 28 of the

13See footnote 12 for a full list of responses.

30 DOD officials in our structured interview reported that the amount of
communication within the CT directorate allows them to effectively
implement their projects. Project managers are in frequent contact with
contractors implementing projects in recipient countries. We observed a
meeting in Russia between a CTR project manager and the Russian
contractors implementing the project he manages. During the meeting, they
negotiated revisions to a new contract and discussed the project's status.
The project manager makes similar trips at least once a month to the
project site to oversee progress and meet with the contractors. Other
project managers we interviewed in Russia and in the U.S. stated that they
hold weekly phone conferences with contractors, exchange emails, and make
regular visits to project sites.

Contracting officials in Russia stated that they hold weekly telephone
conferences with their CTR project managers and contact them regularly
when project implementation issues arise. We observed such a weekly
telephone communication during our visit to the International Science and
Technology Center in Moscow. Contractors also submit monthly written
reports. Project managers also are in daily contact with their program
managers and CT directorate management. According to a CTR official, at
quarterly program review meetings, program and project managers present
detailed information, both orally and in writing, on the status of their
projects to all involved stakeholders.

DOD has also improved its external communications with CTR-recipient
countries. DOD and recipient government officials now consistently share
more detailed information on project developments and issues of concern.
CTR management officials and program and project managers are in frequent
contact with their recipient government counterparts throughout project
implementation. In 2004 CTR teams made 165 trips, compared with 70 trips
in fiscal year 2001, to meet recipient government officials and improve
their monitoring of CTR projects. Russian government officials working on
CTR projects stated that they communicate with CTR officials continually
and meet regularly with the director of the CT directorate. They also hold
weekly teleconferences with project managers, and project managers visit
project sites regularly. While traveling with CTR project managers in
Russia and Kazakhstan, we observed extensive discussions of important
issues during site visits and meetings with contractors and recipient
government officials.

Furthermore, DOD has introduced and updated its controls to ensure that
commitments made by the CTR program and recipient governments are

regularly documented and discussed. These controls also are a means to
ensure that each party is held accountable for its responsibilities. In
2003, DOD began using Joint Requirements and Implementation Plans (JRIP)
to document the commitments and responsibilities agreed to by each party
involved in project implementation. For example, a requirements plan for a
CTR project tasked with eliminating a specific type of Russian nuclear
missile states that one of DOD's responsibilities in implementing the
project is to design and construct storage facilities for the missiles to
be eliminated. One of the Russian government's responsibilities on the
same project is to provide DOD with a schedule for the delivery of the
missiles to the proper facility for elimination. If either party fails to
meet its obligations as articulated in the document, the other party can
stop progress on the project. For example, DOD officials halted new
construction from March to June 2004 at the CTR-funded chemical weapons
destruction facility at Shchuch'ye until the Russian government stopped
insisting on unnecessary design changes for the construction of a boiler
house on the site. To further enhance communication between CTR program
officials and CTR recipient countries, DOD also holds biannual meetings
where officials from both sides meet to review and discuss project
implementation and revise plans when necessary. According to CTR
management officials and JRIP documents we reviewed, these meetings
provide a regular forum for discussion that was not previously available
and have improved communication between DOD officials and CTR-recipient
governments.

Inherent Risks Remain in Working with Recipient Governments

DOD faces significant challenges in collaborating with CTR-recipient
governments to jointly implement projects and ensure that assistance is
used to meet program objectives. Successful implementation of CTR projects
requires the cooperation of recipient governments, but DOD cannot fully
mitigate the risks involved in working jointly with these governments.
First, working with CTR-recipient governments often involves lengthy
negotiations to reach agreements on various issues throughout a project's
implementation. This can delay U.S. funded efforts to help secure or
dismantle weapons of mass destruction by months or years. Second, risks to
the project can increase when implementation begins before the necessary
agreements are in place. Third, after agreements are reached and
implementation is under way, additional risk is

introduced by the control environment14 within the recipient governments.
For instance, if a recipient government has a poor control environment
risk increases that the agreed to objectives and conditions will not be
met.

In cooperating with CTR-recipient governments, DOD must negotiate a
variety of agreements that can require lengthy negotiations. The highest
level of agreements, called umbrella agreements, provide an overall legal
framework for U.S. and CTR-recipient countries' cooperation in
implementing projects.15 Implementing agreements outline the types and
amounts of assistance to be provided for specific CTR projects. For
instance, projects to eliminate strategic nuclear arms, including
strategic bombers, missiles, and related equipment are conducted under the
Strategic Nuclear Arms Elimination Implementing Agreement signed by DOD
and the Ukrainian Ministry of Defense in December 1993.16 Agreement
amendments update the annual amount of funding that CTR will provide for a
specific project within a recipient country. For example, the December
2004 agreement amendment for biological weapons proliferation projects
with the government of Kazakhstan provides for $30 million in CTR funding
during fiscal years 2004 and 2005. The recipient governments must sign
agreements or agreement amendments before projects can begin and funding
can be provided or increased, but this may take time and delay projects,
according to CTR officials. According to a CTR program area manager, the
Russian government took more than 18 months to sign an implementing
agreement for nuclear weapons transportation and security projects because
it did not want to reveal the location of nuclear weapons storage sites
that the government planned to close. In 2004, the government of
Kazakhstan took more than 6 months to sign the annual agreement amendment
for biological weapons proliferation projects. According to CTR
contractors and officials at Kazakhstani

14The governments maintain and establish an environment throughout their
bureaucracies that sets a positive and supportive attitude toward internal
control and management. It provides discipline and structure as well as
the climate, which influences the quality of internal control.

15Umbrella agreements contain a comprehensive set of rights, exemptions,
and protections for U.S. personnel and CTR program activities. Currently,
DOD has umbrella agreements with the governments of Albania, Azerbaijan,
Georgia, Kazakhstan, Moldova, Russia, Ukraine, and Uzbekistan.

16Agreement Between the Department of Defense of the United States of
America and the Ministry of Defense of Ukraine Concerning the Provision of
Material, Services, and Related Training to Ukraine in Connection with the
Elimination of Strategic Nuclear Arms, dated December 5, 1993, and as
amended.

biological research facilities, the government's delay slowed efforts to
improve the security and safety of biological pathogens at their
institutes. For CTR biological weapons proliferation prevention projects
in Russia, however, DOD has no implementing agreement. These projects are
implemented through the International Science and Technology Center in
Moscow.17 Until it can conclude a biological threat reduction implementing
agreement with the Russian government, DOD has limited the types of
projects it initiates in Russia.

Risks to CTR projects can increase when DOD begins implementation before
the necessary agreements are in place with CTR recipient governments.
After more than 10 years, Russia and DOD have yet to negotiate a
transparency agreement that would allow U.S. personnel access to the
CTR-funded fissile material storage facility at Mayak to ensure that it is
being used as intended. DOD designed and built the facility to provide
centralized, safe, secure, and ecologically sound storage for
weapons-grade fissile material from dismantled Russian nuclear warheads.
In December 2003, DOD completed the CTR-funded Mayak facility at a cost of
about $335 million,18 and the Russian government assumed full
responsibility for its operation and maintenance. Although the Russian
government has pledged its commitment to transparency, it has not signed
an agreement with DOD. Therefore, the United States has no reasonable
assurance that Russia will only use the facility to store materials from
dismantled nuclear weapons and not reuse the materials. According to CTR
program officials, the Russian government may soon begin storing nuclear
materials at the Mayak facility without an agreement in place. We first
raised concerns about the lack of a transparency agreement for the Mayak
facility in 1994.19 Later, in April 1999, we voiced concerns that the
United States still lacked

17The International Science and Technology Center was established by the
United States, the European Union, Russia, and Japan in November 1992 to
provide peaceful research opportunities to former Soviet weapons
scientists and redirect their skills away from producing weapons of mass
destruction.

18As of April 2005, DOD had spent $14.9 million on the design of the
facility and $319.6 on the facility's construction. The amount does not
include $69.3 million spent on fissile material containers for the
facility.

19GAO, Weapons of Mass Destruction: Reducing the Threat From the Former
Soviet Union, GAO/NSIAD-95-7 (Washington, D.C.: Oct. 6, 1994).

clear assurances that Russia would use the Mayak facility in a manner
consistent with all U.S. national security objectives for the project.20

Furthermore, two CTR project failures in Russia illustrate the
consequences of DOD not having the necessary agreements in place (see app.
I for additional information). In the early 1990s, DOD agreed to assist
Russia in constructing a facility to dispose of liquid missile propellant,
known as heptyl, which had been drained from intercontinental and
submarine-launched ballistic missiles. DOD spent nearly $95 million over
10 years to build a facility to destroy the heptyl, only to learn in
January 2002 that Russia had diverted the heptyl to its commercial space
program, rather than storing it for eventual destruction. As a result, the
facility was never used. The DOD IG reported in 2002 that CTR program
officials negotiated a weak implementing agreement with the Russian
government. Specifically, the agreement did not require the Russian
government to provide the heptyl or provide access for CTR program
officials to inspect the heptyl storage facilities and verify the
quantities present.21

Similarly, DOD had agreed in the early 1990s to build a facility in Russia
to dispose of solid rocket motors from dismantled missiles. DOD spent
almost $100 million over nearly 10 years to design the facility, despite
the concerns of local residents about the possible environmental impact.
In January 2003, Russian officials notified DOD that the regional
government had denied the land allocation permit necessary to begin
construction due to the opposition from local residents. As a result, DOD
never began construction on the facility. The DOD IG found that the
implementing agreement for the design of the solid rocket motor
elimination facility at Votkinsk failed to specify Russian
responsibilities for the project. Primarily, the Russian government was to
obtain the necessary land allocation permits. CTR officials accepted in
good faith that Russia would help implement program objectives and
therefore assumed that they did not need to document the Russian
government's responsibilities. In addition, despite local protests against
construction of the facility from the

20GAO, Weapons of Mass Destruction: Effort to Reduce Russian Arsenals May
Cost More, Achieve Less Than Planned, GAO/NSIAD-99-76 (Washington, D.C:
Apr. 13, 1999.)

21DOD Office of the Inspector General, Cooperative Threat Reduction:
Cooperative Threat Reduction Program Liquid Propellant Disposition
Project, D-2002-154 (Washington, D.C.: Sept. 2002).

beginning of the project, DOD project managers did not identify land
allocation as a potential risk until April 2002.22

Even after DOD concludes appropriate agreements, however, risks still may
exist due to the control environment of the recipient governments. For
instance, if a recipient government has a poor control environment risk
increases that the agreed to objectives and conditions will not be met. A
good control environment requires that an organization's structure clearly
defines key areas of authority and responsibility. When the Russian
government reorganized in early 2004, it was uncertain which agencies and
officials were in charge of working with DOD. While the names of some of
the agencies had merely changed, other agencies were subsumed into larger
organizations or completely dissolved. According to CTR program officials,
the reorganization had a significant impact on program implementation. For
example, the CTR Policy Office is renegotiating its implementing
agreements to reflect the new Russian government entities. CTR projects
also experienced delays when the Russian government reorganized the
committee that granted tax exemptions and resolved customs issues for all
CTR assistance entering Russia. Work on the CTRfunded chemical weapons
destruction facility in Russia was delayed until needed equipment was
cleared through customs. Furthermore, CTR recipient governments may not
provide adequate access to project sites or may pursue priorities that
compete with CTR program objectives. DOD's inability to gain access to all
sites where CTR assistance is provided has been an issue since the CTR
program began in 1992. The U.S. government has been concerned with its
ability to examine the use of its CTR-provided assistance, while
CTR-recipient countries have security concerns regarding U.S. access to
sensitive sites.23 For example, as we reported in March 2003, DOD had made
only limited progress installing security upgrades at Russian nuclear
weapons storage sites and former biological weapons facilities because
Russia would not provide DOD access to several sites.24 Since March 2003,
Russia has granted DOD access to some nuclear weapon

22DOD Office of the Inspector General, Cooperative Threat Reduction: Solid
Rocket Motor Disposition Facility Project, D-2003-131 (Washington, D.C.:
Sept. 2003).

23GAO, Cooperative Threat Reduction: DOD Has Adequate Oversight but
Procedural Limitations Remain, GAO-01-694 (Washington, D.C.: June 19,
2001).

24GAO, Weapons of Mass Destruction: Additional Russian Cooperation Needed
to Facilitate U.S. Efforts to Improve Security at Russian Sites,
GAO-03-482 (Washington, D.C.: Mar. 24, 2003).

storage sites, and continues to restrict access to some former biological
weapons facilities.

DOD Does Not Have a Mechanism to Review CTR Projects Once They Are
Completed

While CTR program officials monitor the progress of ongoing projects, DOD
has no mechanism to monitor and evaluate the results of completed projects
in relation to their meeting program objectives. According to internal
control standards, monitoring should assess the quality of project
performance over time. Conducting program evaluations, such as reviewing
completed CTR projects, may be warranted after major changes in management
plans. DOD does not conduct final evaluations of completed CTR projects
and currently has no mechanism to document lessons learned and apply them
to future project planning and implementation. At its inception, the CTR
program primarily provided equipment to recipient countries, but now the
vast majority of assistance is provided through contracted services.
Although the program has shifted to funding costly, complex, and sometimes
high-risk projects that can last for many years, DOD has not expanded the
scope of its project monitoring process to include evaluations of the
efficiency and effectiveness of CTR projects upon their completion.

In June 2001, we recommended that DOD conduct such evaluations to improve
DOD's overall program oversight. In response, DOD agreed to periodically
assess the efficiency and effectiveness of CTR assistance, including
contracted services. However, DOD lacks a final review process to assess
the efficiency and effectiveness of completed CTR projects. As of June
2005, DOD had completed 77 projects, but program officials did not
evaluate and record what went well during a project's implementation and
what could have been improved to better meet program objectives. While CTR
officials discuss ongoing individual projects performance through the MDA
process, senior CTR management officials acknowledged that projects are
not evaluated upon their completion and such information is not shared
program wide in a systematic manner. As such, it is difficult to apply
lessons learned to future CTR projects as they are being planned and
implemented and avoid past mistakes. Officials stated that conducting
final evaluations could further improve their management of the CTR
program,especially as the program expands into countries outside the
former Soviet Union. Since DOD does not assess the efficiency and
effectiveness of projects as they are completed, it cannot apply the
lessons learned from such evaluations to new and ongoing projects in a
systematic way.

Conclusion	Since 1992, CTR assistance has helped the states of the former
Soviet Union eliminate and protect their weapons of mass destruction.
Although the CTR program has helped reduce the threat that these weapons
could be stolen or misused, incidents such as the heptyl disposition and
solid rocket motor elimination projects demonstrated significant problems
with DOD's program management. In the aftermath of these incidents, DOD
has worked to revamp its CTR program management to achieve greater
assurance that projects are implemented according to program objectives.
By standardizing its management approach and applying it consistently
across all CTR program areas, DOD is improving its management of the CTR
program. DOD has greater assurance that all stakeholders, including
recipient governments, are involved in project implementation. CTR program
and project managers have clearer guidance on how to conduct their work
and report on it. Furthermore, DOD has made progress in more clearly
articulating and documenting its cooperative arrangements with CTR
recipient countries, as well as holding recipient governments more
accountable for implementing the CTR projects in their respective
countries.

These improved controls cannot eliminate the risks inherent in the
program, but the goal is to mitigate risk to an appropriate level given
the circumstances. Most significantly, the success of the CTR program
requires the cooperation of recipient governments. Good internal controls
help mitigate the risks from having to rely on recipient governments to
sign agreements, provide access, and support project implementation.
Still, governments can change their project goals, deny access to U.S.
contractors and officials, or withhold permits to allow work to proceed.
DOD's more robust internal controls have helped minimize the impact of
these actions, but they cannot guarantee a project's success. The U.S.
government remains concerned about its ability to determine how
CTRprovided assistance is being used, while CTR recipient countries
continue to have security concerns regarding U.S. access to their
sensitive facilities and sites.

In addition, while DOD has made progress over the past 2 years in
improving its management of the CTR program, it still does not review the
overall performance of projects upon their completion. As projects are
completed, assessing and documenting lessons learned will allow DOD to
further improve CTR project implementation. As the CTR program completes
more projects and the program begins to expand beyond the

former Soviet Union, such a mechanism will become more important to
overall program management.

Recommendation for 	We recommend that the Secretary of Defense conduct
performance reviews upon the completion of CTR projects. Such reviews
would provide

Executive Action	a mechanism for documenting lessons learned and applying
them to future project planning and implementation.

Agency Comments and 	DOD provided comments on a draft of this report,
which are reproduced in appendix VI. DOD concurred with our recommendation
that reviews of

Our Evaluation	completed CTR projects should be conducted to document and
apply lessons learned. DOD also provided technical comments, which we have
incorporated where appropriate.

We are providing copies of this report to the Secretary of Defense and
other interested congressional committees. We will also make copies
available to others upon request. In addition, this report will be
available on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at (202) 512-8979 or [email protected]. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this report
are listed in appendix VII.

Joseph A. Christoff, Director International Affairs and Trade

Appendix I

Two Project Failures Cost the CTR Program Nearly $200 Million

By 2003, two CTR program project failures caused DOD to reassess its
management of the program. In the early 1990s, DOD agreed to assist Russia
in constructing a facility to dispose of liquid missile propellant, known
as heptyl, and build a solid rocket motor disposition facility. However,
DOD terminated these projects after spending nearly $200 million over
almost a decade.

In the case of the heptyl disposition facility, DOD spent more than $95
million over 10 years on the facility at Krasnoyarsk, Russia, that was
never used. In 1993, the Russian government asked for CTR assistance to
dispose of heptyl from intercontinental and submarine-launched ballistic
missiles that were being destroyed in compliance with arms control
agreements.1 At the time, Russian government officials claimed that
existing heptyl storage facilities were full and that they needed a way to
dispose of the propellant, according to DOD officials. DOD officials also
stated that Russian officials had told them that the heptyl could not be
used for the Russian commercial space program. However, when CTR officials
were ready to test the almost completed facility in January 2002,
officials from the Russian Aviation and Space Agency revealed that nearly
all of the heptyl had been diverted to the commercial space program. In
February 2003, the Deputy Secretary of Defense approved the dismantlement
and salvage of the no-longer needed heptyl disposition facility.

According to the DOD IG, a variety of inadequate management controls
contributed to the heptyl project failure.2 The IG reported that AT&L was
not assuming its role in managing the CTR program by providing input and
direction for projects. Rather, the CTR Policy Office, which had little
experience in following DOD acquisition guidelines, establishing
milestones, and identifying risks, was managing daily CTR project
activities. Because AT&L was not performing adequate oversight of the

1The Strategic Arms Reduction Treaty (START) I, signed July 31, 1991, by
the United States and the Soviet Union, limited the number of
intercontinental ballistic missiles, submarinelaunched ballistic missiles,
and heavy bombers each side could have as well as the number of warheads
the missiles could carry. START II, signed in 1993 by the United States
and the Russian Federation, was to eliminate multiple warheads on all
intercontinental ballistic missiles except for submarine-launched
missiles.

2DOD Office of the Inspector General, Cooperative Threat Reduction:
Cooperative Threat Reduction Program Liquid Propellant Disposition
Project, D-2002-154 (Washington, D.C.: Sept. 2002).

Appendix I Two Project Failures Cost the CTR Program Nearly $200 Million

program, CTR program officials negotiated an implementing agreement3
without specific programmatic commitments from the Russian government and
did not thoroughly identify the risks associated with eliminating the
heptyl. Specifically, the agreement did not require the Russian government
to provide the heptyl or provide access for CTR program officials to
inspect the heptyl storage facilities and verify the quantities present.
CTR officials accepted in good faith that Russia would provide the heptyl
and therefore assumed that they did not need to document or oversee the
Russian government's responsibilities. In assessing the risks of the
heptyl project, CTR project officials failed to identify the possibility
that the Russian government would use the heptyl for other purposes and
therefore developed no mitigation plan.

A second project failed in January 2003. After spending almost 10 years to
design the facility at Votkinsk to destroy solid rocket motors, CTR
program officials ended the project at a cost of almost $100 million. In
the early 1990s, Russia had requested CTR assistance to destroy motors
from dismantled missiles in compliance with an arms control agreement.
Originally, the facility was to be located at Perm, but pending
construction of the facility generated environmental opposition from local
residents. The facility was thus moved to Votkinsk in February 1998, where
local residents concerned with the environmental impact of the facility
also began protests. Still, CTR program officials continued with the
design of the facility, remaining optimistic that the regional government
would issue the required permits regardless of opposition. Officials from
the Russian Aviation and Space Agency told CTR program officials in July
2002 that land for the facility would be allocated no later than September
2002. In a January 2003 letter, however, Russian officials notified DOD
that the regional government had denied the land allocation permit due to
the opposition from local residents.

Inadequate management practices also contributed to the failure of the
solid rocket motor disposition project at Votkinsk. As with the failed
heptyl project, the DOD IG reported that AT&L did not assume its
management role in overseeing the CTR program.4 The CTR Policy Office was
managing

3Implementing agreements, signed by DOD and the executive agents of CTR
recipient countries, outline the types and amounts of assistance to be
provided for specific projects.

4DOD Office of the Inspector General, Cooperative Threat Reduction:
Management Structure of the Cooperative Threat Reduction Program,
D-2004-050 (Washington, D.C.: Feb. 2004).

Appendix I Two Project Failures Cost the CTR Program Nearly $200 Million

daily CTR project activities. The implementing agreement for the Votkinsk
project failed to specify Russian responsibilities, such as obtaining the
necessary land allocation permits. In addition, despite the local
environmental protests against construction of the facility from the
beginning, project managers did not identify land allocation as a risk
until April 2002. Furthermore, the contracting processes that were in
place contained no mechanism to terminate the project when costs increased
and the schedule was delayed. DTRA awarded the project contract for the
complete design and construction of the facility rather than contracting
in phases so that possible CTR program losses could be minimized.

Appendix II

Legislative Mandates Covering the CTR Program

As required by section 3611 of the National Defense Authorization Act for
Fiscal Year 2004, we reviewed the status of DOD's implementation of
legislative mandates covering the CTR program. Since 1992, Congress has
passed 25 pieces of legislation that guide CTR project activities.
Specifically, Congress has established a series of (1) requirements that
must be met before DOD can fund CTR projects, (2) conditions on CTR
expenditures, and (3) reporting requirements on the CTR program and
project implementation. Figure 3 illustrates the types of congressional
legislation covering the CTR program from fiscal year 1992 to 2004 and
includes those legislative requirements that have lapsed. Over the years,
DOD has mostly complied with these requirements, except for several
occasions when it was late in providing required reports to Congress.
Legislation has recently been proposed that would repeal some DOD
requirements.

Congress has established a variety of requirements that must be met before
DOD can fund CTR projects. For example, in establishing the CTR program in
1991, Congress required that CTR assistance provided to the countries of
the former Soviet Union could not be expended until the President
certified to Congress that the recipient governments were committed to
reducing their weapons arsenals.1 According to CTR officials, verifying
CTR program compliance with legislation can be a time-consuming process
and may delay the implementation of projects, but they cannot spend CTR
funds unless all legislative conditions are met. DOD officials involved
with managing the CTR program recognize that Congress is exercising its
oversight responsibilities over the CTR program.

Congress has also placed limits or conditions on how DOD can spend CTR
money. For instance, in Congress placed conditions on CTR money to
prohibit spending in certain areas, such as conventional weapons
destruction2 and housing for retired or current members of CTR-recipient
countries' military forces.3 Also in 2000, Congress halted CTR funding for

1Public Law 102-228, Section 211. 2Public Law 106-65, Section 1303.
3Public Law 106-79, Section 8078.

Appendix II Legislative Mandates Covering the CTR Program

construction of the Russian chemical weapons destruction facility at
Shchuch'ye4 until fiscal year 2004 when it granted a waiver.5

Congress also requires DOD to submit reports on overall program
implementation, as well as specific projects. Since the beginning of the
CTR program, DOD has mostly complied with its congressional reporting
requirements. However, as we previously reported, from 1994 through 1999
DOD was late in providing its annual report, which accounts for CTR
assistance.6 Specifically, DOD was 16 months late in submitting its report
for 1997 and more than 10 months late in submitting its report for 1998.
Beginning in fiscal year 2001, the reporting requirement to account for
CTR assistance became part of the annual CTR report.7 For fiscal years
2002 through 2004, DOD provided its annual CTR report to Congress late.8
However, DOD provided its annual report to Congress for fiscal years 2005
and 2006 mostly on time.

Recently, some members of Congress have introduced bills that may lesson
the legislative burden on the CTR program. In February 2005, Senator Lugar
introduced the Nunn-Lugar Cooperative Threat Reduction Act of 2005.9 The
bill, among other actions, would repeal some of the restrictions that
Congress had previously placed on the CTR program. If enacted the

4Public Law 106-65, Section 1305.

5Public Law 106-65, Section 1305 and Public Law 108-136, Section 1306.

6GAO, Cooperative Threat Reduction: DOD's 1997-1998 Reports on Accounting
for Assistance Were Late and Incomplete, GAO/NSIAD-00-40 (Washington,
D.C.: Mar. 15, 2000). GAO, Cooperative Threat Reduction: DOD Has Adequate
Oversight of Assistance, but Procedural Limitations Remain, GAO-01-694
(Washington, D.C.: June 19, 2001).

7Public Law 106-398, Section 1308(a). The annual report describes CTR
activities and assistance provided during the preceding fiscal year.
Subsequent legislation has added required information to this report. See
Public Law 107-107, Section 1309; Public Law 107314, Section 1304.

8GAO, Cooperative Threat Reduction Program Annual Report, GAO-03-341R
(Washington, D.C.: Dec. 2, 2002). GAO, FY 2003 Annual Report on the
Cooperative Threat Reduction Program, GAO-03-627R (Washington, D.C.: Apr.
8, 2003). GAO, FY 2004 Annual Report on the Cooperative Threat Reduction
Program, GAO-03-1008R (Washington, D.C.: July 18, 2003).

9S. 313.

Appendix II Legislative Mandates Covering the CTR Program

bill would remove (1) a Presidential certification10 requirement for all
CTR recipient countries to receive CTR assistance and (2) the funding
constraints placed on the construction of the CTR-funded chemical weapons
destruction facility in Russia. In February 2005, members of the House of
Representative introduced the Omnibus Nonproliferation and Anti-nuclear
Terrorism Act of 2005.11 This bill also includes a provision for the
repeal of the same restrictions outlined in the bill introduced by Senator
Lugar.

10Public Law 102-228, Section 211, as amended, specifies that the
President must state in writing that CTR recipient countries are committed
to (1) making substantial investment of their own resources to dismantle
or destroy weapons, (2) forgoing a military modernization program that
exceeds legitimate defense requirements, (3) forgoing any use of
components of destroyed nuclear weapons in new weapons, (4) facilitating
U.S. verification of weapons destruction, (5) complying with all relevant
arms control agreements, and (6) observing internally recognized human
rights.

11H.R. 665 was introduced by Representatives Schiff, Shays, Butterfield,
Chandler, Davis, Edwards, Grijalva, Holt, Israel, Maloney, Scott, Sherman,
and Watson.

Appendix II Legislative Mandates Covering the CTR Program

Figure 3: CTR Program Legislative Mandates (Fiscal Years 1992-2004)

Sec. 231 Requirement that Congress be given 15 days notice prior to the
obligation of funds

Sec.232

        Quarterly report activities to reduce the Soviet military threat

Pub. L. 102-484

                Former Soviet Union Demilitarization Act of 1992

Sec.1412

Certification requirement related to commitments of CTR recipients to
various CTR goals

Sec. 1431	Requirement that Congress be given 15 days notice prior to the
obligation of funds with additional notice requirements regarding
industrial demilitarization projects

Sec.1432

Pub. L. 103-139

Pub. L. 103-160

Sec.1203

 Report requirement concerning activities to reduce the Soviet military threat

Department of Defense Appropriations Act, 1994

                               Line item earmark

                    Cooperative Threat Reduction Act of 1993

Certification requirement related to commitments of CTR recipients to
various CTR goals

Sec. 1205	Limitation on funds authorized for programs to assist in the
environmental restoration of military sites

Sec. 1206	Requirement that Congress be given 15 days notice prior to the
obligation of funds with additional notice requirements regarding
demilitarization or conversion projects

Sec.1207

Report requirement concerning activities carried out pursuant to the CTR program

                                Pub. L. 103-335

         Pub. L. 103-337 Department of Defense Appropriations Act, 1995

Line item earmark for the study, assessment, and identification of nuclear
waste disposal by the former Soviet Union in the Arctic and North Pacific
regions

            National Defense Authorization Act for Fiscal Year 1995

Sec.1202

Report requirement concerning activities carried out pursuant to the CTR program

Sec. 1203 Report requirement concerning accounting for U.S. assistance

Sec. 1204	Report requirement concerning control and accountability of
material relating to weapons of mass destruction

Sec. 1205 Report requirement concerning multiyear planning and allied
support for CTR programs

Sec. 1206 Limitation on the amount of funds authorized to be expended on
various CTR programs

Sec. 1207	Report requirement concerning the offensive biological warfare
program of the former Soviet Union states

                       Sec. 1208 Coordination requirement

Appendix II Legislative Mandates Covering the CTR Program

Sec. 1202 Limitation on the amount of funds authorized to be expended on various
                                  CTR programs

Sec. 1203 Prohibition on use of funds for peacekeeping exercises with
Russia

    Sec. 1205 Requirement that Congress be given 15 days notice prior to the
  obligation of funds Sec.1206, as amended ReportonaccountingforU.S.assistance

Sec. 1207	Certification requirement regarding assistance to nuclear
weapons scientists of the former Soviet Union

Sec. 1208 Certification requirement relating to the offensive biological
warfare program of Russia

Sec.1209

Certification requirement regarding the use of CTR funds for the planning
and design of a chemical weapons facility

Pub. L. 104-208

                   DepartmentofDefenseAppropriationsAct,1997

Sec.8098

Prohibition on use of funds to finance housing of members of the military
forces of the former Soviet Union or of the Russian Federation

Pub. L. 104-201

                NationalDefenseAuthorizationActforFiscalYear1997

Sec.1502

Limitation on the amount of funds authorized to be expended on various CTR
                                    programs

Sec.1503

  Prohibition on use of funds for conducting peacekeeping activities , forwith
 Russia military housing, for environmental restoration, or for job retraining

Pub. L. 105-56

                   DepartmentofDefenseAppropriationsAct,1998

Line Item Earmarks for the dismantling and disposal of nuclear submarines
and submarine reactor components and for the Arctic Military Environmental
Cooperation Program Sec.8085 Prohibition on use of funds to finance
housing of members of the military forces of the former Soviet Union or of
the Russian Federation

Pub. L. 105-85

                NationalDefenseAuthorizationActforFiscalYear1998

Sec.1402

Limitation on the amount of funds authorized to be expended on various CTR
programs

  Sec. 1403 Prohibition on use of funds for conducting peacekeeping activities
                           with Russia, for military

         housing, for environmental restoration, or for job retraining

Sec. 1404 Certification requirement for projects related to the START II
Treaty

Sec.1405	Certification requirement regarding the use of CTR funds for the
planning and design of a chemical weapons facility. Prohibition against
use of funds for construction of the facility

Sec.1406	Certification requirement regarding the use of CTR funds for the
destruction of chemical weapons

Appendix II Legislative Mandates Covering the CTR Program

Sec. 1407 Limitation on the use of CTR funds for a storage facility for Russian
                                fissile material

Sec. 1408 Limitation on the use of CTR funds for weapons storage security
activities

Sec.1409

Report requirement regarding payment of taxes, duties, and other
assessment on assistance provided to Russia under CTR programs

Pub. L. 105-262

                 Department of Defense Appropriations Act, 1999

Former Soviet Union Threat Reduction Line Item

Earmark for the dismantling and disposal of nuclear submarines and
submarine reactor components

Sec.8079

Prohibition on use of funds to finance housing of members of the military
forces of the former Soviet Union or of the Russian Federation

Pub. L. 105-261

            National Defense Authorization Act for Fiscal Year 1999

Sec.1302

Limitation on the amount of funds authorized to be expended on various CTR
programs

Sec. 1303 Prohibition on use of funds for conducting peacekeeping
activities with Russia, for military

         housing, for environmental restoration, or for job retraining

Sec. 1304	Certification requirement regarding use of CTR funds for
chemical weapons destruction activities in Russia

Sec. 1305	Limitation on the use of CTR funds for biological weapons
proliferation prevention activities in Russia

Sec. 1306 Certification requirement regarding the Cooperative Counter
Proliferation Program

Sec. 1307	Requirement to submit as part of the Defense Department's annual
budget request a summary of amounts requested by project category

Sec. 1308 Report requirement regarding biological weapons programs in
Russia

Sec.1309

Report requirement regarding individuals in the former Soviet Union with
expertise in matters associated with ballistic missiles and weapons of
mass destruction

Pub. L. 106-79

                 Department of Defense Appropriations Act, 2000

Former Soviet Union Threat Reduction Line Item

Earmark for the dismantling and disposal of nuclear submarines and
submarine reactor components

Sec.8078

Prohibition on use of funds to finance housing of members of the military
forces of the former Soviet Union or of the Russian Federation

Pub. L. 106-65

            National Defense Authorization Act for Fiscal Year 2000

Sec.1302

Limitation on the amount of funds authorized to be expended on various CTR
programs

Sec. 1303(a) Prohibition on use of funds for conducting peacekeeping activities
                           with Russia, for military

         housing, for environmental restoration, or for job retraining

Appendix II Legislative Mandates Covering the CTR Program

Sec. 1303(c) Prohibition on use of CTR funds for elimination of
conventional weapons

Sec. 1304(a)(1)	Prohibition on use of Fiscal Year 2000 CTR funds for
construction of a second wing of a storage facility for Russian fissile
material

Sec. 1304(a)(2)	Limitation on use of CTR funds for design or planning with
respect to a second wing of a storage facility for Russian fissile
material

Sec. 1304(b)	Certification requirement regarding the use of previously
authorized CTR funds for construction of a second wing of a storage
facility for Russian fissile material

Sec. 1305 Prohibition on use of CTR funds for construction of a chemical
weapons facility in Russia

    Sec. 1306 Report requirement concerning the Defense Department's role in
                            managing the CTR program

Sec. 1308	Report requirement concerning DoD's strategy for encouraging
states of the former Soviet Union to contribute financially to the CTR
effort and other matters

Sec. 1309 Report requirement concerning the expanded threat reduction
initiative

Sec.1310

Certification requirement related to CTR fund recipients' commitment to various
                                   CTR goals

Pub. L. 106-259

                 Department of Defense Appropriations Act, 2001

Former Soviet Union Threat Reduction Line Item

Earmark for the dismantling and disposal of nuclear submarines and
submarine reactor components

Sec.8074

Prohibition on use of funds to finance housing of members of the military
forces of the former Soviet Union or of the Russian Federation

Pub. L. 106-398

            National Defense Authorization Act for Fiscal Year 2001

Sec. 1302(a), (c)

Limitation on the amount of funds authorized to be expended on various CTR
                                    programs

Sec. 1302(b) Report requirement concerning the obligation of CTR funds

Sec. 1303 Prohibition on use of CTR funds for elimination of conventional
weapons

Sec. 1304(a)(1)	Prohibition on use of Fiscal Year 2000 CTR funds for
construction of a second wing of a storage facility for Russian fissile
material

Sec. 1304(a)(2)	Limitation on use of CTR funds for design or planning with
respect to a second wing of a storage facility for Russian fissile
material

Sec. 1304(b)	Cap on CTR funding available for planning, design, or
construction of the first wing of a storage facility for Russian fissile
material

Sec. 1305 Limitation on use of funds to support warhead dismantlement
processing

Sec. 1307	Prohibition on use of CTR funds for construction of fossil fuel
energy plants; report requirement concerning options for assisting Russia
in the development of alternative energy sources

Sec. 1308(a) Report requirement concerning previous year activities

Appendix II Legislative Mandates Covering the CTR Program

Sec. 1308(i) Report requirement concerning Russian nonstrategic nuclear
arms

  Sec. 1309 Report requirement concerning Russian efforts concerning chemical
                              weapons elimination

Sec.1310

      Report requirement concerning elimination of weapons grade plutonium

Pub. L. 107-107

            National Defense Authorization Act for Fiscal Year 2002

Sec.1302(a)

Limitation on the amount of funds authorized to be expended on various CTR
                                    programs

Sec. 1302(b) Report requirement concerning the obligation of CTR funds

Sec. 1305	Prohibition on use of Fiscal Year 2000 CTR funds for
construction of a second wing of a storage facility for Russian fissile
material

Sec. 1306	Prohibition against use of CTR funds for construction activities
carried out under Russia's program to eliminate the production of weapons
grade plutonium

Sec. 1308 (amending Sec. Certification requirement concerning use of CTR
funds for construction of a chemical weapons 1305 of Pub. L. 106-65)
facility in Russia

Sec.1309

Report requirement concerning the financial commitment of other countries
to the Shchuch'ye chemical weapons facility

Pub. L. 107-117

                 Department of Defense Appropriations Act, 2002

Former Soviet Union Threat Reduction Line Item

Earmark for the dismantling and disposal of nuclear submarines and
submarine reactor components

Pub. L. 107-248

                 Department of Defense Appropriations Act, 2003

Former Soviet Union Threat Reduction Line Item

Earmark for the dismantling and disposal of nuclear submarines and
submarine reactor components

Pub. L. 107-314

            National Defense Authorization Act for Fiscal Year 2003

Sec. 1302(a), (b), (d) Limitation on the amount of funds authorized to be
                        expended on various CTR programs

Sec. 1302(c) Report requirement concerning the obligation of CTR funds

Sec. 1304	Report requirement concerning the use of revenue generated by
activities carried out under CTR programs

Sec.1305

 Prohibition against use of CTR funds for a second wing of the fissile material
                                storage facility

Pub. L. 108-87

                 Department of Defense Appropriations Act, 2004

Former Soviet Union Threat Reduction Line Item

Earmark for the dismantling and disposal of nuclear submarines and
submarine reactor components

Pub. L. 108-136

            National Defense Authorization Act for Fiscal Year 2004

Sec. 1302(a) (c)

Limitation on the amount of funds authorized to be expended on various CTR
                                    programs

Appendix II Legislative Mandates Covering the CTR Program

Sec. 1302(b) Report requirement concerning the obligation of CTR funds

Sec. 1303 Limitation on use of CTR funds for construction activities until
                          certain permits are obtained

Sec. 1304 Limitation on use of CTR funds for biological research in the
former Soviet Union

 Sec. 1305 Requirement for on-site managers Sec. 1306 Certification requirement
           concerning funding for chemical weapons facility in Russia

Sec. 1307	Certification requirement concerning use of facilities
constructed for CTR programs or activities

Sec. 1308 Limited grant of authority to engage in proliferation threat
reduction activity outside the states of the former Soviet Union

Pub. L. 108-287

                 Department of Defense Appropriations Act, 2004

Former Soviet Union Threat Reduction Line Item

Earmark for the dismantling and disposal of nuclear submarines and
submarine reactor components

Pub. L. 108-375

            National Defense Authorization Act for Fiscal Year 2004

Sec. 1302(a), (c)

Limitation on the amount of funds authorized to be expended on various CTR
programs Sec. 1302(b) Report requirement concerning the obligation of CTR funds

                             Source: GAO analysis.

Appendix III

Scope and Methodology

To assess DOD's management and internal controls over the CTR program, we
collected and analyzed DOD documents, including CTR project plans,
briefings, annual reports, and milestone decision authority memorandums.
We also obtained and analyzed all legislation passed since 1992 that
covers the CTR program. We applied the internal standards as described in
GAO's Standards for Internal Control in the Federal Government. 1 We
focused on those controls most relevant to the CTR program, including
organizational structure, risk assessments, performance measures, program
reviews, communications, and monitoring of projects. We also reviewed DOD
acquisition management guidance as contained in the Defense Threat
Reduction Agency's Instruction 5000.01 for our assessment of CTR
management controls.2 Using the federal government standards and DOD's
guidance, we developed and tested a semi-structured interview guide that
included questions regarding DOD's internal controls for the CTR program.
We included steps in the development and administration of the
semi-structured interview guide to minimize errors resulting from the
respondents' interpretation of the questions or from differences in
information available to respondents answering the questions. We pretested
the instrument with three DOD officials. In addition, an internal survey
specialist reviewed our semi-structured interview guide. We modified the
interview guide to reflect the questions and comments from the pretests
and internal review. We used the semistructured interview guide to
interview 30 DOD officials responsible for managing and implementing the
CTR program. We also held meetings with 17 other officials. Specifically,
we met with officials from the CTR Policy Office, AT&L, and DTRA's
Business and Cooperative Threat Reduction (CT) directorates. Within CT, we
obtained information from the director, deputy director, program and
project managers from all five program areas,3 and officials from the
Program Integration office. In addition, we met with officials from DTRA
offices in Moscow and Almaty and the Threat Reduction Support Center in
Springfield, Virginia. We traveled to the Russian Federation to observe
CTR projects involving strategic offensive

1GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1999). We also referred to
GAO's publication, Internal Control Management and Evaluation Tool,
GAO-01-1008G (Washington, D.C.: Aug. 2001).

2DTRA Instruction 5000.01: Defense Threat Reduction Agency (DTRA) Major
Programs (Ft. Belvoir, VA: Nov. 15, 2004).

3The five program areas are Biological Weapons Proliferation Prevention,
Chemical Weapons Elimination, Nuclear Weapons Safety and Security,
Strategic Offensive Arms Elimination, and Weapons of Mass Destruction
Proliferation Prevention.

Appendix III Scope and Methodology

arms elimination and biological weapons proliferation prevention. We met
with Russian officials at the Federal Space Agency, the Federal Agency for
Industry, and the Federal Atomic Energy Agency. We also visited the
Republic of Kazakhstan to observe CTR-funded projects involving biological
weapons proliferation prevention. While in Russia and Kazakhstan, we met
with representatives from all five CTR Integrating Contractors4 to obtain
information on their roles in implementing CTR projects. We also reviewed
our prior work on the CTR program.

Although information about funding for the CTR program and the program's
accomplishments is used for background purposes only, we assessed the
reliability of these data by reviewing relevant agency documents and
obtaining information from agency officials. We determined that the data
used were sufficiently reliable for the purposes of this report.

We performed our work from April 2004 through May 2005 in accordance with
generally accepted government auditing standards.

4The five contractors are Parsons; Bechtel International Systems, Inc.;
Raytheon Technical Services Company; Kellogg, Brown, and Root; and
Washington Group International.

Appendix IV

Current CTR Program Areas

Since 1992, Congress has authorized DOD to provide more than $5 billion
for the CTR program to help the former states of the Soviet Union,
including Russia, Ukraine, Belarus, Kazakhstan, Uzbekistan, Azerbaijan,
Moldova, and Georgia, secure and eliminate their weapons of mass
destruction and prevent their proliferation. As of April 2005, DOD has
obligated about $4.5 billion in support of the CTR program. Of this
obligated amount, about $2.7 billion funds projects are being implemented
under CTR's five program areas of biological weapons proliferation
prevention, chemical weapons elimination, nuclear weapons safety and
security, strategic offensive arms elimination, and weapon of mass
destruction proliferation prevention initiative, as shown in figure 4. The
remaining obligations cover completed CTR projects or other program
support areas.1

1Other program support areas include Defense and Military Contacts, Arctic
Nuclear Waste, and administrative costs.

Appendix IV
Current CTR Program Areas

Figure 4: CTR Program Area Descriptions and Obligations as of April 2005

Appendix IV Current CTR Program Areas

Sources: DOD (photos 2, 4, 5) and GAO (photos 1, 3).

aUkraine may also receive CTR assistance under the BWPP program.

cNWSS includes Nuclear Weapons Storage Security projects and Nuclear
Weapons Transportation Security projects in Russia.

Appendix V

DOD's Current Management and Internal Controls for the CTR Program
Compared with Internal Control Standards

In managing the CTR program, standards for internal controls in the
federal government provide an overall framework for DOD to establish and
maintain management controls and identify and address major performance
challenges and areas at risk for mismanagement. The five overall standards
for internal control are control environment, risk assessment, control
activities, information and communications, and monitoring. Each standard
contains numerous factors that an organization's management can use to
evaluate its internal controls. For example, under the control environment
standard, there are about 30 factors listed such as whether an agency's
organizational structure has appropriate and clear internal reporting
requirements. For this report, we focused on those factors most relevant
to CTR program implementation. The scope of our work thus covered factors
such as organizational structure, risk assessments, performance measures,
program reviews, communications, and monitoring of projects. Table 1
describes the factors selected in reviewing DOD's current internal
controls for the CTR program.

                                   Appendix V
                     DOD's Current Management and Internal
                     Controls for the CTR Program Compared
                        with Internal Control Standards

Table 1: Internal Control Standards and Factors Compared with DOD Internal
controls

                Standards Factors Current DOD internal controls

                  Control environment Organizational structure

Establish and maintain an environment throughout the organization that
sets a positive and supportive attitude toward internal control and
conscientious management.

Key areas of authority and responsibility are defined and communicated
throughout the organization.

Appropriate and clear internal reporting relationships have been
established.

DOD filled vacancies in the office of the Under Secretary of Defense for
Acquisitions, Technology, and Logistics (AT&L) to provide oversight of the
program. Specifically, within AT&L, the office of the Deputy Assistant to
the Secretary of Defense for Chemical Demilitarization and Threat
Reduction participates in CTR program planning, including overseeing
program review meetings and providing guidance to program and project
managers. This office also interacts with the CTR Policy Office and
conveys policy guidance to the Cooperative Threat Reduction Directorate.

DOD uses designated Milestone Decision Authority (MDA) to perform
oversight of all CTR program areas. The MDA chairs program reviews and
approves project acquisition and implementation strategies. The MDA has
the authority to approve all project phases or to withhold approval
subject to revised planning.

CTR project managers regularly report to their MDAs to provide updates on
project status and to report on cost, schedule, and performance. With the
introduction of the MDA process, program reviews occur at the same
intervals for each project and project managers are reporting similar
types of information to their MDAs.

DTRA Implementing Instructions for Major Program Guidance (DTRA 5000.01)
now defines the roles and responsibilities for management and oversight of
DTRA major programs, including CTR projects.

                                   Appendix V
                     DOD's Current Management and Internal
                     Controls for the CTR Program Compared
                        with Internal Control Standards

                         (Continued From Previous Page)

                Standards Factors Current DOD internal controls

Risk assessment Risk identification, risk analysis, and managing risk
during change

Provide for an assessment of the risks the agency faces from both external
and internal sources.

Management comprehensively identifies risk using various methodologies as
appropriate.

Management has developed an approach for risk management and control based
on how much risk can be prudently accepted. For example, specific control
activities are identified to manage or mitigate specific risks at each
activity level.

The agency has mechanisms in place to anticipate, identify, and react to
risks presented by changes in governmental, economic, industry,
regulatory, operating, or other conditions that can affect the achievement
of entity-wide or activity-level goals and objectives.

Adequate mechanisms exist to identify risks to the agency arising from
external factors.

Since the two CTR project failures in 2003, DOD now uses several methods
to assess and mitigate risks associated with CTR projects. An MDA is
designated for each CTR project based on several factors, including the
project's risk and expected cost.

CTR program officials now use a phased-contract approach in managing
project implementation. Under this approach, projects are evaluated in
three phases to minimize project risk.

DOD has instituted periodic meetings of stakeholders to assess and
minimize risks associated with CTR projects.

The CTR program uses amendments to implementing agreements to convert
recipient government assumptions or responsibilities into firm
commitments. Implementing agreements have been used to limit CTR program
risks.

CTR's new and revised internal controls provide a mechanism for addressing
and mitigating the specific risks associated with each project, but the
CTR program must still rely on the good will of recipient governments to
help implement projects. DOD cannot fully mitigate the risks of
cooperating with these governments.

Control activities Top-level and management reviews at the functional or
activity level

Help ensure that Top-level management regularly The MDA for CTR projects
is responsible for balancing requirements with management's reviews actual
performance risks, approving and overseeing cost, schedule, and
performance directives are carried out against budgets, forecasts, and
baselines.

effectively and efficiently prior results.

in accomplishing the DOD has introduced a new process to review CTR
projects whereby the agency's objectives. Agency managers review actual
designated MDA conducts periodic reviews of a project's cost, schedule,
performance against targets. and performance objectives.

Monthly review meetings of CTR projects include more detailed discussions
of project plans that now include objectives, exit strategies, and project
status. Project plans are submitted to CTR management for review
regularly.

Performance measures and indicators	The agency has established and CTR
project baselines now include the thresholds and objectives for key 	

monitors performance measures and indicators.

parameters such as cost, schedule, and performance.

DTRA had developed and implemented guidelines that provide CTR project
managers with written instructions on developing and reporting project
objects, schedules, and cost estimates.

                                   Appendix V
                     DOD's Current Management and Internal
                     Controls for the CTR Program Compared
                        with Internal Control Standards

                         (Continued From Previous Page)

                Standards Factors Current DOD internal controls

Information and communications

Should be recorded and communicated to management and others who need it.

Communications

Mechanisms should exist to allow DTRA Implementing Instructions for Major
Program Guidance (DTRA the easy flow of information down, 5000.01)
documents the roles and responsibilities for management and across, and up
the organization, oversight of DTRA major programs, including CTR
projects. and easy communications exist

between functional activities, such All CTR stakeholders are provided with
consistent information on a as between procurement and regular basis
through emails, weekly reports, and periodic meetings. production
activities.

CTR project managers hold weekly phone conferences with contractors
implementing projects in recipient countries to ensure proper program
implementation. Contractors are required to submit monthly written reports
to CTR officials.

DOD has improved its external communications with CTR-recipient countries.
To more clearly define the project commitments of CTRrecipient governments
and minimize risk at the outset of each project and throughout its life
cycle, DOD has introduced and updated controls to ensure that commitments
made by the CTR program and governments receiving CTR assistance are
clearly defined and documented.

                         Monitoring Ongoing monitoring

Should assess the quality of performance over time and ensure that the
findings of audits and other reviews are promptly resolved.

Management has a strategy to ensure that ongoing monitoring is effective
and will trigger separate evaluations where problems are identified.

Separate evaluations are often prompted by events such as major changes in
management plans or strategies.

CTR program officials now monitor the performance of ongoing projects
through a variety of controls, but they do not assess the performance of
CTR projects upon their completion.

DTRA has developed and implemented guidance that provides CTR project
managers with written instructions on how to measure performance for
meeting project objectives, schedules, and cost estimates. The metrics
described in this guidance are intended to establish meaningful goals and
track milestones for each project.

During periodic program reviews, CTR project managers report to their MDAs
on the status of their projects, primarily whether objectives are being
met.

CTR project managers interact regularly with contractors and recipient
government officials through emails, phone conferences, and project
visits. In fiscal year 2003, CTR teams made 165 project trips compared
with 70 trips in 2001.

                             Source: GAO analysis.

                                  Appendix VI

                    Comments from the Department of Defense

Appendix VII

                     GAO Contact and Staff Acknowledgments

GAO Contact Joseph A. Christoff (202) 512-8979

Staff 	In addition to the contact named above, Dave Maurer, Beth Hoffman
Leon, Josie Sigl, Stephanie Robinson, Nima Patel Edwards, Stacy Edwards,
Lynn

Acknowledgments	Cothern, Judy Pagano, and Mark Dowling contributed to this
report. Etana Finkler also provided assistance.

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