Defense Acquisitions: DOD's Research and Development Budget	 
Requests to Congress Do Not Provide Consistent, Complete, and	 
Clear Information (05-SEP-07, GAO-07-1058).			 
                                                                 
The Department of Defense (DOD) asked Congress for $73.2 billion 
in fiscal year 2007 for research, development, testing, and	 
evaluation (RDT&E). DOD organized this request using program	 
element (PE) codes, which are designed to convey key information 
about the budget request. DOD also provides documents called	 
budget exhibits detailing the activities for which funds are	 
being requested. The National Defense Authorization Act for	 
Fiscal Year 2006 mandated that GAO examine the program elements  
and budget exhibits. GAO assessed (1) whether the RDT&E program  
element code structure and the associated budget exhibits provide
accurate, consistent, complete, and clear information, and (2)	 
what factors contribute to any problems found. In conducting this
review GAO analyzed all of the fiscal year 2007 program element  
codes and 47 budget exhibits. GAO also interviewed key DOD	 
officials.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1058					        
    ACCNO:   A75756						        
  TITLE:     Defense Acquisitions: DOD's Research and Development     
Budget Requests to Congress Do Not Provide Consistent, Complete, 
and Clear Information						 
     DATE:   09/05/2007 
  SUBJECT:   Budget activities					 
	     Budget functions					 
	     Budget obligations 				 
	     Budget outlays					 
	     Defense budgets					 
	     Defense economic analysis				 
	     Financial management				 
	     Military research and development			 
	     Program evaluation 				 
	     Research and development				 
	     Research program management			 
	     Evaluation 					 
	     Testing						 

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GAO-07-1058

   

     * [1]Results in Brief
     * [2]Background
     * [3]Program Element Codes and Budget Exhibits Do Not Consistentl
     * [4]One-Third of the Requested RDT&E Funding Is Not Identified a
     * [5]Program Element Codes also Misidentified the Specific Nature
     * [6]Budget Exhibits Were Sometimes Inconsistent, Incomplete, or
     * [7]DOD Guidance and Practices Contribute to Reduced Visibility
     * [8]Conclusion
     * [9]Recommendations for Executive Action
     * [10]Matter for Congressional Consideration
     * [11]Agency Comments and Our Evaluation
     * [12]GAO's Mission
     * [13]Obtaining Copies of GAO Reports and Testimony

          * [14]Order by Mail or Phone

     * [15]To Report Fraud, Waste, and Abuse in Federal Programs
     * [16]Congressional Relations
     * [17]Public Affairs

Report to Congressional Committees

United States Government Accountability Office

GAO

September 2007

DEFENSE ACQUISITIONS

DOD's Research and Development Budget Requests to Congress Do Not Provide
Consistent, Complete, and Clear Information

GAO-07-1058

Contents

Letter 1

Results in Brief 2
Background 3
Program Element Codes and Budget Exhibits Do Not Consistently Provide Key
Information 5
One-Third of the Requested RDT&E Funding Is Not Identified as RDT&E
Programs 6
Program Element Codes also Misidentified the Specific Nature of R&D
Efforts 7
Budget Exhibits Were Sometimes Inconsistent, Incomplete, or Unclear 9
DOD Guidance and Practices Contribute to Reduced Visibility 11
Conclusion 11
Recommendations for Executive Action 12
Matter for Congressional Consideration 13
Agency Comments and Our Evaluation 13
Appendix I Scope & Methodology 16
Appendix II Comments from the Department of Defense 18

Figures

Figure 1: Sample Research and Development PE Code Structure Based on the
FMR 4
Figure 2: Fiscal Year 2007 Budget Activity 7 Programs Occur in Most Phases
of Development 7
Figure 3: Number of Fiscal Year 2007 Program Elements That Match Their
Assigned Budget Activity 8
Figure 4: Total Fiscal Year 2007 RDT&E Requests by Budget Activity 9

Abbreviations

AMP Avionics Modernization Program
BA budget activity
DOD Department of Defense
GPS Global Positioning System
FMR Financial Management Regulation
JLENS Joint Land Attack Cruise Missiles Defense Elevated Netted Sensor
MFP Major Force Program
PE program element
R&D research and development
RDT&E research, development, testing, and evaluation
UAV unmanned aerial vehicle

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United States Government Accountability Office
Washington, DC 20548

September 5, 2007

Congressional Committees

In fiscal year 2007, the Department of Defense (DOD) asked Congress for
$73.2 billion for research, development, testing, and evaluation (RDT&E).
DOD organized this request for funds for more than 1,000 projects by using
the long-standing program element (PE) code structure. This system
produces a code that is structured to give decision makers key information
such as the development stage of the project. The PE code, for example,
describes whether the effort is for basic research in a laboratory on
directed energies, integration of weapon system prototypes, or upgrades to
long-fielded weapon systems such as the B-52 bomber. PE codes are the
building blocks of the defense programming and budgeting system, and can
be aggregated to display total resources assigned to specific programs, to
specific military services, or in other ways for analytical purposes. For
example, decision makers use the reported stages of development to assess
how much is being invested in fundamental science and technology. These
efforts determine the future capabilities of U.S. military forces.

Each development effort that is assigned a unique PE code has its
activities detailed in accompanying documents known as budget exhibits.
DOD directs that these documents include such information as a description
of the effort, an assessment of progress, and the expected
accomplishments.

Although other sources of information are also available to Congress about
some of these RDT&E programs, the decision to authorize and appropriate
funds for many programs is based primarily on budget exhibits. Accurate
classifications of programs and projects by budget activity are needed for
decision-makers to readily understand how projects are progressing and on
what money is being spent. The National Defense Authorization Act for
Fiscal Year 20061 required that we examine the program element codes and
budget exhibits. We responded with a briefing to the committees in
February 2007. In this follow-on report, which summarizes the briefing, we
assess:

1Pub. L. No. 109-163, section 251.

           1. Whether the RDT&E program element code structure and the
           associated budget exhibits provide accurate, consistent, complete
           and clear information, and
           2. What factors contribute to any problems found.

In conducting our evaluation, we reviewed pertinent program element and
budget justification policies and guidance; analyzed all of the fiscal
year 2007 program elements and the associated budget exhibits for over 47
of these programs; and interviewed officials from the offices of the
Secretary of Defense and each of the military services. We conducted our
review from June 2006 to July 2007 in accordance with generally accepted
government auditing standards. Additional information about our
methodology is contained in appendix I.

Results in Brief

Neither the RDT&E program element code structure nor the budget exhibits
consistently provide accurate, clear, and complete information on the
nature of DOD's proposed research and development efforts. First,
one-third of the requested RDT&E funding is for efforts that are not
identified as RDT&E in their program element codes. In addition, 65
percent of the remaining funding request misidentified the stage of
development as it is stated in program element codes. Second, the budget
exhibits justifying the programs' funding requests do not consistently
provide complete, and clear information with suitable levels of detail
needed to understand DOD's research and development efforts. We found that
DOD budget exhibits were difficult to understand, frequently lacked
information about the accomplishments and planned efforts of each project,
lacked appropriate cross-references between efforts, and were frequently
missing key schedule data.

There are two major reasons why the program element codes and budget
exhibits are not always accurate, clear, consistent, and complete. First,
once a weapon system is fielded or approved for production, DOD's
regulation does not require the identification of any RDT&E effort as such
in its program element code. This affects the visibility of more than
one-third of all RDT&E funds. Second, the regulation governing the
structuring of the coding and the content of the exhibits is vague. For
example, the regulation does not require the coding to be updated from one
year to the next to ensure the correct stage of development has been
accurately identified. The regulation also does not provide sufficiently
detailed guidance to ensure consistency in the format and content of the
budget exhibits. This results in budget exhibits being insufficient as
decision-making tools, according to DOD officials.

Taken together, current reporting policies and practices for justifying
R&D requests to Congress could be improved to provide more useful
information to decision makers and to strengthen accountability for
performance. This report makes two recommendations to DOD. First, DOD
should adjust the current RDT&E program element code structure to enhance
the visibility that Congress has into the nature of the proposed
development. Second, DOD should revise the regulation governing the budget
exhibits to provide more specific direction and ensure a more disciplined
process is used to provide Congress with accurate, clear, consistent, and
complete information.

We have also included a matter for congressional consideration that
Congress may wish to have the DOD Comptroller work with the relevant
committees to revise the budget exhibit format and content to meet the
needs of both Congress and DOD.

In written comments on a draft of this report, DOD partially concurred
with our recommendations. However, it is unclear from DOD's response what
specific actions the department will take in response to our
recommendations other than to put additional emphasis on properly
reporting program progress and planned efforts. DOD's comments are
reproduced in their entirety in appendix II.

Background

Under the DOD Financial Management Regulation (FMR),2 all major new
systems are to be identified with a unique PE code. PE codes have 10
positions. In general, each position conveys information, as seen in
figure 1.

2DOD's Financial Management Regulation (FMR), DoD 7000.14-R, Volume 2B,
Chapter 5, details what information is to be included in the individual PE
code budget exhibits or R-docs. This regulation is maintained and updated
by the Office of the Under Secretary of Defense (Comptroller).

Figure 1: Sample Research and Development PE Code Structure Based on the
FMR

Note: Budget activity codes are required only if the major force program
is 06. The seventh budget activity--systems approved for production or
already fielded--is not identified in the code.

The first and second positions of the PE code illustrated above define the
Major Force Program (MFP), which contain the resources necessary to
achieve a broad objective or plan. In figure 1, for example, the "06" in
the first positions indicate this is a research and development effort.
Because it is a research and development effort beginning with "06," under
the FMR, the third and fourth positions must define the budget activity.
In general, the budget activity codes that fill positions three and four
are intended to describe the current nature of the research and
development effort for each PE code. For example, budget activities 1
through 3 cover initial development efforts and should describe activities
that take place in what is often called the science and technology realm.
Research and development efforts in these first three budget activities
may produce scientific studies and experimentation, develop paper studies
of alternative concepts, or test integration of subsystems and components.
Budget activities 4 and 5 cover efforts used to fully develop and acquire
integrated weapon systems respectively. Programs in these budget
activities may perform efforts necessary to further mature a technology or
conduct engineering and manufacturing development tasks. Budget activity 6
funds efforts to sustain or modernize the installations or operations
required for general RDT&E. Test ranges, military construction,
maintenance support of laboratories, studies and analysis, and operations
and maintenance of test aircraft and ships are funded with this budget
activity.

Budget activity 7 is used to designate R&D efforts for systems that have
already been approved for production or those that have already been
fielded. Unlike budget activities 1 through 6, budget activity 7 is not
indicated in a PE code. This information is seen in the accompanying
budget exhibits. Despite the fact that these are research and development
efforts, their program element code does not contain any indication that
they are for research and development.

The FMR also requires that DOD justify the annual RDT&E budgets requests
in budget exhibit documents. These accompanying budget exhibits are the
primary information source for Congress and analysts throughout the
government. Generally, there are six sections in each budget exhibit that
are used to justify each funding request made using an RDT&E PE code.
These include a mission description and budget item justification section;
an accomplishments and planned program section; a program change summary
section showing total funding, schedule, and technical changes to the
program element that have occurred since the previous budget submission; a
performance measures section to justify 100 percent of resources
requested; a section that shows connections and dependencies among
projects, which should also include information such as the appropriation,
budget activity, line item, and program element number of the related
efforts; and, a section providing a schematic display of major program
milestones that reflect engineering milestones, acquisition approvals,
test and evaluation events, and other key milestones for the program
events.

Program Element Codes and Budget Exhibits Do Not Consistently Provide Key
Information

The program element code structure and budget exhibits do not consistently
provide accurate, clear, and complete information regarding RDT&E budget
requests. The PE codes given for many programs do not indicate that they
are for an R&D effort at all or do not accurately reflect the reported
nature of the development. Budget exhibits sometimes omit required
information about programs and their links to other programs, and may
provide only minimal information.

One-Third of the Requested RDT&E Funding Is Not Identified as RDT&E Programs

Programs that were requested in budget activity 7--RDT&E efforts for
fielded systems and programs approved for production--presented the
greatest visibility problem. Under DOD's current regulation, programs in
this budget activity are not required to report in the code itself that
the funds are for research and development, nor are they required to
report the nature of the development effort. This budget activity was used
to request $23.5 billion in fiscal year 2007, or about a third of DOD's
entire RDT&E funding request. Instead, the information available about
these funding requests is contained in their budget exhibits.

Programs classified as budget activity 7 do not begin their PE code with
06, which would identify them as RDT&E requests. Instead, budget activity
7 RDT&E efforts use PE codes that begin with the major force program code
established for the system being modified. For example, PE 0102419A, the
Joint Land Attack Cruise Missiles Defense Elevated Netted Sensor System
(JLENS) program, provides no indication that the effort uses RDT&E funds,
nor does it identify the nature of the development. It begins with 01,
indicating it is for strategic forces and ends with A, indicating that it
is an Army request.

In addition, we found that nature of the efforts funded in budget activity
7 overlap with the nature of the efforts undertaken in other budget
activities, making it difficult to determine the amounts requested for the
different stages of development across the entire RDT&E budget. While the
definition for budget activity 7 describes efforts that are fielded or
approved for production, several defense acquisition efforts covered under
budget activity 7 are involved in phases ranging from technology
development to production, as shown in figure 2. The JLENS program, for
example, is currently developing an aerostat for cruise missile defense,
but its code does not indicate that it is in system development and
demonstration. There is a separate code, budget activity 5, which also
funds efforts in system development and demonstration.

Figure 2: Fiscal Year 2007 Budget Activity 7 Programs Occur in Most Phases
of Development

Note: The programs represented above are the Aerial Common Sensor (ACS),
the Warrior Unmanned Aircraft System, Mobile User Objective System (MUOS),
Joint Land Attack Cruise Missile Defense Elevated Netted Sensor System
(JLENS), Global Hawk Unmanned Aircraft System, and Navstar Global
Positioning System II.

Program Element Codes also Misidentified the Specific Nature of R&D Efforts

We found that 65 percent of the RDT&E PE codes for budget activities 1
through 6 misidentified the nature or stage of the development in fiscal
year 2007. While the early development efforts described by budget
activities 1 through 3 generally properly identified the nature of the
effort in their codes, budget activities 4 through 6 generally did not, as
seen in figure 3. Programs reported in budget activities 4 through 6
requested more than half of the total RDT&E funding.

Figure 3: Number of Fiscal Year 2007 Program Elements That Match Their
Assigned Budget Activity

Note: A total of 207 program element codes funded under BA7 are excluded
from the figure because they are not required by the FMR to identify the
budget activity in the program element code.

The challenge of clearly identifying the nature of the development efforts
is actually much worse when the budget activity 7 programs are considered
along with the misidentified programs in budget activities 1 through 6. As
a result of these combined problems, the PE code provides only limited
visibility into 85 percent of the requested funding, as seen in figure 4.

Figure 4: Total Fiscal Year 2007 RDT&E Requests by Budget Activity

Budget Exhibits Were Sometimes Inconsistent, Incomplete, or Unclear

While reviewing a set of 47 RDT&E budget exhibits from fiscal years 2006
and 2007, we observed that some of the exhibits omitted key information.
While DOD presents some valuable information in these exhibits, we found
in many cases that the justification narratives were not clear or provided
little or no additional information from the previous year's
justification. In a number of cases the narratives appeared to be "copy
and paste" descriptions of activities from prior years, making it
difficult to determine recent changes or program progress. We also
observed that information on accomplishments from the past year was
provided for few programs. In addition, few programs provided detailed
narratives of planned activities for the current budget year. For the few
exhibits that did contain narratives on planned activities, the level of
detail was minimal. For example, the Air Force Global Positioning System
(GPS) Block III program requested $315 million for fiscal year 2007 and
had requested $119 million combined in the previous 2 fiscal years. In
this section, the accomplishments were described as "Continue Program
Support and Modernization Development for GPS III," and the planned
program was described as "Begin Modernization Segment."

Furthermore, funding changes from year to year were inconsistently
reported. In some cases they were provided at the PE code level and in
other cases at the project level, when the PE code involved multiple
projects. These funding change summaries also routinely provide limited
detail on the reasons for the changes. For example, the Navy's EA-18G and
DD(X) programs had funding changes of millions of dollars to their
previous and current budgets but failed to provide details of why these
changes had occurred.

Additionally, the budget exhibits did not always identify the connections
and dependencies among related projects consistently as required by the
FMR. In general, these connections can be vital to the successful
development of some programs. In some instances, key components to a
system under development are being developed in other programs. A delay or
failure in one program can mean delay and failure in the related program.
For example:

           o C-130 Avionics Modernization Program (AMP) exhibit did not
           identify all of the required information for related programs in
           the Navy and Special Forces nor did it identify C-130 Talon II
           procurement, which included C-130 AMP upgrades.
           o DDG-1000 (formerly the DD(X)) destroyer program is developing
           dual-band radar that will be used on the CVN-21 aircraft carrier.
           No reference is made to this link/dependency in the exhibit.
           o Expeditionary Fire Support System is being developed to be
           transported by the V-22 aircraft, but makes no reference to the
           V-22 program.
           o Warrior UAV (unmanned aerial vehicle) is being developed in two
           PEs--one for the system and one to weaponize. Only one program
           references the other.

Our review found the schedule profiles in the budget exhibits were
generally provided but sometimes did not provide a detailed display of
major program milestones such as engineering milestones, acquisition
approvals, or test and evaluation events. Also, we could not find the
standard program milestones in a number of the schedule profiles we
reviewed. In some cases we found it difficult to determine the program's
phase of development. For example, in two cases the development schedule
showed "continue development" across all fiscal years displayed. In
another example, a program simply reported "S/W Development" with a bar
covering all fiscal years.

DOD Guidance and Practices Contribute to Reduced Visibility

We found the RDT&E program element code and the budget exhibits are not
always accurate, clear, consistent, and complete for two major reasons.
First, DOD's own regulation for constructing program element codes does
not require a large part of the RDT&E effort to be reflected in program
element codes. Second, the regulation governing the structuring of the
coding and the content of the exhibits is vague. For example, it does not
require the coding to be updated from one year to the next to ensure the
correct stage of development has been accurately identified. The
regulation also does not provide sufficiently detailed guidance to ensure
consistency in the format and content of the budget exhibits. This leads
to inconsistencies in how it is applied by different organizations and
officials within DOD.

The FMR requires that once a weapon system is fielded or approved for
production that it be identified not as R&D efforts in the program element
code, but rather under a different code. These PE codes are required to
carry the Major Force Program code of the fielded systems. As a result,
these PE codes, accounting for one-third of the requested RDT&E budget, do
not identify the efforts as R&D activities and do not indicate the nature
of the R&D effort.

In addition, the regulation is unclear on how or when program element
coding should change over time as the development progresses into a
different stage. As a result, even if the program element code is accurate
when a program is assigned a code, without updating the code, the programs
that successfully mature will automatically develop inaccurate coding over
time.

Several DOD officials said that one of the reasons that the budget
exhibits are insufficient as decision-making tools is the lack of clear
and consistent guidance for the budget exhibits in the FMR. For example,
while the FMR requires a "Program Schedule Profile" exhibit, it is not
standardized. The FMR provides examples of the budget exhibits that
include an "Accomplishment/Planned Program" section. However, it is
unclear whether this section has to contain specific information about
both the accomplishments achieved from previous funds and the activities
to be achieved with requested funds.

Conclusion

Congress has the difficult task of choosing which RDT&E efforts to fund
from the many competing demands. These RDT&E efforts are critical to the
national interest. However, they must be balanced within the other fiscal
pressures facing the government, including the large and growing
structural deficit. These factors make it especially important that
Congress get the justifications for these R&D efforts in a clear,
consistent, and readily useable form.

However, the department's policies and practices are not providing this
key information to congressional decision makers. The RDT&E justification
material often obscures rather than reveals the nature of the efforts
under way and prevents a determination of the specifics regarding why the
money is needed.

A number of opportunities exist for DOD to provide Congress with clearer
justifications for the funds requested for these efforts. Congress needs a
structure that will (1) properly identify the development status of
projects for which funds are requested, (2) bring complete visibility to
all of the activities for which funds are requested, and (3) provide
consistent information about how well these projects are progressing in
order to make efficient decisions.

More specific guidance could improve the ability of the program element
codes and budget exhibits to aid Congress in focusing oversight where it
is needed, facilitate early corrective action, and improve accountability.

Recommendations for Executive Action

This report makes two recommendations. To provide Congress with greater
understanding of the nature of developmental activities proposed, as well
as to improve the consistency and completeness of the justification
material provided for the RDT&E funds requested, the Secretary of Defense
should ensure that the DOD Comptroller:

           o Revises the Financial Management Regulation to, (1) in the case
           of programs approved for production or fielded, ensure that the
           code or the budget exhibit indicates which stage of
           development--from basic research through system development and
           demonstration--the effort is undertaking, and (2) ensure that the
           program element codes reflect the stage of development--that is
           from basic research through system development and
           demonstration--of the requested research and development effort.

           o Develops more specific guidance for budget exhibits to ensure
           that they are accurate, consistent, clear, and complete, and
           enforce a disciplined process for ensuring proper reporting of
           program progress and planned efforts.

Matter for Congressional Consideration

Congress may wish to have DOD's Comptroller work with relevant committees
to reach agreement on how to revise budget exhibits and the program
element code structure to meet congressional oversight needs as well as
serve the needs of DOD. In these discussions, consideration could be given
to:

           o The value and cost of modifying or replacing the current PE code
           structure so that it more readily informs Congress as to the
           nature of the R&D effort for systems in development as well as
           fielded systems and systems approved for production.
           o The best means to inform Congress of the state of development of
           the requested effort as it progresses toward production.
           o The changes needed to the format and content of the budget
           exhibits to more effectively communicate the purpose for which
           funding is sought, the progress made with prior funding, and other
           key funding justification information.
           o The time frames and funding needed to develop and implement any
           changes.

Agency Comments and Our Evaluation

DOD partially concurred with both of our recommendations. However, it is
unclear from DOD's response what specific actions the department will take
in response to our recommendations other than to put additional emphasis
on properly reporting program progress and planned efforts.

In partially concurring with our first recommendation, DOD commented that
in the case of systems that have been approved for production and fielded,
specifically capturing RDT&E funding would be counterproductive to how the
departmental leadership makes decisions. We recognize the importance to
the department of enabling the department's leadership to make decisions
on the full scope of a program; however, we note that program element
codes also have the purpose of providing important oversight information
to Congress and the current practice significantly lacks the clarity of
the RDT&E funding justifications to Congress. As we reported, RDT&E funds
for programs approved for production and fielded systems currently
represents one-third of the total RDT&E budget. As a result, we believe
this level of investment warrants improved clarity. We have modified the
wording in the recommendation to focus on providing clearer information to
Congress either through the program element code structure or the budget
exhibits.

DOD fully concurred with the second part of that recommendation to ensure
that the program element codes reflect the state of development of the
requested effort as it progresses toward production. DOD noted that the
program element structure accommodates this progression. However, our
analysis found that a significant amount of funding is misidentified in
the coding. DOD has not identified any proposed actions to correct this
misidentification.

DOD partially concurred with our second recommendation and will place
greater emphasis on proper reporting of program progress and planned
efforts as reported in its budget exhibits. However, DOD took issue with
developing a template, stating that it is doubtful any single template
would be feasible or desirable given the complexity of the RDT&E activity.
We believe more specific guidance is needed to ensure that DOD is more
effectively communicating the purpose for which funding is sought, the
progress made with prior funding, as well as the other key funding
justification information. We have modified the wording of the
recommendation to remove the term "template." We still believe that
greater standardization is called for, but recognize that templates are
but one means among many to achieve that end.

We are sending copies of this report to interested congressional
committees; the Secretary of Defense; the Secretaries of the Air Force,
Navy, Army, and the Commandant of the Marine Corps; and the Director,
Office of Management and Budget. We will provide copies to others on
request. This report will also be available at no charge on GAO's Web site
at [18]http://www.gao.gov .

Should you or any of your staff have any questions on matters discussed in
this report, please contact me on (202)512-4841 or by e-mail at
[email protected]. Contact points for our offices of Congressional
Relations and Public Affairs may be found on the last page of this report.
Principal contributors to this report were David Best (Assistant
Director), Jerry Clark, Chris Deperro, Greg Campell, Anna Russell, Julie
Hadley, and Noah Bleicher.

Michael Sullivan
Director, Acquisition and Sourcing Management

List of Congressional Committees

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

The Honorable Daniel K. Inouye
Chairman
The Honorable Ted Stevens
Ranking Member
Subcommittee on Defense
Committee on Appropriations
United States Senate

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

The Honorable John P. Murtha, Jr.
Chairman
The Honorable C.W. Bill Young
Ranking Member
Subcommittee on Defense
Committee on Appropriations
House of Representatives

Appendix I: Scope & Methodology

To assess whether DOD's RDT&E program element code structure provides
Congress consistent, complete and clear information, we reviewed relevant
guidance while analyzing all 696 program elements contained in the fiscal
year 2007 RDT&E budget request. We assessed program elements by budget
activity, dollar value, number of projects, and phase of development. We
also determined the number of program elements that properly matched their
assigned budget activity to determine if guidance contained in the
Financial Management Regulation was properly followed. To determine the
actual phase of development for programs requesting funding in budget
activity 07, we reviewed both their budget exhibits and other documents,
such as their Selected Acquisition Reports. For this analysis, we reviewed
the Global Hawk Unmanned Aircraft System, Aerial Common Sensor, Warrior
Unmanned Aircraft System, Mobile User Objective System, Joint Land Attack
Cruise Missile Defense Elevated Netted Sensor System, and Navstar Global
Positioning System.

We assessed the information contained the RDT&E budget justification
documents by reviewing the content, structure, clarity, and completeness
of all components of the budget exhibits, including sections related to
the program's description and budget item justification, schedule profile,
and funding summaries. We reviewed multiple budget justification documents
from 47 program element codes reported in February 2005 and 2006. We
ensured that this review encompassed all military services and covered
multiple fiscal years. This review focused on budget exhibits for programs
in budget activities 4, 5, and 7 to identify any differences in the
consistency, completeness and clarity of information presented. To assess
connections and dependency information, we included additional programs
that GAO has recently reported on because a more detailed understanding of
the programs involved is required to identify these connections. To assess
consistency, we compared the level of detail reported from year to year
and compared the treatment of funding changes from program to program. To
assess completeness, we compared the information in the budget exhibits to
the requirements of the FMR. To assess the clarity of the information, we
reviewed the details provided in the narrative language in the exhibits.

To determine the factors that contribute to any problems found, we also
reviewed the Department of Defense Financial Management Regulation and the
Future Years Defense Planning Handbook policies and guidance related to
developing program elements and budget justification documents. To better
understand the processes involved with developing program elements and
budget justification documents, we interviewed officials from the offices
of the Under Secretary of Defense for Acquisition, Technology, and
Logistics Director, Defense Research and Engineering; Under Secretary of
Defense (Comptroller); Principal Deputy Under Secretary of Defense
(Comptroller); Director, Program Analysis and Evaluation; Assistant
Secretary of the Army for Financial Management and Comptroller; Office of
the Assistant Secretary of the Navy Financial Management and Comptroller;
Office of the Secretary of the Air Force; and the Air Force Office for the
Deputy Chief of Staff for Strategic Plans and Programs.

We conducted our review from June 2006 to January 2007 in accordance with
generally accepted government auditing standards.

Appendix II: Comments from the Department of Defense

(120630)

[19]www.gao.gov/cgi-bin/getrpt?GAO-07-1058 .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Mike Sullivan at (202) 512-4841 or
[email protected].

Highlights of [20]GAO-07-1058 , a report to congressional committees

September 2007

DEFENSE ACQUISITIONS

DOD's Research and Development Budget Requests to Congress Do Not Provide
Consistent, Complete, and Clear Information

The Department of Defense (DOD) asked Congress for $73.2 billion in fiscal
year 2007 for research, development, testing, and evaluation (RDT&E). DOD
organized this request using program element (PE) codes, which are
designed to convey key information about the budget request. DOD also
provides documents called budget exhibits detailing the activities for
which funds are being requested. The National Defense Authorization Act
for Fiscal Year 2006 mandated that GAO examine the program elements and
budget exhibits. GAO assessed (1) whether the RDT&E program element code
structure and the associated budget exhibits provide accurate, consistent,
complete, and clear information, and (2) what factors contribute to any
problems found. In conducting this review GAO analyzed all of the fiscal
year 2007 program element codes and 47 budget exhibits. GAO also
interviewed key DOD officials.

[21]What GAO Recommends

GAO recommends the Secretary of Defense take several actions aimed at
providing Congress with more clear and complete information on RDT&E
funding requests. In addition, Congress may wish to have the DOD
Comptroller work with relevant committees to determine how best to revise
these budget materials. DOD partially concurred with these
recommendations.

Neither the RDT&E program element code structure nor the budget exhibits
consistently provide accurate, clear, and complete information on the
nature of DOD's proposed research and development efforts. First,
one-third of the requested RDT&E funding is for efforts that are not
identified as research and development in their program element codes. In
addition, a majority of the remaining funding request misidentifies the
budget activity (which is a classification of the stage of development and
ranges from BA 1 for basic research to BA 6 for management support) as it
is stated in program element codes. Second, some of the budget exhibits
justifying the programs' funding requests do not provide consistent,
complete, and clear information with suitable levels of detail needed to
understand DOD's research and development efforts. GAO found that DOD
budget exhibits were difficult to understand, frequently lacked
information about the accomplishments and planned efforts of each project,
lacked appropriate cross-references between efforts, and were frequently
missing key schedule data.

Number of Program Elements That Match Their Assigned Budget Activity

The RDT&E program element codes are not always accurate nor are the budget
exhibits always accurate, clear, consistent and complete for two major
reasons. First, DOD's regulation does not require identification of any
RDT&E effort as such in its program element code if it is taking place on
a weapon system that is approved for production or already fielded. This
affects over a third of all RDT&E funds. Second, the regulation governing
the structuring of the coding and the content of the exhibits is vague.
For example, the regulation does not require the coding to be updated from
one year to the next to ensure the correct stage of development has been
accurately identified. The regulation also does not provide sufficiently
detailed guidance to ensure consistency in the format and content of the
budget exhibits. This results in budget exhibits being insufficient as
decision-making tools, according to DOD officials.

References

Visible links
  18. http://www.gao.gov/
  19. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1058
  20. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1058
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