Chemical Weapons Disposal: Improvements Needed in Program Accountability
and Financial Management (Chapter Report, 05/08/2000, GAO/NSIAD-00-80).

Pursuant to a legislative requirement, GAO reviewed the financial
management of the Department of Defense's (DOD) Chemical
Demilitarization Program, focusing on whether: (1) the program will meet
the Chemical Weapons Convention timeframes within the costs projected;
(2) obligations and liquidations of funds appropriated for the program
have been adequately managed; and (3) the management structure of the
program allows for coordinated accountability of the program.

GAO noted that: (1) the Army had destroyed approximately 17.7 percent of
the chemical weapons stockpile as of January 31, 2000, and could destroy
about 90 percent of the stockpile by the convention's 2007 deadline,
given its recent progress and projected plans; (2) however, the Army may
not meet the deadline for the remaining 10 percent of the stockpile
because the incineration method of destruction has not been acceptable
to two of the states where the chemical stockpile is located; (3)
additionally, some of the nonstockpile materiel may not be destroyed
before the deadline because the proposed method of destruction has not
been proven safe and effective and accepted by state and local
communities; (4) the Army's $14.9 billion estimate for program costs
will likely increase due to: (a) the additional time required to develop
and select disposal methods for the remaining 10 percent of the
stockpile and for some of the nonstockpile chemical materiel; and (b)
possible delays in demolition of a former chemical weapons production
facility; (5) the Army has experienced significant problems in recent
years in effectively managing the use of funds appropriated for the
Chemical Demilitarization Program; (6) the Army reported that as of
September 30, 1999, $498 million of the $3.1 billion appropriated for
the program in fiscal years 1993 through 1998 was unliquidated; (7) in
an assessment of interagency orders that account for $495.1 million of
the unliquidated obligations, GAO found that $63.1 million had been
liquidated but was not recorded in accounting records or included in
financial reports prepared by the Defense Finance and Accounting
Service; (8) of the remaining $432 million, most was for work completed
but not yet billed by the contractor or verified by the Defense Contract
Audit Agency or for work in progress but not yet completed; (9)
effective management of the Chemical Demilitarization Program has been
hindered by its complex management structure and ineffective
coordination among program offices and with state and local officials;
(10) coordination and communication among officials responsible for
elements of the program have been inadequate, thus causing confusion
about what actions would be taken at certain sites; (11) DOD and Army
officials have not agreed on whether or when management roles,
responsibilities, and accountability should be consolidated for
destruction of the chemical stockpiles in Kentucky and Colorado; and
(12) consequently, state and local officials have expressed concern that
no single office is accountable for achieving the desired results of the
Chemical Demilitarization Program.

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

 REPORTNUM:  NSIAD-00-80
     TITLE:  Chemical Weapons Disposal: Improvements Needed in Program
	     Accountability and Financial Management
      DATE:  05/08/2000
   SUBJECT:  Chemical warfare
	     Property disposal
	     Munitions
	     Accountability
	     Program management
	     Interagency relations
	     Military appropriations
	     Waste disposal
	     Cost analysis
	     Financial management
IDENTIFIER:  DOD Chemical Demilitarization Program
	     DOD Assembled Chemical Weapons Assessment Program
	     DOD Chemical Stockpile Disposal Project
	     DOD Nonstockpile chemical Materiel Product
	     DOD Alternative Technologies and Approaches Project

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GAO/NSIAD-00-80

8

20

Elements of the Chemical Demilitarization Program 20

Management Structure of the Chemical Demilitarization Program 30

International Efforts to Eliminate Chemical Agents and Weapons 31

Our Prior Concerns With the Chemical Demilitarization Program 32

Before the Convention's 2007 Deadline

33

Ninety Percent of the Chemical Stockpile Could Be Destroyed Before
the Convention's 2007 Deadline 34

Significant Obstacles Could Prevent the Nonstockpile Product From Meeting
the Convention's 2007 Deadline 41

Program Costs Will Likely Exceed $14.9 Billion Estimate 45

Conclusions 49

Program Funds

50

Prior Reviews Report Weaknesses in the Management of Program
Funds 51

About 16.1 Percent of Prior Years' Obligations Were Unliquidated 52

Assessment Indicates That Most Unliquidated Obligations Were
Accounted For 54

Reasons for Some Unliquidated Obligations 56

Recent Factors Reducing Unliquidated Obligations 60

Financial Improvements Have Not Been Consistently and
Systematically Implemented Across All Program Elements 62

Conclusions 62

Recommendations 63

Agency Comments and Our Evaluation 63

and Ineffective Coordination

65

Complex Management Structure 65

Unclear Accountability for Program Results and Inadequate
Coordination and Communication 70

Conclusions 73

Recommendations 73

Agency Comments 73

Appendix I: Objectives, Scope, and Methodology

74

Appendix II: Comments From the Department of Defense

79

Appendix III: Comments From the Federal Emergency Management Agency

82

Appendix IV: GAO Contacts and Staff Acknowledgments

85

86

Table 1: Nonstockpile Chemical Materiel 24

Table 2: Status of the Army's Efforts to Destroy Its Nonstockpile
Chemical Materiel 42

Table 3: Nonstockpile Transportable Treatment Systems 43

Table 4: Working Life Cycle Cost Estimates and Appropriated Funds
for the Chemical Demilitarization Program 47

Table 5: Reported Budget Authority and Unobligated, Obligated, and
Unliquidated Obligations for the Chemical Demilitarization Program for
Fiscal Years 1993-98 53

Table 6: Unliquidated Obligations for 428 Military Interdepartmental
Purchase Requests for Fiscal Years 1993-98 55

Figure 1: Original Stockpile of Chemical Agents and Munitions
(prior to the start of disposal operations at Johnston Atoll
in June 1990) 21

Figure 2: Nonstockpile Chemical Materiel 25

Figure 3: Status of the Army's Efforts to Destroy Its Chemical
Stockpile 36

Figure 4: Schedules for Disposal Operations at the Nine Chemical Stockpile
Sites 38

Figure 5: Organization Structure for the Chemical Demilitarization Program
67

DCAA Defense Contract Audit Agency

DFAS Defense Finance and Accounting Service

DOD Department of Defense

FEMA Federal Emergency Management Agency

National Security and
International Affairs Division

B-284698

May 8, 2000

Congressional Committees

The Department of Defense's (DOD) program to destroy chemical agents and
munitions has been controversial from its inception and has experienced
delays, cost increases, and management weaknesses. Recently, concerns over
the financial management of the program surfaced following a review by the
Office of the Under Secretary of Defense (Comptroller), which suggested that
significant portions of prior years' appropriations remained unliquidated.

This report responds to mandates contained in the National Defense
Authorization Act for Fiscal
Year 2000 and the House Report No. 106-244 on DOD's Appropriations Act for
Fiscal Year 2000 and to a request from the Chairmen of the Subcommittees on
Defense and Foreign Operations, Senate Committee on Appropriations, to
report on the management of the program. Accordingly, this report discusses
whether (1) the program will meet the Chemical Weapons Convention's time
frames within the costs projected, (2) obligations and liquidations of funds
appropriated for the program have been adequately managed, and (3) the
management structure of the program allows for coordinated accountability of
the program.

We are sending copies of this report to Senators Pete V. Domenici, Frank R.
Lautenberg, Joseph I. Lieberman, Fred Thompson, and Charles S. Robb and to
Representatives John R. Kasich and John M. Spratt, Jr., in their capacities
as Chair or Ranking Minority Member of cognizant Senate and House Committees
and Subcommittees. We are also sending copies of this report to the
Honorable William S. Cohen, Secretary of Defense; the Honorable William J.
Lynn, Under Secretary of Defense (Comptroller); the Honorable Louis Caldera,
Secretary of the Army; the Honorable James Lee Witt, Director, Federal
Emergency Management Agency; and the Honorable Jacob Lew, Director, Office
of Management and Budget. Copies will also be made available to others upon
request.

GAO contacts and key contributors to this report are listed in appendix IV.

David R. Warren, Director
Defense Management Issues

List of Congressional Committees

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

The Honorable Ted Stevens, Chairman
The Honorable Robert C. Byrd
Ranking Minority Member
Committee on Appropriations
United States Senate

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

The Honorable Mitch McConnell, Chairman
The Honorable Patrick Leahy
Ranking Minority Member
Subcommittee on Foreign Operations
Committee on Appropriations
United States Senate

The Honorable Floyd D. Spence, Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives

The Honorable C.W. Bill Young, Chairman
The Honorable David R. Obey
Ranking Minority Member
Committee on Appropriations
House of Representatives

Executive Summary

In 1985, the Congress required the Department of Defense to carry out the
destruction of the U.S. stockpile of chemical agents and munitions and
establish an organization within the Army to manage the disposal program.
Over time, the Congress also directed the Department of Defense to dispose
of chemical warfare materiel not included in the stockpile and to research
and develop technological alternatives for disposing of chemical agents and
munitions. Under the United Nations-sponsored Chemical Weapons Convention
ratified by the U.S. Senate in 1997, the Department of Defense agreed to
dispose of its 31,496-ton stockpile of chemical weapons stored throughout
the United States and its territories. The convention requires that the
chemical stockpile and chemical warfare materiel, such as recovered chemical
weapons and training sets, be destroyed by April 29, 2007. The Department of
Defense has spent approximately $6.2 billion and estimates that it will
spend another $8.7 billion on its disposal efforts under the Chemical
Demilitarization Program.

In response to recent congressional concerns about the financial management
of the Chemical Demilitarization Program, GAO assessed whether (1) the
program will meet the convention's time frames within the costs projected,
(2) obligations and liquidations of funds appropriated for the program have
been adequately managed, and (3) the management structure of the program
allows for coordinated accountability of the program.

In section 1412 of the Department of Defense Authorization Act for Fiscal
Year 1986 (P.L. 99-145),1 the Congress directed the Department of Defense to
destroy the U.S. stockpile of lethal chemical agents and munitions that
existed on the date of the legislation's enactment. The stockpile consisted
of nerve and mustard agents contained in rockets, bombs, projectiles, spray
tanks, and bulk containers. These items are stored at eight sites in the
continental United States and on Johnston Atoll in the Pacific Ocean. Since
then, disposal activities have evolved into the Chemical Demilitarization
Program, which comprises the following five elements:

Chemical Stockpile Disposal Project. This project was set up in 1988 to
destroy the stockpile of unitary chemical weapons2 stored at eight sites in
the continental United States and on Johnston Atoll in the Pacific Ocean.
The method chosen for destruction was incineration.

Chemical Stockpile Emergency Preparedness Project. This project was set up
in 1988 to help communities in 10 states near the chemical stockpile storage
sites and the associated Army installations enhance existing emergency
management and response capabilities in the unlikely event of a chemical
stockpile accident.

Nonstockpile Chemical Materiel Product. This project was set up in 1993 to
identify, locate, and destroy binary chemical weapons,3 miscellaneous
chemical warfare materiel, recovered chemical warfare materiel, and former
production facilities and identify and locate buried chemical warfare
materiel.

Alternative Technologies and Approaches Project. This project was set up in
1994 to develop and support testing of two technologies for neutralizing
chemical agents at two sites that store only large containers holding one
type of agent.

Assembled Chemical Weapons Assessment Program. This program was established
under congressional direction in 1997 to identify and test two or more
technologies (other than incineration) for destroying assembled chemical
weapons. Such weapons include fuzes, explosives, propellants, chemical
agents, shipping and firing tubes, and packaging materials.

Several different offices within the Office of the Secretary of Defense and
the Department of the Army share management roles and responsibilities for
the five elements of the Chemical Demilitarization Program. The Assistant
Secretary of the Army (Acquisition, Logistics, and Technology) oversees the
chemical stockpile, nonstockpile, and alternative technologies projects. The
Assistant Secretary of the Army (Installations and Environment) and the
Federal Emergency Management Agency oversee the emergency preparedness
project. The Agency manages the emergency preparedness activities in the
civilian communities, and the U.S. Army Soldier and Biological Chemical
Command manages similar activities on the Army installations. The Under
Secretary of Defense (Acquisition and Technology) oversees the assembled
chemical weapons program.

On April 24, 1997, the Senate ratified the Chemical Weapons Convention,
committing the United States to dispose of its unitary chemical weapons
stockpile, binary chemical warfare materiel, recovered chemical warfare
materiel, and former chemical weapons production facilities by April 29,
2007. If a country is unable to meet the convention's deadline, the
convention's Organization for the Prohibition of Chemical Weapons may grant
an extension of up to 5 years.

The Army had destroyed approximately 17.7 percent of the chemical weapons
stockpile as of January 31, 2000, and could destroy about
90 percent of the stockpile by the convention's 2007 deadline, given its
recent progress and projected plans. However, the Army may not meet the
deadline for the remaining 10 percent of the stockpile because the
incineration method of destruction has not been acceptable to two of the
states where the chemical stockpile is located. Additionally, some of the
nonstockpile materiel may not be destroyed before the deadline because the
proposed method of destruction has not been proven safe and effective and
accepted by state and local communities. The Army's $14.9 billion estimate
for program costs will likely increase due to (1) the additional time
required to develop and select disposal methods for the remaining
10 percent of the stockpile and for some of the nonstockpile chemical
materiel and (2) possible delays in demolition of a former chemical weapons
production facility.

The Army has experienced significant problems in recent years in effectively
managing the use of funds appropriated for the Chemical Demilitarization
Program. The Army reported that as of September 30, 1999, $498 million (16.1
percent) of the $3.1 billion appropriated for the program in fiscal years
1993-98 was unliquidated.4 During the review, GAO examined the transactions
for which most of these obligations were recorded, a type of interagency
order known as a military interdepartmental purchase request.5 In an
assessment of these interagency orders that account for $495.1 million (99.4
percent) of the unliquidated obligations, GAO found that $63.1 million (12.7
percent) had been liquidated but was not recorded in accounting records or
included in financial reports prepared by the Defense Finance and Accounting
Service. Of the remaining $432 million, most was for work completed but not
yet billed by the contractor or verified by the Defense Contract Audit
Agency or for work in progress but not yet completed. In addition, program
officials could not explain why $10.4 million of the $432 million had not
been liquidated. Some obligations remain unliquidated due to a lack of
attention to and a fragmented structure for managing program activities and
tracking liquidations, failure to liquidate obligations on completed
contracts and deobligate excess funds, and program delays. The Army has
begun to improve its management of funds appropriated for the program.
However, it has not consistently implemented improvements across the
program, and it is too soon to assess the effect of these improvements.

Effective management of the Chemical Demilitarization Program has been
hindered by its complex management structure and ineffective coordination
among program offices and with state and local officials. In addition,
coordination and communication among officials responsible for elements of
the program have been inadequate, thus causing confusion about what actions
would be taken at certain sites. Further, officials of the Departments of
Defense and the Army have not agreed on whether or when management roles,
responsibilities, and accountability should be consolidated for destruction
of the chemical stockpiles in Kentucky and Colorado. Consequently, state and
local officials have expressed concern that no single office is accountable
for achieving the desired results of the Chemical Demilitarization Program's
activities.

GAO is making recommendations to address problems noted involving financial
and program management and coordination and accountability.

Destroyed by the Convention's Deadline

Despite early delays in the destruction program, the Army could destroy
about 90 percent of its stockpile of chemical agents and munitions and most
of its nonstockpile chemical warfare materiel6 before the Chemical Weapons
Convention's 2007 deadline. The convention contains provisions that, if
granted, could extend the deadline by as much as 5 years to 2012.

The Army has made progress toward establishing the capabilities needed to
destroy the stockpile and, absent unanticipated delays, could destroy about
90 percent of the chemical stockpile before the convention's 2007 deadline.
It now has two operational destruction sites, at Johnston Atoll and Tooele,
Utah, that have incinerated about 17.7 percent of the original chemical
stockpile. These two sites accounted for 49.7 percent of the original
stockpile. The Army has also begun constructing chemical disposal facilities
at five other sites--Aberdeen, Maryland; Anniston, Alabama; Newport,
Indiana; Pine Bluff, Arkansas; and Umatilla, Oregon.7 These sites account
for approximately 40.4 percent of the stockpile. The Army has selected
incineration as the method of destruction of the chemical stockpile in
Alabama, Arkansas, and Oregon, and state and local governments have agreed
to this method. In Maryland and Indiana, the states have agreed to test
neutralization technologies as an alternative to incineration and have
granted permits for the construction of full-scale pilot facilities. Because
of the testing, these sites may experience some initial delays in their
destruction of chemical weapons, but the Army still expects to meet the 2007
deadline.

Two sites--Blue Grass, Kentucky, and Pueblo, Colorado--are unlikely to meet
the 2007 deadline. These two sites account for about 10 percent of the
original stockpile. Recent program schedules show that operations using
alternative technologies at the two sites would not begin until after the
2007 deadline because of the time needed to validate, certify, and obtain
approval of the technologies. Even if it decided to use incineration as the
method of destruction, the Army would have difficulty obtaining the
environmental permits from the states in time to meet the 2007 deadline.

The Army has destroyed a large portion of its nonstockpile chemical warfare
materiel. However, it may not meet the 2007 deadline for destroying some
recovered chemical warfare materiel. The methods developed by the Army for
destroying this materiel have not been proven safe and effective and have
not been approved by state and local communities. In addition, the Army may
not meet the deadline for demolition of part of a former chemical weapons
production facility because it must destroy the chemical weapons stockpiled
there first. Any delay in the stockpile disposal may push demolition
operations past the deadline.

Costs for the Chemical Demilitarization Program are likely to exceed the
Army's estimate of $14.9 billion. This estimate does not include the costs
associated with likely delays in destruction of the stockpile in Kentucky
and Colorado and delays in destroying nonstockpile materiel. Also, the Army
has not developed a reliable baseline to estimate costs to clean and close
chemical stockpile disposal facilities and adjacent areas. In response to
congressional direction, the Army has implemented cost-reduction initiatives
to reduce contract costs and reduce costs associated with extended state and
local processes for obtaining environmental permits.

The Army has not adequately managed program activities and tracked
disbursements to ensure the timely liquidation of funds appropriated for the
Chemical Demilitarization Program. This has occurred because of a lack of
attention to and a fragmented organizational structure for managing program
activities and tracking liquidations, delays in recording financial
transactions and untimely liquidation of obligations under completed
contracts, and delays in program schedules. The Army reported that as of
September 30, 1999, $498 million (16.1 percent) of the $3.1 billion
appropriated for the program in fiscal years 1993-98 was unliquidated. In an
assessment of obligation documents that accounted for $495.1 million, or
99.4 percent of the unliquidated balance, GAO found that $63.1 million
(12.7 percent) had been liquidated but was not recorded in accounting
records or included in financial reports prepared by the Defense Finance and
Accounting Service. Of the remaining $432 million, most was for work
completed but not yet billed by the contractor or verified by the Defense
Contract Audit Agency or for work being done but not yet completed. In
addition, program officials could not explain why $10.4 million of the
$432 million had not been liquidated.

Program officials have historically placed a priority on the timely
obligation of appropriations and paid much less attention to tracking
liquidations of obligations. During GAO's review, program officials could
not readily determine whether unliquidated obligations were for completed or
ongoing efforts and admittedly gave little priority to deobligating excess
funds under completed or closed contracts. In addition, several different
entities were responsible for managing program activities and tracking the
dispersal of funds. In some cases, this has caused confusion as to who was
accountable for liquidating obligations and deobligating excess funds.

Delays in reporting transactions in the defense accounting records and
financial reports have contributed to the magnitude of unliquidated
obligations. Such delays were generally due to the time contractors took to
validate and process liquidations and the time the Defense Finance and
Accounting Service took to record them. Other unliquidated obligations were
due to the amount of time contractors took to submit their final bills after
completing work or the time the Defense Contract Audit Agency took to review
and approve costs associated with completed contracts. Finally, delays in
program schedules have resulted in unliquidated obligations. Program
officials have underestimated the time it would take to obtain states'
approvals for permits to construct destruction facilities. For example,
permits to construct disposal facilities in Oregon, Alabama, and Arkansas
took longer than anticipated to obtain, and the program office could not
liquidate construction and procurement obligations for these sites until it
obtained the approvals to start construction. In addition, obligations could
not be liquidated due to technical and contractual delays.

The Army could liquidate some of its obligations soon, as it has recently
obtained permits to construct destruction facilities at five of the
stockpile sites. Additionally, actions by the Congress and the Office of the
Under Secretary of the Defense (Comptroller) to reduce the funding requested
for the program have decreased the amount of funds available for obligation
and better aligned funding with the program's execution. This will decrease
the likelihood that these funds will be obligated far in advance of when
they are needed.

The Army has begun to improve its management of obligations and liquidations
of appropriated funds for the destruction program. For example, the Program
Manager for Chemical Demilitarization recently required the managers for
stockpile, nonstockpile, and alternative technology projects to report
monthly on obligations, disbursements, and planned and actual cost
information. However, at the time of GAO's review, these improvements have
not been consistently and systematically implemented across all program
elements, and program officials could not explain why $10.4 million had not
been liquidated.

Effectiveness

Effective management of the Chemical Demilitarization Program has been
hindered by its complex management structure and ineffective coordination
among program offices and with state and local officials. Several changes in
the organization and structure of the program during 1997-99, including some
changes to implement legislative requirements, divided the management roles,
responsibilities, and accountability among offices at several different
levels within the Departments of Defense and the Army. In addition,
coordination and communication among managers of the various elements of the
program have been inadequate. Further, officials of the Departments of
Defense and the Army have not agreed on whether or when management roles,
responsibilities, and accountability should be consolidated for destruction
of the chemical stockpiles in Kentucky and Colorado. Consequently, state and
local officials have expressed concern that no single office is accountable
for achieving the desired results of the Chemical Demilitarization Program's
activities. The Congress has also expressed concern about the management of
the program.

Some state and local officials have expressed concern because they have
received conflicting information about the program and because no single
office is clearly accountable for the execution of the program. For example,
according to state and local officials, spokespersons for the Chemical
Stockpile Disposal Project and the Assembled Chemical Weapons Assessment
Program have made conflicting and inconsistent statements about the possible
disposal methods for the chemical stockpile stored in Kentucky and Colorado.
Consequently, the perception is that the program lacks a single vision for
accomplishing its objectives effectively. To complicate matters, Department
of Defense and Army officials have not decided on whether or when management
roles, responsibilities, and accountability should be consolidated for
destruction of the chemical stockpiles in Kentucky and Colorado. Whatever
the decision is, closer cooperation will be needed between the two program
elements.

GAO also found instances where coordination and communication among project
managers for the program was inadequate. For example, as previously
discussed, the Program Manager for Chemical Demilitarization's efforts to
improve the office's management of program funds have not been consistently
and systematically implemented across all program elements. In another case,
officials of the stockpile and nonstockpile projects in Arkansas were not
coordinating their efforts to obtain environmental permits and approvals for
their disposal operations.

The Congress has expressed concern over the management of the Chemical
Demilitarization Program. In the Department of Defense Appropriations Act
for Fiscal Year 2000,8 the Congress directed the Secretary of Defense to
report on the management of the Chemical Demilitarization Program, including
an assessment of the Assembled Chemical Weapons Assessment Program. Some in
the Congress have also expressed concern that, in recent budget submissions,
the Department of Defense included the budget for the Chemical
Demilitarization Program as part of the Army's budget. In its report for the
National Defense Authorization Act for Fiscal Year 2000,9 the House Armed
Services Committee reaffirmed its belief that, as required by the original
statute establishing the program, chemical demilitarization funds should be
set forth in a Defense Department-wide budget account to emphasize that
destruction of the chemical weapons stockpile is a national issue that
affects the entire Department.

GAO recommends that the Secretary of Defense monitor the Army's actions to

ï¿½ develop a systematic approach for ensuring the timely, effective
expenditure of funds appropriated for all elements of the Chemical
Demilitarization Program and

ï¿½ direct program officials to account for the $10.4 million in unliquidated
obligations that they could not give an explanation for, or explain why the
obligations have not been liquidated.

In addition, GAO recommends that the Secretary of Defense direct the
Secretary of the Army to clarify the management roles and responsibilities
of program participants, assign accountability for achieving program goals
and results, and establish procedures to improve coordination among the
program's various elements and with state and local officials.

The Department of Defense and the Federal Emergency Management Agency
provided separate, written comments on a draft of this report. Both agencies
generally agreed with the report's findings and recommendations.

In its comments on the draft report, the Department of Defense agreed with
GAO's recommendations to develop a systematic approach for ensuring the
timely, effective expenditure of funds appropriated for all elements of the
Chemical Demilitarization Program and direct program officials to account
for the $10.4 million in unliquidated obligations that they could not
explain. However, the Department disagreed that the Secretary of Defense
should direct the Secretary of the Army to implement the recommendations
because the Army's Program Manager for Chemical Demilitarization had already
initiated implementation actions. Given these actions and the
long-standing nature of the concerns raised in the draft report, GAO
modified the recommendations to call for the Secretary of the Defense to
monitor the actions to ensure that the Army completes them fully and in a
timely way and that appropriate results are obtained. The Department of
Defense concurred with the last recommendation in the draft report, which
called for more management accountability.

The Federal Emergency Management Agency concurred with the recommended
principle of a systematic approach for ensuring the timely, effective
expenditure of funds and elaborated on its actions to implement the
principle behind the recommendation. Because the recommendation to account
for the $10.4 million in unliquidated obligations pertains to the Army, the
Agency had no comment on that recommendation. To the extent that the
Chemical Demilitarization Program management impacts state and local
emergency preparedness, the Federal Emergency Management Agency concurred
with last the recommendation, which called for more management
accountability.

The comments of the Department of Defense and the Federal Emergency
Management Agency are presented in their entirety in appendixes II and III,
respectively. The two agencies also provided technical clarifications, and
where appropriate, GAO incorporated them in the report.

Introduction

Since World War I, the United States has maintained a stockpile of chemical
agents and munitions to deter the use of chemical weapons against its
troops. From 1917 through the 1960s, obsolete or unserviceable chemical
agents and munitions were disposed of by fire in an open pit, burial, and
dumping in the ocean. However, because of public concern about the potential
effects of these methods of disposal on public health and the environment,
they were discontinued during the 1970s. In 1985, the Congress required the
Department of Defense (DOD) to carry out the destruction of the U.S.
stockpile of chemical agents and munitions and establish an organization
within the Army to be responsible for the disposal program. Over time, the
Congress also directed DOD to dispose of chemical warfare materiel not
included in the stockpile and to research and develop technological
alternatives for disposing of chemical agents and munitions. In April 1997,
the U.S. Senate ratified the U.N.-sponsored Chemical Weapons Convention,
effectively agreeing to dispose of the chemical stockpile weapons and
chemical warfare materiel by April 29, 2007. If a country is unable to
maintain the convention's disposal schedule, the convention's management
organization may grant an extension of up to 5 years.

Since the 1980s, DOD's chemical weapons disposal activities have evolved
into the current program, known as the Chemical Demilitarization Program. It
now consists of the Chemical Stockpile Disposal Project, the Chemical
Stockpile Emergency Preparedness Project, the Nonstockpile Chemical Materiel
Product, the Alternative Technologies and Approaches Project, and the
Assembled Chemical Weapons Assessment Program.

In section 1412 of the Fiscal Year 1986 Department of Defense Authorization
Act (P.L. 99-145),10 the Congress directed DOD to destroy the U.S. stockpile
of lethal chemical agents and munitions that existed on the date of the
legislation's enactment. The original stockpile consisted of 31,496 tons of
nerve and mustard agents contained in rockets, bombs, projectiles, spray
tanks, and bulk containers. Some munitions contained nerve agents, which can
disrupt the nervous system and lead to loss of muscular control and death.
Others contained a series of mustard agents that blister the skin and can be
lethal in large amounts. The stockpile is stored at eight sites in the
continental United States and on Johnston Atoll in the Pacific Ocean, as
shown in figure 1.

Figure 1: Original Stockpile of Chemical Agents and Munitions (prior to the
start of disposal operations at Johnston Atoll in June 1990)

Note: Program officials consider the original stockpile to be those chemical
agents and munitions that existed before the start of disposal operations at
Johnston Atoll in June 1990.

Source: Program office for chemical demilitarization.

In 1988, the Army formally announced its Chemical Stockpile Disposal Project
and stated that incineration on site at each of the existing stockpile
locations was the preferred disposal method. The objectives of the program
are to (1) destroy the stockpile of chemical weapons and
(2) provide maximum protection to the environment, the public, and personnel
involved in the storage, handling, and disposal of the stockpile. To destroy
the weapons, the Army uses a "reverse-assembly" procedure that drains the
chemical agent from the weapons and takes apart the weapons in the reverse
order of assembly. Once disassembled, the chemical agents and weapons are
incinerated in separate furnaces.

As of January 30, 2000, the Army had incineration-based disposal operations
under way at two sites, had destroyed approximately
17.7 percent of the original chemical stockpile, and had started
construction of disposal facilities for future disposal operations at five
other sites. The two operational disposal facilities are at the following
locations:

ï¿½ Johnston Atoll is located in the Pacific Ocean about 825 miles southwest
of Hawaii. The Army completed construction of its baseline incineration
disposal facility in July 1988 and started incineration operations in June
1990. It is the world's first full-scale facility designed specifically for
the disposal of chemical weapons and is the prototype plant for the
destruction program. The stockpile at Johnston Atoll originally contained
2,031 tons of nerve and mustard agents and represented
6.4 percent of the original stockpile.

ï¿½ Deseret Chemical Depot is located about 22 miles south of Tooele, Utah.
The Army completed construction of the disposal facility in August 1993 and
started incineration operations in August 1996. The Army considers this
disposal facility to be a first generation incineration facility, and as at
the Johnston Atoll facility, it expects to apply lessons learned from its
operations to other disposal sites. The Deseret stockpile originally
contained 13,616 tons of nerve and mustard agents, representing
43.2 percent of the original stockpile.

Three other baseline incineration disposal facilities are under
construction. In June 1997, the Army started construction of both the
Umatilla facility, located about 7 miles from Hermiston, Oregon, and the
Anniston facility, located about 50 miles east of Birmingham, Alabama. The
Umatilla stockpile contains 3,717 tons of nerve and mustard agents, or 11.8
percent of the original stockpile. The Anniston stockpile contains 2,254
tons of nerve and mustard agents, or 7.2 percent of the original stockpile.
These facilities are scheduled to begin destroying agents in late 2001 or
early 2002. Construction of the Pine Bluff facility, located about 35 miles
southeast of Little Rock, Arkansas, started in 1999. The Pine Bluff
stockpile contains 3,850 tons of agents, or 12.2 percent of the original
stockpile. The Army plans to begin destroying chemical agents at the Pine
Bluff facility in late 2003.

In 1988, DOD established the Chemical Stockpile Emergency Preparedness
Project to help communities in 10 states near the stockpile storage sites
enhance their emergency management and response capabilities in the unlikely
event of a chemical stockpile accident. The project, a companion to the
Chemical Stockpile Disposal Project, is necessary to help protect the
civilian population, workers, and the environment until disposal of the
chemical stockpile is complete. Since 1988, the Army and the Federal
Emergency Management Agency (FEMA) have assisted the civilian communities in
the vicinity of the eight chemical stockpile storage locations and the
storage installations in enhancing their emergency response capabilities. In
1997, the Army and FEMA implemented a management structure under which FEMA
assumed responsibility for
off-post (civilian community) program activities, while the Army continued
to manage on-post chemical emergency preparedness and to provide technical
support for both on- and off-post activities. FEMA, with its
long-standing knowledge and experience in preparing for and dealing with
emergencies of all kinds, provides its expertise, guidance, training, and
other support to the civilian community. The Agency also administers the
grant funds provided to the states and counties where stockpile facilities
are located in order to carry out the program's off-post activities.

Recognizing that the stockpile program did not include all chemical warfare
materiel, the Congress directed DOD to plan for the disposal of materiel not
included in the stockpile.11 Consequently, DOD implemented the Nonstockpile
Chemical Materiel Product to identify the locations, types, and quantities
of chemical materiel not included in the stockpile; develop and implement
disposal and transportation methods and procedures; and develop plans,
schedules, and cost estimates to implement the program. This materiel, some
of which dates as far back as World War I, consists of binary chemical
warfare materiel, miscellaneous chemical warfare materiel, recovered
chemical warfare materiel, former production facilities, and buried chemical
warfare materiel. These items are described in table 1.

Table 1: Nonstockpile Chemical Materiel

 Category                       Description
                                Binary chemical weapons form lethal
                                chemical agents from two less toxic
                                elements through a chemical reaction during
 Binary chemical warfare        flight to a target. Binary weapons were
 materiel                       manufactured, stored, and transported with
                                only one chemical element in the weapon.
                                The second chemical element was to be
                                loaded into the weapon at the battlefield.
                                Unfilled munitions, devices, and equipment
                                specifically designed for use in the
                                deployment of chemical weapons.

                                Empty ton containers formerly used to store
 Miscellaneous chemical warfare chemical agents.
 materiel
                                Chemical samples such as agents transferred
                                from a research project or from leaking
                                munitions into glass vials, metal
                                cylinders, steel bottles, and ton
                                containers to ensure safe storage of agent.
                                Items that were recovered from
                                range-clearing operations, chemical burial
                                sites, and research and development test
                                areas. The handling and disposal of
                                recovered chemical weapons are difficult
                                because the weapons are more likely to have
 Recovered chemical warfare     deteriorated than other nonstockpile
 materiel                       materiel, and the identity of the agent is
                                unknown in some of the items. Most
                                recoveries involve very small quantities of
                                materiel and include chemical containers
                                such as training sets, glass bottles, metal
                                containers, artillery projectiles, mortar
                                cartridges, and bombs.
                                Prior to 1968, these facilities produced
 Former chemical weapons        chemical agents, their precursors, and
 production facilities          components for chemical weapons or were
                                used for loading and filling chemical
                                munitions.
                                Until the late 1950s, disposal by burial
                                was an accepted and approved practice. In
                                most cases, the materiel was burned or
                                chemically neutralized before burial.
                                Although the actual amount, agent, and
 Buried chemical warfare        types of materiel are unknown, the Army
 materiel                       estimates that there are 100 known or
                                suspected burial locations in 38 states and
                                2 U.S. territories. Some locations have
                                multiple burial sites; the Army has
                                identified approximately 227 known or
                                suspected sites.

Source: Program office for nonstockpile chemical materiel.

The locations of the nonstockpile chemical materiel, as of January 31, 2000,
are shown in figure 2.

Figure 2: Nonstockpile Chemical Materiel (as of Jan. 31, 2000)

Note: No disposal operations are being conducted at the recovered chemical
materiel sites.

Source: Program office for nonstockpile chemical materiel.

Since the early 1990s, the Army has undertaken research and development on
several transportable systems that are designed to identify, access, and
treat chemical agents in nonstockpile munitions and decontaminate the
containers and munitions. All disposal methods are to comply with federal
and the affected state's environmental and safety regulations. Until
recently, the Army emphasized the use of transportable treatment systems
because of the relatively small quantities and the characteristics of
nonstockpile chemical weapon materiel located at a potentially large number
of sites through the country.

In November 1991, because of public concern about the safety of
incineration, the Army requested the National Research Council to evaluate
potential technological alternatives to the baseline incineration process.
In the 1993 Defense Authorization Act (sec. 173), the Congress directed the
Army to use the Council's evaluation and report on potential technological
alternatives to incineration. The Congress also directed the Army to
consider safety, environmental protection, and cost-effectiveness when
evaluating alternative technologies. Consequently, in August 1994, the Army
initiated the Alternative Technologies and Approaches Project, a more
aggressive research and development program, to investigate, develop, and
support the testing of two technologies based on chemical neutralization of
chemical agents at the bulk-only stockpile sites--Aberdeen, Maryland, and
Newport, Indiana. The project focused on these two sites because they have
only one type of chemical agent stored in large steel bulk containers. The
Army is conducting this project in conjunction with the baseline
incineration program.

In 1997, the project proceeded with full-scale pilot testing of the
neutralization technologies at the following two stockpile sites:

ï¿½ Edgewood Chemical Activity is located at the Edgewood Area of the Aberdeen
Proving Ground, north of Baltimore, Maryland. The Aberdeen stockpile
consists of 1,625 tons (or 5.2 percent of the original stockpile) of mustard
agent stored in 1,818 ton containers. These containers are designed for safe
storage of bulk chemical agents and do not have fuzes, warheads, or other
explosive devices. The disposal technology being tested at Aberdeen is
neutralization followed by the biodegradation process.12 The environmental
permit was obtained from the state in February 1999, enabling the start of
site preparation activities and construction.

ï¿½ Newport Chemical Depot is located 2 miles south of Newport and
32 miles north of Terre Haute in western Indiana. The Newport stockpile
consists of 1,269 tons (or 4 percent of the original stockpile) of nerve
agent stored in 1,690 ton containers. The technology being tested at Newport
was neutralization followed by a supercritical water oxidation process.13
The environmental permit was obtained from the state in December 1999,
enabling the start of construction activities.

In the National Defense Authorization Act for Fiscal Year 1997,14 the
Congress directed DOD to assess alternative technologies to the baseline
incineration process for the disposal of assembled chemical munitions.15 In
addition, section 8065 of the Department of Defense Appropriations Act,
1997, provided $40 million to conduct the Assembled Chemical Weapons
Assessment Program, a pilot program to identify and demonstrate two or more
alternatives to the incineration process for the destruction of assembled
chemical munitions.16 The appropriations act required the Under Secretary of
Defense for Acquisition and Technology to designate a program manager who
was not, nor had been, in direct or immediate control of the baseline
incineration program to carry out the pilot program. The act also prohibited
DOD from obligating any funds for constructing incineration facilities at
Blue Grass, Kentucky, and Pueblo, Colorado, until 180 days after the
Secretary of Defense reports on alternative disposal methods for assembled
chemical weapons. The Strom Thurmond National Defense Authorization Act for
Fiscal Year 199917 requires that if a technology other than incineration is
selected for these sites, the Under Secretary of Defense must certify in
writing to the Congress that the alternative is (1) as safe and
cost-effective for disposing of assembled chemical munitions as is
incineration, (2) capable of completing the destruction of such munitions on
or before the later date of either when the destruction would be completed
if incineration were used or the convention's deadline, and (3) capable of
satisfying federal and state environmental and safety laws.

Because of the legislative prohibition on obligating any funds for
constructing incineration facilities and the states' unwillingness to accept
incineration as a disposal method, the Army tentatively chose the Blue Grass
and Pueblo depots to test alternative technologies for destroying the
assembled chemical weapons.

ï¿½ The Blue Grass Army Depot, located in central Kentucky, has a stockpile of
weapons containing 523 tons of nerve and mustard agents, or
1.7 percent of the original stockpile.

ï¿½ The Pueblo Chemical Depot, located about 14 miles east of Pueblo,
Colorado, has a stockpile of weapons containing about 2,611 tons of mustard
agent, or 8.3 percent of the original stockpile.

The program involves a three-phased approach that includes the development
of technology evaluation criteria, technology assessment, and demonstration
of not less than two technologies. The public has thus far participated in
all phases of the program. During criteria development in mid-1997, the
program office developed three sets of criteria to select proposals of
technologies worthy of further evaluation, demonstration, and
implementation. From September 1997 through June 1998, the program office
selected six technologies as worthy of demonstration from
12 proposals. However, because of funding constraints, the program office
selected only three of the six technologies for further testing. This
selection was based on the program office's evaluation of the demonstration
plans and determination of each technology's value to the government. In May
1998, the program office determined that neutralization followed by
supercritical water oxidation was a viable solution for destroying assembled
chemical weapons containing either nerve or mustard agents. It determined
that neutralization followed by biodegradation was a viable solution for
destroying assembled weapons containing mustard agents.

The conference report for the National Defense Authorization Act for Fiscal
Year 2000 stated that the conferees had been advised that DOD intended to
conduct evaluations of the three technologies previously selected for the
demonstration program, but which had not been tested because of funding
constraints.18 In addition, the conference report noted that DOD had decided
to spend $40 million for this purpose. In the conference report for the
Department of Defense Appropriations Act for Fiscal Year 2000, the conferees
directed DOD to make available $40 million to conduct demonstration testing
of the three additional alternative technologies.19 Program officials are
now using these funds to demonstrate these technologies. As of February 28,
2000, no decision had been made on which of the alternative technologies or
the baseline incineration process would be used to destroy the chemical
stockpile in Kentucky or Colorado.

To increase public awareness and acceptance, the program office established,
with the assistance of the Keystone Center,20 the Dialogue on Assembled
Chemical Weapons Assessment. The Dialogue includes representatives of the
affected communities, national citizens' groups, state regulatory agencies,
Native American tribes, the Environmental Protection Agency, and the
Departments of Defense and the Army and participates in the Army's
decision-making process for the program.

DOD and Army managers at several different levels share management roles and
responsibilities for elements of the Chemical Demilitarization Program.

ï¿½ The Assistant Secretary of the Army (Acquisition, Logistics and
Technology) oversees the chemical stockpile, nonstockpile, and alternative
technologies and approaches projects. The Program Manager for Chemical
Demilitarization manages the daily operations of these projects. The office
of the program manager is organized into distinct project areas: the Project
Manager for Chemical Stockpile Disposal, the Product Manager for
Nonstockpile Chemical Materiel, and the Project Manager for Alternative
Technologies and Approaches.

ï¿½ The Assistant Secretary of the Army (Installations and Environment) and
FEMA share management responsibilities for the Chemical Stockpile Emergency
Preparedness Project. The U.S. Army Soldier and Biological Chemical Command
manages on-post Army activities for the Assistant Secretary of the Army,
while FEMA manages the off-post portion of the program in the civilian
communities.

ï¿½ The Under Secretary of Defense (Acquisition and Technology) oversees the
Assembled Chemical Weapons Assessment Program. The Program Manager for
Assembled Chemical Weapons Assessment manages daily operations.

The management structure for the program is discussed in more detail in
chapter 4.

In 1993, the United States, Russia, and more than 150 nations signed the
U.N.-sponsored Convention on the Prohibition of the Development, Production,
Stockpiling and the Use of Chemical Weapons and on Their Destruction,
commonly referred to as the Chemical Weapons Convention. In October 1996,
the 65th nation ratified the Chemical Weapons Convention, making the
convention effective on April 29, 1997.21 On
April 24, 1997, the Senate ratified the convention, committing the United
States to dispose of its unitary chemical weapons,22 binary chemical warfare
materiel, recovered chemical warfare materiel, and former chemical weapons
production facilities by April 29, 2007. The Army classifies unitary
chemical weapons as chemical stockpile weapons and classifies binary
chemical warfare materiel, recovered chemical warfare materiel, former
chemical weapons production facilities, and miscellaneous chemical warfare
materiel as nonstockpile chemical materiel.23 If a country is unable to meet
the convention's disposal schedule, the convention's Organization for the
Prohibition of Chemical Weapons may grant an extension, although in no case
may the deadline be extended past April 29, 2012.

Since its beginning, the Chemical Demilitarization Program has been beset by
controversy over disposal methods, delays of 2 to 3 years more than the Army
anticipated in obtaining needed federal and state environmental permits and
other approvals, and increasing costs. In prior reports, we expressed
concern about the Army's lack of progress and the rising cost of the
program. For example, in 1991 we reported that continued problems in the
program indicated that increased costs and additional time to destroy the
chemical stockpile should be expected and recommended that the Army
determine whether faster and less costly technologies were available to
destroy the stockpile.24 In a 1994 report on the nonstockpile program, we
concluded that the Army's plans for disposing of nonstockpile chemical
warfare materiel were not final and that its costs were likely to change.25
In 1997, we reported that the program cost and schedule were largely driven
by the degree to which DOD and the affected states and communities agreed
with the proposed method to dispose of the chemical weapons and materiel.26
In July 1999, we reported that, although sizable unliquidated obligations
were reported for the program from prior years, program funds did not appear
to be available for other uses.27 In addition, we reported that these
unliquidated obligations were caused by a number of factors, such as delays
in obtaining environmental permits and technical delays. See related GAO
products at the end of this report.

Our objectives, scope, and methodology are described in appendix I.

Most Chemical Weapons and Materiel Could Be Destroyed Before the
Convention's 2007 Deadline

The Army has destroyed approximately 17.7 percent of the original chemical
weapons stockpile and could destroy 90 percent of its stockpile of chemical
agents and munitions and most of its nonstockpile chemical warfare
materiel28 before the Chemical Weapons Convention's 2007 deadline, given its
recent progress and projected plans. The Army has disposal operations under
way at two stockpile sites and has started construction of disposal
facilities for future destruction operations at five other sites--these
seven sites store 90 percent of the chemical stockpile. However, because of
the additional time required to develop and select disposal methods that are
acceptable to the state regulatory agencies and local communities in
Kentucky and Colorado, which store the remaining
10 percent of the original stockpile, the Army will not meet the 2007
deadline at these sites. In addition, the disposal of some nonstockpile
items may exceed the 2007 deadline because of delays in the testing of and
obtaining permits for key disposal systems for recovered chemical warfare
materiel and because of possible delays in the demolition of a former
chemical weapons production facility. Given past program experience, these
types of delays are likely to occur and will add to program costs. The Army
estimates that the program will cost $14.9 billion; it has spent
approximately $6.2 billion and estimates that the program will cost another
$8.7 billion. To identify opportunities to reduce the cost of the program,
officials have developed and implemented several cost-reduction initiatives
associated with contracting for the stockpile disposal facilities and
increasing the public awareness and acceptance of the program.

the Convention's 2007 Deadline

In prior reports, we have expressed concern about the Army's lack of
progress in destroying the stockpile of chemical agents and munitions.
Despite these early delays, the Army is now making progress toward
establishing the capabilities needed to destroy the stockpile. Absent
unanticipated delays, the Army could destroy about 90 percent of the
stockpile before the convention's 2007 deadline.29 However, because of the
additional time required to research, develop, test, and verify new disposal
methods that may be environmentally acceptable to the state regulatory
agencies and local communities in Kentucky and Colorado, destruction
activities at these locations, which store the remaining 10 percent of the
stockpile, are not likely to start before the 2007 deadline.

Stockpile

Since the Army formally announced its stockpile disposal project in 1988, it
has disposal operations under way at two sites and has started construction
of disposal facilities for future operations at five other sites. It is now
operating stockpile disposal facilities at Johnston Atoll and Tooele, Utah,
which together stored 49.7 percent of the total original stockpile.30 Of
this amount, 5,572 tons (17.7 percent of the original stockpile) of chemical
agents have been destroyed, and another 10,075 tons (32 percent of the
original stockpile) are scheduled for disposal at the two sites.31 In
addition, the Army has started to build chemical weapons disposal facilities
at Aberdeen, Maryland; Anniston, Alabama; Newport, Indiana; Pine Bluff,
Arkansas; and Umatilla, Oregon.32 As shown in figure 3, these sites stored
40.4 percent of the total original stockpile.

Figure 3: Status of the Army's Efforts to Destroy Its Chemical Stockpile
(as of Jan. 31, 2000)

Note: Percentages do not total 100 due to rounding.

Source: Program office for chemical demilitarization.

Significant actions in the implementation of disposal operations for
90 percent of the stockpile have been completed. Such actions include the
selection of a disposal method and the granting of environmental permits by
state and local governments. The disposal method for the remaining
10 percent of the stockpile stored in Kentucky and Colorado has not yet been
selected because the 1997 Defense Appropriations Act requires an examination
of alternative disposal methods under the Assembled Chemical Weapons
Assessment Program.

Completed Before the 2007 Deadline

The Army's most recent schedule shows that disposal operations are expected
to be completed at seven of the nine stockpile sites with at least
5 months to spare, most sites have at least 18 months to spare, before the
2007 deadline. However, the schedules for completion at the Maryland and
Indiana sites, which are pilot testing alternative disposal technologies,
are more uncertain because of the need to further test the alternatives
proposed for these locations. For the remaining two sites in Kentucky and
Colorado, disposal methods have not yet been selected because the 1997
Defense Appropriations Act requires an examination of alternative disposal
methods under the Assembled Chemical Weapons Assessment Program. Figure 4
depicts the Army's current disposal schedules for these sites.33

Figure 4: Schedules for Disposal Operations at the Nine Chemical Stockpile
Sites (as of May 11, 1999)

aSchedule execution is on hold because the 1997 Defense Appropriations Act
requires an examination of alternative disposal methods under the Assembled
Chemical Weapons Assessment Program.

Source: Chemical Stockpile Disposal Schedule, Program Manager for Chemical
Demilitarization,
May 11, 1999.

As part of the Alternative Technologies and Approaches Project, Aberdeen,
Maryland, and Newport, Indiana, have pilot projects to investigate, develop,
and support the testing of disposal technologies based on chemical
neutralization processes. The Army has started site preparation and
construction activities for the full-scale pilot facilities at both
locations, but the schedules for testing the technologies at these sites are
based primarily on research, modeling, and input from engineers and
scientists and not on full-scale operations. It is premature to assume that
operations at these sites will successfully demonstrate the technologies
without some initial delays associated with the design and operation of the
pilot plant. Until the pilot tests are completed, the schedules for these
sites remain uncertain, and the sites may not have as long a period before
the 2007 deadline as shown in figure 4.

On February 2, 2000, officials from the Assembled Chemical Weapons
Assessment Program provided schedules showing that disposal operations at
Blue Grass, Kentucky, and Pueblo, Colorado, will not start until after the
2007 deadline because of the time required to validate and certify the
alternative technologies and obtain environmental permits. However, program
officials are optimistic that operations could be completed within the
possible 5-year extension to the deadline. Two other reviews of the program
also concluded that the two sites would not meet the 2007 deadline. In
August 1999, a National Research Council brief by the Chairman of the
Assembled Chemical Weapons Committee concluded that disposal operations
using an alternative technology in Kentucky and Colorado would not be
completed by December 2007. In September 1999, an Arthur Andersen, Limited
Liability Partnership, consulting report prepared for the office of the
Deputy Assistant Secretary of the Army for Chemical Demilitarization
concluded that the estimated completion dates for these sites ranged between
May 2011 and December 2015, well beyond the 2007 deadline.34

The protocol for selecting an alternative technology for the destruction of
assembled chemical munitions stored in Kentucky or Colorado has not yet been
determined and remains under study. If a technology other than incineration
is selected for these sites, the 1999 Defense Authorization Act requires the
Under Secretary of Defense for Acquisition and Technology to certify in
writing to the Congress that the alternative is (1) as safe and
cost-effective for disposing of assembled chemical munitions as
incineration, (2) capable of the destruction of such munitions on or before
the later date of the completion of destruction if incineration were used or
the convention's deadline, and (3) capable of satisfying federal and state
environmental and safety laws. DOD and Army officials were assessing these
three conditions and identifying the criteria for making the certification.
At the same time, the Congress directed that DOD make available, and DOD
actually committed, funds in fiscal year 2000 to award contracts to evaluate
and demonstrate three additional technologies for the Assembled Chemical
Weapons Assessment Program. Program officials were also determining whether
the Under Secretary of Defense could issue the required certification before
demonstrating the three additional technologies.

It is unlikely that an alternative technology can be validated, certified,
and implemented in Colorado and Kentucky in time to meet the convention's
2007 deadline. In addition, insufficient time remains for the Departments of
Defense and the Army to meet the 2007 deadline at these two sites using the
baseline incineration process. According to the Army's 1998 annual report on
the program, to meet the destruction schedule required by the convention,
authority to proceed with the baseline incineration process in Colorado and
Kentucky was required before June 30, 1999.35 Even so, DOD and Army
officials were discussing whether to grant such authority for both Colorado
and Kentucky. These officials were preparing two notices of intent
announcing the preparation of separate environmental impact statements for
the disposal of the stockpile in Colorado. One environmental impact
statement will focus on whether to pilot test alternative technologies in
Colorado or at two other sites. The other environmental impact statement is
to be specific to Colorado and will focus on which disposal method--the
baseline incineration process, a modified incineration process, or an
alternative technology--should be used in Colorado. Some program officials
believe it may still be possible to meet the 2007 deadline by using a
modified incineration process to destroy the stockpile in Colorado. However,
according to state officials, the Army would have great difficulty in
obtaining environmental permits for any type of chemical agent incineration
in Colorado or Kentucky. Each state has requirements for obtaining
environmental permits that could prevent or slow the implementation of
incineration in the two states.

Meeting the Convention's 2007 Deadline

The Army has made progress in destroying most caterories of its nonstockpile
chemical materiel as required by the Chemical Weapons Convention.36 However,
the disposal operations for some recovered chemical warfare materiel may
exceed the convention's 2007 deadline because the Army needs more time to
develop and prove the proposed disposal methods will be safe and effective
and will be accepted by state and local communities. Further, the demolition
of a section of a former chemical weapons production facility in Indiana may
exceed the 2007 deadline because the chemical stockpile stored there must be
destroyed before demolition of the facility can begin. Any slippage in the
stockpile disposal schedule, which is considered optimistic by some involved
in the program, will cause demolition operations of the facility to extend
past the deadline.

Materiel

The Army has destroyed a large portion of its nonstockpile chemical warfare
materiel. Table 2 summarizes the status of the Army's efforts to destroy
binary chemical warfare materiel, miscellaneous chemical warfare materiel,
recovered chemical warfare materiel, and former chemical weapons production
facilities.

Table 2: Status of the Army's Efforts to Destroy Its Nonstockpile Chemical
Materiel (as of Feb. 23, 2000)

 Category  Location              Inventory                 Percent
                                                           destroyed
 Binary chemical warfare materiel
           Aberdeen, MD          1 metric ton              94
           Pine Bluff, AR        161 metric tons           0
           Tooele, UT            427 metric tons           100
           Umatilla, OR          30 metric tons            100
 Miscellaneous chemical warfare
 materiel
           Aberdeen, MD          1,765 ton containers      98
           Blue Grass, KY        25 items                  100
           Pine Bluff, AR        477 items                 86
                                 4,375 ton containers      0
           Tooele, UT            1,895 items               85
                                 944 ton containers        100
           Umatilla, OR          9,744 items               100

           Various locations     6 metric tons of samples  0
           (eight)
 Recovered chemical warfare
 materiel
           Aberdeen, MD          11 munitions              0
           Camp Bullis, TX       8 bottles                 0
           Dugway, UT            41 munitions              0

           Fort Richardson, AK   7 containers with         0
                                 chemical training items

           Johnson Atoll         75 containers with        39
                                 chemical training items
           Pine Bluff, AR        1,250 munitions           0

                                 5,299 chemical training   0
                                 set components

           Redstone, AL          1 container with training 0
                                 items and 1 bottle
           Tooele, UT            575 bottles and 578 vials 0
 Former chemical weapons production facilitiesa
           Aberdeen, MD          Former pilot plant        100
           Newport, IN           Nerve agent facility      8
           Pine Bluff, AR        Chemical facility         100
                                 Binary weapons facility   0

aFormer production facilities managed by the Product Manager for
Nonstockpile Chemical Materiel.

Source: Product office for nonstockpile chemical materiel.

Recovered Chemical Warfare Materiel

The disposal of some recovered chemical warfare materiel could exceed the
convention's 2007 deadline because of technical issues and cost increases
associated with key disposal methods. In addition, the Army has experienced
delays in obtaining state permits and approvals to test and implement these
methods. Because of these factors, program officials are considering
alternative disposal methods to replace the problematic systems.

Until recently, the Army was developing four types of integrated
transportable destruction systems for nonstockpile materiel. These systems
and their status are briefly described in table 3. Each system was expected
to use a neutralization process, through which the chemical agent would be
mixed with chemicals that would convert the agent into waste compounds. This
waste would be much less hazardous than the chemical agent and would be sent
to commercial treatment, storage, and disposal facilities that specialize in
the treatment of hazardous industrial waste.

Table 3: Nonstockpile Transportable Treatment Systems

 System               Description                    Status
                      System is designed to safely
                      destroy nonexplosively         Full-scale prototype
 Rapid Response       configured chemical warfare    designed, assembled,
 System               materiel, primarily chemical   and scheduled to be
                      training sets, by accessing    operational in fiscal
                      the agent and neutralizing it  year 2001.
                      in a sealed environment.
                      System provides the capability
                      to receive, contain, access,   Full-scale prototype
                                                     designed and assembled
 Munitions Management monitor, and treat             but on hold pending
 Device-Version 1     range-recovered or buried,     program decision on
                      nonexplosively configured
                      chemical warfare materiel      alternative disposal
                      weighing up to 500 pounds.     methods.
                      System provides the capability
                      to safely destroy explosively
                      configured chemical warfare    Full-scale system in
                      materiel by accessing the      design and explosive
                      agent and neutralizing it in a containment chamber
 Munitions Management sealed environment. It is      tested but on hold
 Device-Version 2     designed to process            pending program
                      nonexplosively configured      decision on
                      munitions and bulk items and   alternative disposal
                      to fully contain any potential methods.
                      explosion resulting from
                      operations.
                      System is designed to destroy
                      explosively configured
                      chemical warfare munitions
                      that are unsafe for transport. First phase system in
                      Materiel is placed in the      testing and scheduled
                      system and detonated, and the  to be operational in
 Explosive            chemical agent is neutralized. fiscal year 2002.
 Destruction System   The first phase system is
                      expected to safely contain up  Second phase system in
                      to 1 pound dynamite-equivalent design and the
                      explosion. The second phase    operational date not
                      system is expected to contain  yet determined.
                      up to 31 pounds of explosive
                      materiel.

Source: Product office for nonstockpile chemical materiel.

Nonstockpile officials stated that the research and development of the four
treatment systems described in table 3 have reached the point where the Army
must decide whether it wants to complete development and make the systems
available for deployment in the field. In the case of the two munitions
management devices, the Army has experienced technical problems and cost
overruns. In addition, it experienced delays in obtaining state permits and
approvals to test the prototype for the munitions management device (version
1). The required permits to test the system had not been approved as of
February 2, 2000.

Because of the problems and delays, nonstockpile product officials were
considering alternative disposal methods to replace the two munitions
management devices. For example, they were deliberating over the possibility
of destroying recovered chemical warfare materiel stored in Oregon and
Colorado in stockpile disposal facilities37 and disposing of the recovered
materiel stored in Maryland and Arkansas in
neutralization-based disposal facilities specially designed for nonstockpile
materiel. However, officials still need more time to prove that the
alternatives will safely and effectively destroy recovered chemical
materiel. Environmental issues similar to those affecting the testing of the
prototype munitions management devices are also likely to affect the Army's
ability to obtain the environmental approvals and permits for the
alternatives. Consequently, until the alternatives for disposing of the
recovered chemical warfare materiel are proven and accepted by the state and
local communities, this portion of the nonstockpile product is at risk of
exceeding the 2007 deadline.

the Convention's 2007 Deadline

A portion of a former production facility at Newport, Indiana, classified as
a nonstockpile requirement, may not be destroyed before the convention's
2007 deadline because the chemical stockpile agent stored there must be
destroyed before destruction of the facility can begin. The weapons were
scheduled to be destroyed by December 2004. Although nonstockpile program
officials were confident that their schedule provides sufficient time to
complete demolition of the facility before the 2007 deadline, slippages in
the disposal of the chemical stockpile could extend nonstockpile operations
past the deadline. As previously discussed, the Newport, Indiana, stockpile
schedule is at risk because the Army needs more time to demonstrate whether
the proposed alternative technology--developed by the Alternative
Technologies and Approaches Project but not yet proven in full-scale
operations--will safely and effectively destroy the stockpile. In addition,
state officials believe the disposal schedule is too ambitious because it is
based on processing 600 containers filed with nerve agent during pilot
testing, more than they believe is realistic in the time allowed. State
officials said the Army's schedule for the pilot test phase might not allow
sufficient time for program participants to fully evaluate the new
technology before full-scale operations are scheduled to start.

$14.9 Billion Estimate

The Chemical Demilitarization Program has a long-standing history of
experiencing significant cost growth. The Army estimates that the program
will cost $14.9 billion;38 it has spent approximately $6.2 billion. However,
the $14.9 billion cost estimate does not include the costs associated with
the schedule slippages likely in Kentucky and Colorado and in the
Nonstockpile Chemical Materiel Product. Army officials said that they were
revising their cost estimates. However, the Army will likely need more time
to develop a reliable baseline to estimate the cost for the closure and
remediation of the chemical stockpile disposal facilities, adjacent areas,
and miscellaneous materiel contaminated during disposal operations.39 At the
same time, program officials have initiated some actions to contain costs.

$14.9 Billion

As shown in table 4, the Army estimates that the program will cost
$14.9 billion;40 the Congress has appropriated nearly $6.2 billion through
fiscal year 1999. Since 1985, the Army's cost estimate for the Chemical
Stockpile Disposal Project, the largest portion of the program, has
increased significantly from the initial $1.7 billion estimate to nearly
$10 billion. The major reasons for the cost increases in the stockpile
project include (1) overly optimistic program assumptions and estimates by
program officials, (2) enhancements to respond to concerns for maximizing
the safety of the public and environment, (3) technical problems resulting
in lower than expected disposal rates, and (4) additional legislative and
program requirements. In 1997, we reported that until the disposal methods
for nonstockpile materiel were developed and proven and accepted by state
and local communities, the Army would not be able to predict the cost of the
nonstockpile product with any degree of accuracy.41

Table 4: Working Life Cycle Cost Estimates and Appropriated Funds for the
Chemical Demilitarization Program

 Dollars in millions

 Program element                             Estimated Appropriated fundsb
                                             costa
 Program Office for Chemical
 Demilitarization                            $851.2    $189.8
 Chemical Stockpile Disposal Projectc        9,984.4   4,734.9
 Chemical Stockpile Emergency Preparedness
 Project                                     1,237.3   645.3
 Nonstockpile Chemical Materiel Product      1,383.6   309.1
 Alternative Technologies and Approaches
 Project                                     1,122.8   235.1
 Assembled Chemical Weapons Assessment
 Program                                     370.3     76.7
 Total                                       $14,949.6 $6,190.9

aEstimated program costs as of May 11, 1999.

bAppropriations during fiscal years 1988-99.

cThe estimated cost of the Chemical Stockpile Disposal Project includes the
cost of constructing and operating baseline incineration facilities at Blue
Grass, Kentucky, and Pueblo, Colorado.

Source: Our analysis of data provided by the program offices for chemical
demilitarization and assembled chemical weapons assessment.

The working life cycle cost estimate for the Chemical Demilitarization
Program shown in table 4 does not include the costs associated with schedule
slippages likely in the disposal of the chemical stockpile stored in
Kentucky and Colorado and the nonstockpile materiel. The cost estimates are
based on the assumption that the disposal of the chemical stockpile and
nonstockpile materiel would be completed before the 2007 deadline, which we
believe is unlikely. Historically, schedule delays increase direct costs
such as labor, emergency preparedness, and management of the program. In
addition, until disposal methods for the stockpile stored in Kentucky and
Colorado have been selected, proven to be safe and cost-effective, and
accepted by the affected states and localities, the Army will be unable to
accurately estimate disposal costs for these sites. Similarly, the cost of
destroying recovered chemical warfare materiel will be uncertain until the
product manager has demonstrated disposal methods for nonstockpile items and
the methods have received permits and have been accepted by the affected
states and localities. The cost estimate shown in table 4 for the
Nonstockpile Chemical Materiel Product does not included possible costs
after the 2007 deadline.

The Army also needs additional time to develop a reliable baseline to
estimate the costs for the closure and remediation of the chemical stockpile
disposal facilities, adjacent areas, and miscellaneous materiel contaminated
during disposal operations.42 According to program officials, these costs
may increase because of uncertainties regarding remediation requirements and
standards for these facilities and other materiel, such as personal
protection suits worn by the workers and miscellaneous equipment,
contaminated during disposal operations. Individual states will establish
the environmental requirements for remediating these facilities and nearby
areas. Consequently, the environmental requirements and standards to use in
estimating the cost to remediate these facilities have not yet been fully
determined. Furthermore, because no stockpile disposal facility has yet to
be remediated, the Army lacks real time experience on which to estimate
these costs.

In response to the National Defense Authorization Act for Fiscal Year 1996,
the program office for chemical demilitarization has developed and
implemented several cost-reduction initiatives.43 Because the majority of
Chemical Stockpile Disposal Project costs are in the contracts for the
construction and operation of the disposal facilities, the program office
implemented a management approach that includes in-depth reviews of the
contracts. According to program officials, these reviews may provide the
office with a better understanding of the contractor's approach to planning,
enhance performance analyses and forecasting, and produce cost savings
during negotiations with contractors. Additionally, the chemical
demilitarization office expects cost savings to accrue through
implementation of programmatic lessons learned, where opportunities to
reduce costs are routinely investigated and applied as the program moves
forward.

To increase public awareness and trust, the program office for chemical
demilitarization has hosted periodic environmental forums on the Chemical
Demilitarization Program. These forums have allowed the public to exchange
information with officials from various organizations associated with the
program and were intended to increase public awareness and gain acceptance
of the program and thereby reduce costs associated with extended
environmental permit schedules and litigation actions. Similarly, to
increase public awareness and acceptance, the program office for assembled
chemical weapons assessment has convened, with the assistance of the
Keystone Center, the Dialogue on Assembled Chemical Weapons Assessment. The
Dialogue includes representatives of the affected communities, national
citizens groups, state regulatory agencies, Native American tribes, the
Environmental Protection Agency, and the Departments of the Defense and the
Army and has participated in the Army's decision-making process for the
program.

The Army could destroy 90 percent of its stockpile of chemical agents and
munitions and most of its nonstockpile chemical warfare materiel before the
Chemical Weapons Convention's 2007 deadline, given its recent progress and
projected plans. However, because of the additional time required to develop
and select disposal methods that are acceptable to the state regulatory
agencies and local communities in Kentucky and Colorado, the Army will not
meet the 2007 deadline at these sites. These sites store
10 percent of the original stockpile. In addition, the disposal of some
nonstockpile items may exceed the 2007 deadline because of technical
problems with key disposal systems for recovered chemical warfare materiel
and because of possible delays in demolition of a former chemical weapons
production facility in Indiana. Given past program experience, these types
of delays are likely to occur and will add to program costs.

The Army Has Not Adequately Managed the Liquidation of Program Funds

The Army has experienced problems in recent years in managing its
liquidations of program funds. Concerns over the financial management of the
Chemical Demilitarization Program surfaced following a February 1999 review
by the Office of the Under Secretary of the Defense (Comptroller), which
suggested that significant portions of prior years' obligations remained
unliquidated and could be used for other purposes. In July 1999, we reported
that sizable unliquidated obligations existed for the program from prior
years. During this review, we examined the transactions for which most of
these obligations were recorded, a type of interagency order known as a
military interdepartmental purchase request.44 We found that the program had
more than $3.1 billion in budget authority from fiscal
years 1993-98 appropriations as of September 30, 1999, of which a reported
$498 million (16.1 percent) was unliquidated.45 Some unliquidated
obligations exist because of the lack of management attention and fragmented
structure for tracking and managing liquidations; procedural delays in
reporting liquidation transactions in the defense financial system, auditing
and liquidating obligated funds on completed contracts, and deobligating
excess funds; and delays in executing the program schedule.

Several recent factors have affected and will continue to affect the
reduction of the unliquidated obligations. The Army can liquidate some of
its obligations as soon as construction and procurement are under way at the
chemical stockpile sites that recently obtained environmental permits. In
addition, congressional reductions in the administration's budget requests
for fiscal years 1999 and 2000 will likely reduce the future buildup of
unliquidated obligations. At the time of our review, the Army had begun to
improve its management of appropriated funds and liquidations of obligations
for the Chemical Demilitarization Program, but these improvements have not
been consistently and systematically implemented across all program
elements, and it is too early to tell their effect.

Concerns over the financial management of the program surfaced following a
review by the Office of the Under Secretary of the Defense (Comptroller),
which suggested that significant portions of prior years' obligations
remained unliquidated and could be used for other purposes. In July 1999, we
reported that there were sizable unliquidated obligations reported for the
program from prior years.

The financial management issue of the program surfaced in February 1999,
following a quick program review summarized in internal memorandums prepared
by an official in the Office of the Under Secretary of the Defense
(Comptroller). The memorandums suggested that significant portions of prior
years' obligations remained unliquidated and could be reprogrammed to other
uses. On July 26, 1999, the office issued a more comprehensive report,46
stating that 26 percent of the Chemical Demilitarization Program's
appropriations were unexpended. The report also notes that delays in
executing the program resulted in the accumulation of funds that were out of
phase with the specific time when the contracted work was actually
performed, resulting in the accumulation of unliquidated obligations.
Consequently, the funds were not available for other immediate defense
priorities and programs. The report also identified procedural delays in
reporting financial transactions in the defense financial system and
programmatic delays in executing the program schedule because of permit,
technical, and contractual issues that contributed to the program's
unliquidated obligations.

In July 1999, we reported that sizable unliquidated obligations existed for
the Chemical Demilitarization Program from prior years, but the unused funds
did not appear to be available for other uses.47 Our review of
$382.1 million (62.6 percent) of the reported $610.5 million in unliquidated
obligations for fiscal years 1992-98 showed that $150.6 million (39.4
percent of our sample) had already been spent but was not recorded in
accounting records or included in financial reports prepared by the Defense
Finance and Accounting Service (DFAS). Further, the remaining $231.5 million
in unliquidated obligations in our sample was scheduled to be liquidated by
November 2000. In addition, we reported that these obligations were
unliquidated because of several factors, such as delays in obtaining
environmental permits and technical delays. At the same time, we identified
a number of factors, including states' approvals of environmental permits to
start construction of chemical stockpile disposal facilities and
congressional deferments in the administration's budget request for the
program, that have affected or will affect the reduction of unliquidated
obligations.

As of September 30, 1999, the Chemical Demilitarization Program had more
than $3.1 billion in budget authority from fiscal years 1993-98, of which
$38.9 million was no longer obligated for specific program areas. (See
table 5.) Nearly this entire amount was obligated previously for program
requirements that were completed for less cost than initially estimated and
was deobligated and reclassified as program reserve. Most of these
unobligated funds are no longer available because their authorized periods
for obligation expired.48 At the same time, the program office had a
reported $498 million (16.1 percent) in unliquidated obligations from fiscal
years 1993-98.

Table 5: Reported Budget Authority and Unobligated, Obligated, and
Unliquidated Obligations for the Chemical Demilitarization Program for
Fiscal Years 1993-98 (as of Sept. 30, 1999)

 Dollars in
 millions
 Summary by funding Budget                                Unliquidated
 category           authority     Unobligated  Obligated  obligations
 Operations and
 maintenancea       $1,560.8      $6.7         $1,554.1   $65.0
 Procurement        968.3         1.9          966.4      339.6
 Research and
 developmenta       266.2         0.2          265.9      20.1
 Military
 construction       334.9         30.1         304.9      73.3
 Total              $3,130.2      $38.9        $3,091.3   $498.0

Note: Numbers may not total due to rounding and are not intended to total
horizontally.

aThe budget authority for fiscal years 1993 and 1994 operations and
maintenance funds and fiscal year 1993 research and development funds are
not included in the table because these accounts have been closed.

Source: Our analysis of detailed transaction data provided by the U.S. Army
Corps of Engineers and FEMA and DFAS data provided by the program offices
for the chemical demilitarization and assembled chemical weapons assessment.

In addition, the program office reported that it had $804 million in budget
authority in fiscal year 1999 funds. Of this amount, $70.7 million was
unobligated and $381.3 million in obligations was unliquidated. However, it
is important to note that the budget authority for fiscal year 1999 is
relatively recent and that some of the funds are still available for
obligation and liquidation and may continue to be available for several
years depending on the type of fund. The budget authority for 1999 research
and development funds under the chemical demilitarization appropriation is
available for obligation during fiscal year 2000, 1999 procurement funds are
available for obligation for fiscal years 2000 and 2001, and 1999 military
construction funds are available for obligation for fiscal years 2000
through 2003. The obligations incurred under each of these chemical
demilitarization appropriation subdivisions may be liquidated up to 5 years
following the end of the funds' periods of availability for obligation
before the fund account is closed.

Accounted For

During this review, we focused our analysis on the unliquidated obligations
for fiscal years 1993-98. On the basis of our analysis of 428 military
interdepartmental purchase requests with $495.1 million in unliquidated
obligations (or 99.4 percent of the total reported unliquidated
obligations), we determined that $63.1 million (12.7 percent) in payments
had been made but was not recorded in the accounting records or financial
reports prepared by DFAS.49 (See table 6.) Of the remaining $432 million in
unliquidated obligations, most was for work completed but not yet billed by
the contractor or verified by the Defense Contract Audit Agency (DCAA), or
for work being done but not yet completed. Included in this amount is $10.4
million that program officials could not explain the reasons for the
unliquidated balances.

Table 6: Unliquidated Obligations for 428 Military Interdepartmental
Purchase Requests for Fiscal Years 1993-98 (as of Sept. 30, 1999)

   Dollars in
    millions
                                           Unrecorded       Adjusted
                                           liquidated       unliquidated
                                           obligationsb     obligations

 Summary by     Number of   Reported
 funding        purchase    unliquidated   Amount Percent   Amount Percent
 category       requests    obligationsa
                reviewed
 Operations and
 maintenance    240         $62.6          $5.3   8.5       $57.2  91.5
 Procurement    97          339.5          52.6   15.5      286.9  84.5
 Research and
 development    76          19.7           5.2    26.4      14.5   73.6
 Military
 constructionc  15          73.3                            73.3   100.0
 Total          428         $495.1         $63.1  12.7      $432.0 87.3

Note: Numbers may not total due to rounding and are not intended to total
horizontally.

aReported by the U.S. Army Corps of Engineers, DFAS, and FEMA.

bIncludes a negative $1.1 million in corrections to the funding data.

cMilitary construction appropriations are provided directly to the U.S. Army
Corps of Engineers, which distributes funds through funding authorization
documents for specific projects. The Corps of Engineers provided obligation
and liquidation data for construction projects during fiscal years 1993-98.

Source: Our analysis of detailed transaction data provided by the U.S. Army
Corps of Engineers and FEMA, and DFAS data provided by the program offices
for the chemical demilitarization and assembled chemical weapons assessment.

As shown in table 6, 240 purchase requests included a reported
$62.6 million in unliquidated operations and maintenance obligations. Of
this amount, $5.3 million had been liquidated, according to documents
provided by the program office and its contractors, but not yet recorded as
liquidated in DFAS accounting data and financial reports. Of the remaining
$57.2 million in unliquidated obligations, program officials identified
$32.3 million for work that had been completed, but they were awaiting other
actions such as final billing by the contractor or audit by DCAA. Another
$18.6 million of the $57.2 million is obligated for ongoing purchase
requests, for which most of the obligations are scheduled to be liquidated
between now and January 2001. Program officials were unable to explain the
reasons for $6.3 million of the unliquidated obligations.

In addition, 97 purchase requests included a reported $339.5 million in
unliquidated procurement obligations. Of this amount, $52.6 million had been
liquidated, according to documents provided by the program office and its
contractors, but not recorded as liquidated in DFAS financial data. Of the
remaining $286.9 million in unliquidated obligations, program officials
identified $2.7 million for work that had been completed, but they were
awaiting other actions such as final billing by the contractor or audit by
the DCAA. Another $283.5 million is obligated for ongoing purchase requests,
for which most of the obligations are scheduled to be liquidated between now
and the end of 2001. Program officials were unable to explain the reasons
for almost $700,000 in unliquidated obligations.

Further, 76 purchase requests included a reported $19.7 million in
unliquidated research and development obligations. Of this amount,
$5.2 million had been liquidated, according to documents provided by the
program office and its contractors, but not recorded as liquidated in DFAS
financial data. Of the remaining $14.5 million in unliquidated obligations,
program officials identified $1.3 million for work that had been completed,
but they were awaiting other actions such as final billing or audit. Another
$9.7 million of the $14.5 million was obligated for ongoing purchase
requests, for which most of the obligations are scheduled to be liquidated
before June 2000. Program officials were unable to explain the reasons for
$3.5 million of the unliquidated obligations.

Last, we found $73.3 million in unliquidated military construction
obligations managed by the U.S. Army Corps of Engineers. The Corps of
Engineers uses integrated financial systems to manage and account for
obligations and liquidations. Unlike the separately located, nonintegrated
financial systems used by the program offices for chemical demilitarization
and assembled chemical weapons assessment, the Corps of Engineers system
contains real-time obligation and liquidation data. The $73.3 million in
obligations will be liquidated as specialized government-furnished equipment
is delivered and installed and the ongoing construction efforts are
completed. The construction of the disposal facilities in Alabama and Oregon
is scheduled to be completed in the first quarter of fiscal year 2001, and
the disposal facility in Arkansas is expected to be completed in the first
quarter of fiscal year 2002.

Some unliquidated obligations are due to the lack of management attention
and the decentralized organizational structure for managing program
activities and tracking liquidations; procedural delays in reporting
liquidation transactions in DFAS accounting data and financial reports;
procedural delays in auditing and liquidating obligated balances on
completed contracts; and delays in executing the program schedule because of
permit, technical, and contractual issues.

Contributing to unliquidated balances have been delays due to the lack of
management attention and decentralized organizational structure for managing
program activities and tracking liquidations.

Lack of Management Attention

The lack of attention to tracking and managing liquidations has contributed
to the accumulation of unliquidated obligations. According to DOD and Army
officials, the program office for chemical demilitarization has historically
prioritized the management and timely obligation of appropriations and given
much less attention to tracking and managing liquidations and deobligating
excess funds. Despite beginning to track and liquidate obligations more
aggressively, program officials still could not readily provide us the
obligation and liquidation status for some purchase requests or determine
whether the unliquidated obligations were for completed or ongoing efforts.
Instead, program officials generally had to obtain liquidation data from
performing entities, such as other government agencies and outside
contractors, and in many cases testimonial data was the best data they could
provide. Some officials said they did not systematically receive financial
reports with liquidation data. Additionally, they gave little priority to
deobligating unliquidated balances associated with completed or closed
contracts. This lack of attention is partially reflected in the inability of
program officials to explain the status of $10.4 million in unliquidated
obligations across all funding categories except for military construction.

Decentralized Organizational Structure

Different organizations are responsible for various elements of the Chemical
Demilitarization Program. For example, the U.S. Army Corps of Engineers is
responsible for managing military construction funds and most of the
program's procurement funds. FEMA and the U.S. Army Soldier and Biological
Chemical Command share responsibility for managing funds appropriated for
the Chemical Stockpile Emergency Preparedness Project.50 FEMA is responsible
for off-post emergency preparedness activities and the Soldier and
Biological Chemical Command is responsible for on-post activities. In
addition, the Program Manager for Assembled Chemical Weapons Assessment
manages the Assembled Chemical Weapons Assessment Program funding, and the
Program Manager for Chemical Demilitarization manages the execution of funds
appropriated for the chemical stockpile, nonstockpile, and alternative
technologies and approaches projects. Within the program office for chemical
demilitarization, project managers are responsible for the execution of
funds provided to their respective projects. Within this decentralized
organizational structure, these program elements manage their obligations
and liquidations as separate operating entities, and in some cases, there
was confusion as to which program element or organization was accountable
for tracking and managing the unliquidated obligations.

Procedural delays have accounted for the accumulation of some of the
unliquidated obligations. Some liquidation transactions were not reported in
accounting records and financial reports prepared by DFAS in a timely way,
and program officials have been reluctant to deobligate unliquidated excess
funds on completed contracts until DCAA validates labor rates and other
contract costs.

Accounting and Procedural Delays

According to program officials, processing and reporting liquidation data
have taken 90 to 120 days before the data were included in accounting
records and financial reports prepared by DFAS. For example, contractors
have taken several weeks to validate and process liquidations by their
subcontractors and report them to the program office, which has its own
processes and procedures to complete before reporting to DFAS. Furthermore,
DFAS requires time to input and report its liquidation data to its financial
system. We recently reported that DOD's payment and accounting processes are
complex, generally involving separate functions carried out by individual
offices using different systems.51 These processes can contribute
significantly to delays in reporting the liquidation of obligations to
responsible program officials.

Contract Closure Delays

According to Army officials, DCAA has taken several months to review and
approve costs associated with completed contracts. Program officials have
generally waited until DCAA validated labor rates and other contract costs.
These audits may adjust labor rates or other costs, requiring additional
payments from the remaining obligated funds.

Contributing to the unliquidated balances have been delays in executing the
program schedule because of environmental permit, technical, and contractual
issues.

Environmental Permit Delays

Program officials found that the time required to actually gain
environmental permit approvals, particularly in Oregon, Alabama, and
Arkansas, exceeded estimates. The additional time was mainly attributable to
a variety of both internally and externally driven requirements. For
example, satisfying safety and environmental design changes resulting from
programmatic lessons learned, new state and federal regulatory requirements,
and new interpretations of existing regulatory requirements in some cases
significantly extended the projected schedules. Although funds were
obligated to support the three sites based on initial permit issuance
projections, the program office could not liquidate some obligations until
after construction began, which was contingent on the issuance of the
environmental permits.

Technical Delays

According to program officials, lessons learned from ongoing disposal
operations at Johnston Atoll and Utah resulted in technical and design
changes for future facilities that required additional time and resources.
While these changes were being incorporated, liquidation of obligated funds
proved to be slower than program officials expected.

Contractual Delays

According to program officials, the award of several construction and
procurement contracts has been delayed due to protests by losing bidders.
For example, the award of the construction contract for the disposal
facility in Arkansas was delayed a year due in part to a bid protest.
Accordingly, obligations for this contract could not be liquidated until
resolution of the protest.

Recently, approvals of environmental permits by state regulatory agencies at
five chemical stockpile disposal sites resulted in initiation of
construction activities and procurement actions and greater disbursement of
obligated funds. Additionally, actions by the Congress and the Office of the
Under Secretary of the Defense (Comptroller) to reduce the funding requested
for the program decreased the amount of funds available for obligation and
better aligned funding with the program's execution. This action decreases
the likelihood that these funds will be obligated far in advance of when
they are needed.

The Army's recent receipt of the required environmental permits and
approvals by the state regulatory agencies at five chemical stockpile
disposal sites has resulted in initiation of construction activities and
procurement actions and greater pay-out of obligated funds. The
environmental permits for the construction of the disposal facilities in
Oregon and Alabama were approved in 1997. The execution of these
construction projects has allowed and will continue to allow the program
office to liquidate construction and procurement obligations for these
locations. In addition, the environmental permits were approved in 1999 for
the construction of disposal facilities in Arkansas, Indiana, and Maryland,
which should allow the program office to liquidate construction and
procurement obligations for these locations.

Congressional actions to reduce the funding requested for the program have
decreased and are expected to continue to decrease the program's
unliquidated balances. In the DOD and military construction appropriations
acts for fiscal year 1999, the Congress appropriated
$78 million less than the administration requested for operations and
maintenance, procurement, and research and development activities and
appropriated $50.5 million less than requested for military construction
projects. Similarly, in the fiscal year 2000 DOD and military construction
appropriations acts, the Congress appropriated $140 million less than the
administration requested for operations and maintenance, procurement, and
research and development activities and appropriated $93 million less than
requested for military construction projects. These actions reduced the
amount of funds available for obligation and better aligned funding with the
program's execution, decreasing the likelihood that these funds will be
obligated far in advance of when they are needed.

In their review of the Army's fiscal year 2001 budget request for the
Chemical Demilitarization Program, the Office of the Under Secretary of the
Defense (Comptroller) recommended, and the Deputy Secretary of Defense
approved, reductions to the Army's budget request for fiscal
year 2001 to better align funding in the year it would be executed.52 For
example, because of the delays in the Alternative Technologies and
Approaches Project, DOD reduced the Army's budget request for construction
funds by $25 million for the Maryland site. It concluded that the contractor
would be unable to execute construction work scheduled for fiscal year 2001.
Similarly, DOD reduced fiscal year 2001 funding for equipment installation
at Newport, Indiana, by $7.2 million because of the delays in the
Alternative Technologies and Approaches Project. Further, DOD reduced the
Army's request for the Assembled Chemical Weapons Assessment Program by $42
million because of expected delays in executing the program during fiscal
year 2001.53

Implemented Across All Program Elements

Although the Army has started to improve its management of obligations and
liquidations of obligated funds for the Chemical Demilitarization Program,
these improvements have not been consistently and systematically implemented
across all program elements. These inconsistencies are due in part to the
decentralized financial management structure of the program.

In July 1999, the Program Manager for Chemical Demilitarization mandated
monthly reporting of obligations, disbursements, and planned and actual cost
information by the managers for chemical stockpile, nonstockpile, and the
alternative technologies and approaches projects. The manager also reminded
all project managers of the importance of effective funds management,
including the management of cost as well as schedule and technical
performance. Consequently, officials started examining the unliquidated
obligations and deobligating those determined as no longer needed. In
addition, they started working with their contractors and other defense
agencies to expedite the reporting of financial transactions and developing
methods for capturing and reporting obligations, liquidations, and accrual
data.

While these are positive steps, the program office has not fully implemented
these improvements for the timely capturing and reporting of obligations,
liquidations, and accruals and could not explain $10.4 million in
unliquidated obligations. The program office did not have an independent,
integrated system to track obligations, liquidations, and accrual data and
has relied mostly upon data in accounting records or financial reports
prepared by DFAS. For example, the Chemical Stockpile Emergency Preparedness
Project and the Assembled Chemical Weapons Assessment Program were not
included in the Chemical Demilitarization Program Manager's monthly
reporting requirement because the U.S. Army Soldier and Biological Chemical
Command manages the funds for the two programs. Further, the managers for
the chemical stockpile, nonstockpile, and alternative technologies and
approaches projects have implemented different systems to comply with the
program manager's mandate for a monthly reporting of obligations,
liquidations, and planned and actual cost information.

Although program officials have acted and are acting to improve the
financial management of the program, problems remain. No systematic approach
exists across all program elements to help ensure the consistent, effective
execution and expenditure of funds appropriated for the program, and a
relatively small amount of unliquidated obligations remain unexplained. Some
unliquidated obligations exist because of the lack of management attention
and decentralized structure for tracking liquidations. Other unliquidated
obligations exist because of procedural delays in reporting financial
transactions in the defense financial system, in auditing and liquidating
obligated balances on completed contracts, and in deobligating excess funds,
and delays in executing the program schedule. Several recent factors,
including the recently approved environmental permits and congressional
actions to reduce funding for the program, have decreased and will likely
reduce the future buildup of unliquidated obligations. However, because the
improvements in its financial management have not been consistently and
systematically implemented, the Army cannot ensure that its unliquidated
obligations will receive consistent attention to bring about a better
alignment of funds with the execution of the program on an ongoing basis. In
response to a draft of this report, the Army has recently initiated actions
to address our concerns over the financial management of the program. Given
the long-standing nature of these concerns, management oversight is
essential to the effective implementation of the Army's actions.

We recommend that the Secretary of Defense monitor the Army's actions to

ï¿½ develop a systematic approach for ensuring the timely, effective
expenditure of funds appropriated for all elements of the Chemical
Demilitarization Program and

ï¿½ direct program officials to account for the $10.4 million in unliquidated
obligations that officials could not give an explanation for, or explain why
the funds had not been liquidated.

In its written comments on our draft report, DOD agreed with our
recommendations to develop a systematic approach for ensuring the timely,
effective expenditure of funds appropriated for all elements of the Chemical
Demilitarization Program and direct program officials to account for the
$10.4 million in unliquidated obligations that they could not explain.
However, DOD disagreed that the Secretary of Defense should direct the
Secretary of the Army to implement the recommendations because the Program
Manager for Chemical Demilitarization had already initiated implementation
actions. We are encouraged by the Program Manager's actions, which once
completed should address the concerns raised in our draft report. Given
these actions and the long-standing nature of our concerns, we modified our
recommendations to call for the Secretary of the Defense to monitor the
Army's actions to ensure that it completes them fully and in a timely way
and that appropriate results are obtained.

FEMA concurred with the recommended principle of a systematic approach for
ensuring the timely, effective expenditure of funds and elaborated on its
actions implementing the principle behind the recommendation. Because the
recommendation to explain the
$10.4 million in unliquidated obligations pertains to the Army, FEMA had no
comment on that recommendation.

Program Management Has Been Hindered by Complex Structure and Ineffective
Coordination

Effective management of the Chemical Demilitarization Program has been
hindered by its complex management structure and ineffective coordination
among program offices and with state and local officials. Several changes in
the organization and structure of the program during 1997-99, including some
changes to implement legislative requirements, divided the management roles,
responsibilities, and accountability among several different levels within
the Departments of Defense and the Army. In addition, accountability for
program performance has been unclear, and coordination and communication
among certain program elements and state and local officials have been
inadequate. Further, officials of the Departments of Defense and the Army
have not agreed on whether or when management roles, responsibilities, and
accountability should be consolidated for destruction of the chemical
stockpiles at Blue Grass, Kentucky, and Pueblo, Colorado. Consequently,
state and local officials have raised concerns that no single office is
accountable for achieving the desired results of the program's various
elements. In addition, the Congress has expressed concern about the
management of the program.

As the program has been expanded beyond its original single purpose of
destroying the stockpile to encompass a broader range of missions, to
include compliance with the Chemical Weapons Convention, the organization
and structure of the Chemical Demilitarization Program have changed and
become increasingly complex. At times, these changes have resulted in the
fragmentation of the responsibilities for management and oversight of the
program. For example, several different levels within the Departments of
Defense and the Army now share oversight and management responsibilities.

As provided for in the original legislation establishing the Chemical
Demilitarization Program, the Army, as executive agent for the program,
established a Program Manager for Chemical Demilitarization who was
responsible for management of the destruction of the stockpile. This Program
Manager reported directly to the Assistant Secretary of the Army
(Installations and Environment). Once the estimated cost of the program
reached a certain dollar amount, as required by statute,54 the Army formally
designated it to be a major defense acquisition program subject to
congressional reporting requirements and Office of the Secretary of Defense
review and approval of various milestones. So that this major defense
acquisition program could be managed in the acquisition chain in accordance
with the DOD Directive 5000 series, program responsibility was transferred
to the Assistant Secretary of the Army (Acquisition, Logistics and
Technology) from the Assistant Secretary of the Army (Installations and
Environment). To support the enhanced oversight role of the Office of the
Secretary of Defense, an office was established in the office of the
Assistant to the Secretary of Defense (Nuclear, Chemical, and Biological
Defense Programs) to provide oversight responsibility for the Chemical
Demilitarization Program regarding policy guidance, budget authority, and
annual reporting requirements. The Program Manager continued to report
directly to the Assistant Secretary of the Army (Acquisition, Logistics and
Technology) in his capacity as the Army Acquisition Executive and the
Program Manager remained responsible for executing the existing elements of
the program, except for the Chemical Stockpile Emergency Preparedness
Project. Under a memorandum of understanding, the responsibility for the
latter project resides with the Assistant Secretary of the Army
(Installations and Environment) in conjunction with FEMA.

There are three different lines of authority within the Departments of
Defense and the Army for elements of the Chemical Demilitarization Program
(see fig. 5). This structure resulted from congressional and DOD actions
affecting various elements of the program. For example, the Congress wanted
greater emphasis on the management of efforts to research and develop
alternative technologies for destroying assembled chemical weapons. To
achieve that goal, it directed that these research and development efforts
be conducted separately from the baseline incineration activities. DOD, as
part of its downsizing theOffice of the Secretary of Defense, devolved
management responsibilities to the Army. In addition, to improve the
management of the Chemical Stockpile Emergency Preparedness Project, the
Army and FEMA changed the management structure for the project.

Figure 5: Organization Structure for the Chemical Demilitarization Program

Source: Our analysis of data provided by the program offices for chemical
demilitarization and assembled chemical weapons assessment.

The current organization has created a complex management structure and
separated responsibilities. For example:

ï¿½ In the 1997 Defense Appropriations Act (sec. 8065),55 the Congress
required the Under Secretary of Defense (Acquisition and Technology) to
designate a program manager who was not, nor had been, in direct or
immediate control of the baseline reverse assembly incineration
demilitarization program to carry out a new pilot program. In response to
the act, DOD established the office of the Program Manager for Assembled
Chemical Weapons Assessment, independent of the Program Manager for Chemical
Demilitarization, to implement the pilot program. The purpose of this
legislation was to separate this pilot program from the baseline
incineration activities. Achievement of that goal also meant that two
program offices would share responsibilities associated with disposal
activities in Kentucky and Colorado. As discussed later, ineffective
coordination between these offices has hindered the program management.

ï¿½ A 1998 Defense Reform Initiative downsized the Office of the Secretary of
Defense and resulted in the devolvement of the DOD office overseeing the
Chemical Demilitarization Program from DOD to the Army. Consequently, the
Office of the Deputy Assistant Secretary of the Army (Chemical
Demilitarization) was formed in February 1998 from a consolidation of the
existing DOD oversight office and the Army staff office that assisted the
Army Assistant Secretary in performing his chemical weapons demilitarization
functions. While this devolvement resulted in a consolidation of staff
offices in the Army Secretariat, it still did not clear up the existing
ambiguity in responsibilities, lines of authority, and accountability. For
example, the responsibility of the Deputy Assistant Secretary of the Army
(Chemical Demilitarization) is limited to oversight of the stockpile,
nonstockpile, and alternative technologies and approaches projects. While
this office reports directly to the Assistant Secretary of the Army
(Acquisition, Logistics and Technology), it has no direct management control
of the Program Manager for Chemical Demilitarization, who also reports
directly to the Assistant Secretary. During our review, we received
conflicting descriptions and inconsistent organizational charts concerning
the relationship and responsibilities of the offices of the Deputy Assistant
Secretary of the Army (Chemical Demilitarization) and the Program Manager
for Chemical Demilitarization. This indicates some amount of confusion among
those involved in the program regarding who is accountable.
DOD, as part of the devolvement, planned to consolidate within the Army
Secretariat management responsibility for the Assembled Chemical Weapons
Assessment Program. For example, as noted in the transition plan for the
reform initiative, program oversight for the Assembled Chemical Weapons
Assessment Program was to be delegated to the Assistant Secretary of the
Army (Acquisition, Logistics and Technology) and the Program Manager for
Assembled Chemical Weapons Assessment was to report directly to the
Assistant Secretary. The Under Secretary of Defense (Acquisition and
Technology) was to evaluate and certify the effectiveness of the alternative
technologies as required by legislation. However, in the Conference Report
accompanying the 1999 Defense Authorization Act,56 the conferees agreed that
the Program Manager for Assembled Chemical Weapons Assessment should
continue to report directly to the Under Secretary of Defense (Acquisition
and Technology) rather than the Assistant Secretary of the Army
(Acquisition, Logistics and Technology).

ï¿½ In 1997, the Secretary of the Army and the Director of FEMA entered into a
memorandum of agreement that revised the management structure of the
Chemical Stockpile Emergency Preparedness Project in an effort to streamline
and improve the management of the program. Under the agreement, FEMA assumed
full responsibility and authority for off-post project activities, and the
U.S. Army Soldier and Biological Chemical Command assumed responsibility for
the on-post portion of the project. As a result of the agreement, the
Assistant Secretary of the Army (Installations and Environment) assumed
oversight responsibilities for the project. In addition, the Chemical
Stockpile Emergency Preparedness Project was removed from the offices of the
Program Manager for Chemical Demilitarization and the Assistant Secretary of
the Army (Acquisition, Logistics and Technology).

Coordination and Communication

The Chemical Demilitarization Program has a complex structure that separates
management roles, responsibilities, and accountability for achieving program
results. In addition, effective management of the program has been hindered
further by ineffective coordination among program offices and with state and
local officials. Consequently, accountability for program performance is
unclear, and state and local officials have expressed concern about
conflicting information and the lack of a single office to be clearly
accountable for the execution of the program. We also found instances where
coordination and communication among project managers for the program were
inadequate. In addition, the Congress has expressed concern about the
management of the program.

In order to comply with congressional direction, program managers for
chemical demilitarization and assembled chemical weapons assessment
currently share responsibilities associated with disposal of the chemical
stockpile at Blue Grass, Kentucky, and Pueblo, Colorado. For example, the
Program Manager for Chemical Demilitarization is responsible for the
destruction of the chemical stockpile, and at the same time, the Program
Manager for Assembled Chemical Weapons Assessment is responsible for
developing and testing alternative technologies for disposing of the
assembled chemical weapons at these sites. However, the activities of these
offices have not always been effectively coordinated. This has led to
difficulties in presenting a clear, coordinated message to affected state
and local officials regarding the overall program goals for these sites.
According to several state and local officials, spokespersons for these two
programs have made conflicting and inconsistent statements about the
possible disposal methods for the chemical stockpile stored in Kentucky and
Colorado. Consequently, this confusion has created the public perception of
the program at these two sites that DOD lacks a single vision for destroying
the chemical stockpile in a judicious manner.

The lack of coordination will pose even greater problems in the future in
implementing the decisions selecting the most appropriate disposal method to
use in Kentucky and Colorado. Specifically, if an alternative technology is
selected for use at these sites, views differ on which program office should
manage the disposal operations after the pilot project starts. Specifically:

ï¿½ Some program officials believe that the Program Manager for Chemical
Demilitarization should assume responsibility for disposal operations after
the method of destruction is selected for use in Kentucky and Colorado. As
provided for in the original legislation establishing the Chemical
Demilitarization Program, the Army established the office of the Program
Manager for Chemical Demilitarization and made it responsible for management
of the destruction of the stockpile. Officials believed that this office
would be more skilled at managing the construction and operation of these
disposal facilities based on its experience at other stockpile sites. Also,
it would match the management structure being employed in Aberdeen,
Maryland, and Newport, Indiana, where the Program Manager for Chemical
Demilitarization has overall responsibility for implementing the pilot
projects to test alternative technologies for disposing of chemical agents
in bulk containers.

ï¿½ Other program officials believe that the Program Manager for Assembled
Chemical Weapons Assessment should continue to manage the program through
the completion of the pilot-scale testing of alternative technologies for
the disposal of assembled chemical weapons stored in Kentucky and Colorado.
In section 142 of the 1999 Defense Authorization Act, the Congress directed
that the Program Manager continue to manage the development and testing,
including the demonstration and pilot-scale testing, of alternative
technologies for the destruction of assembled chemical weapons. The Congress
further directed the Program Manager to act independently of the Program
Manager for Chemical Demilitarization. Program officials believed this could
continue the enhanced communications the program office achieved with these
states and local communities through the Dialogue initiative discussed
previously and retain the expertise the office obtained on alternative
technologies for destroying assembled chemical weapons.

DOD and the Army have not resolved issues related to future management roles
and responsibilities should a full-scale pilot project start for
demonstrating an alternative technology at Kentucky and Colorado be
implemented. In any case, closer cooperation will be required between these
program offices in the future. The adoption of any alternative disposal
method for pilot-scale testing will depend on a certification to the
Congress that the alternative is as safe and cost-effective as the baseline
incineration process for disposing of assembled chemical weapons and will
meet the destruction deadline.

In some instances, coordination and communication among project managers for
the program were inadequate. For example, as previously discussed, the
Program Manager for Chemical Demilitarization's efforts to improve the
office's management of funds had not been consistently and systematically
implemented across all program elements. In another case, officials of the
stockpile and nonstockpile projects in Arkansas had not coordinated their
efforts to obtain environmental permits and approvals for their disposal
operations. This could have a significant effect on the start of one or both
disposal operations because the state of Arkansas has limited resources to
review and approve permit changes that will be needed to begin operations.
Although concerned that nonstockpile activities could delay the state's
approval of permit changes, stockpile officials at the site did not know the
status or schedule for nonstockpile activities. Additionally, some public
outreach offices for the program did not have information related to
emergency preparedness activities, such as information booklets and
evacuation routes maps. According to outreach officials, they did not
routinely provide emergency preparedness information to the public because
those activities were managed by the U.S. Army Soldier and Biological
Chemical Command and FEMA, not by the Program Manager for Chemical
Demilitarization.

The Congress has expressed concern about the management of the Chemical
Demilitarization Program. For example, in the 2000 Defense Appropriations
Act, section 8159,57 the Congress directed the Secretary of Defense to
report on the management of the Chemical Demilitarization Program, including
an assessment of the Assembled Chemical Weapons Assessment Program. Some in
the Congress have also expressed concern that, in recent budget submissions,
DOD included the budget for the Chemical Demilitarization Program as part of
the Army's budget. In its report on the 2000 Defense Authorization Act,58
the House Armed Services Committee reaffirmed its belief that, as required
by the original statute establishing the program, chemical demilitarization
funds should be set forth in a DOD-wide budget account, not in the budget
accounts for any military department. This was to emphasize that destruction
of the chemical stockpile is a national issue that affects all of DOD, not
just a single military service. It stated that the Committee intended to
keep chemical demilitarization funding separate to prevent these funds from
being subject to internal service budget priorities and to avoid
artificially inflating the budgets of any military department.

Effective management of the Chemical Demilitarization Program has been
hindered by its complex management structure and ineffective coordination
among program offices and with state and local officials. This has been the
case particularly at the Kentucky and Colorado sites, which were not
expected to meet the convention's 2007 deadline for destruction of their
stockpiles. As the program's mission has been expanded, some fragmentation
in the management roles, responsibilities, and accountability among various
program participants has resulted. While the Department of the Army is now
responsible for most elements of the mission to destroy the stockpile, in
accordance with congressional direction, responsibility for the Assembled
Chemical Weapons Assessment Program remains with a separate program manager
that reports directly to the office of the Secretary of Defense. Regarding
the future management of this program, officials of the Departments of
Defense and the Army have not agreed on the most appropriate management
structure for accomplishing the destruction of the chemical stockpile stored
in Kentucky and Colorado. Without resolution, these issues leave the
effectiveness of the program at risk.

We recommend that the Secretary of Defense direct the Secretary of the Army
to clarify the management roles and responsibilities of program
participants, assign accountability for achieving program goals and results,
and establish procedures to improve coordination among the program's various
elements and with state and local officials.

Both DOD and FEMA concurred with the recommendation.

Objectives, Scope, and Methodology

The program to destroy chemical weapons has been controversial from its
inception and has experienced delays, cost increases, and management
weaknesses. Recently, concerns over the financial management of the Chemical
Demilitarization Program surfaced following a review by the Office of the
Under Secretary of Defense (Comptroller) which suggested that significant
portions of prior years' appropriations remained unliquidated. Consequently,
the National Defense Authorization Act for Fiscal Year 200059 provided that
we review and assess the Chemical Demilitarization Program which was
established by the Department of Defense (DOD) to destroy the U.S. stockpile
of chemical agents and munitions. We were required by the act to report the
results of our assessment to the congressional defense committees no later
than March 1, 2000. Our assessment was to include a review of the program
execution and financial management of all elements of the Chemical
Demilitarization Program.60 At the same time, the House Report 106-244 on
DOD's Appropriations Act for Fiscal Year 2000 and a request from the
Chairmen of the Subcommittees on Defense and Foreign Operations, Senate
Committee on Appropriations, asked us to report on the management of the
program. Accordingly, we assessed whether (1) the program will meet the
Chemical Weapons Convention's time frames within the costs projected,
(2) obligations and liquidations of funds appropriated for the program have
been adequately managed, and (3) the management structure of the program
allows for coordinated accountability of the program.

During our review, we interviewed officials and obtained data from DOD,
including the offices of the Under Secretary of Defense (Comptroller), the
Under Secretary of Defense for Acquisition and Technology, and the Deputy
Assistant Secretary of Defense for Biological and Chemical Defense. Within
the Department of the Army, we interviewed and obtained data from officials
in the offices of the Assistant Secretary of the Army for Acquisition,
Logistics and Technology; the Deputy Assistant Secretary of the Army for
Chemical Demilitarization; and the Assistant Secretary of the Army for
Installations and Environment. In addition, we met with and obtained data
from representatives of the Program Manager for the Chemical
Demilitarization Program, the Program Manager for Assembled Chemical Weapons
Assessment, and the U.S. Army Soldier and Biological Chemical Command. We
also met with officials of the Department of State, the Federal Emergency
Management Agency (FEMA), and the Army Audit Agency. Further, we conducted
site visits and interviewed program officials at Anniston Army Depot,
Alabama; Edgewood Chemical Activity, Maryland; Newport Chemical Depot,
Indiana; Blue Grass Chemical Activity, Kentucky; Pine Bluff Arsenal,
Arkansas; Pueblo Chemical Depot, Colorado; Deseret Chemical Depot, Utah; and
Umatilla Chemical Depot, Oregon, and we interviewed the site manager for
Johnston Atoll. We also met with officials of the U.S. Army Corps of
Engineers in Anniston, Alabama; Newport, Indiana; Umatilla, Oregon; Pine
Bluff, Arkansas; Huntsville, Alabama; and Washington, D.C. We visited county
and city officials in Colorado and Kentucky; Assembled Chemical Weapons
Assessment Program's Dialogue Group members in Colorado and Kentucky; state
Citizens Advisory Commission members in Colorado, Indiana, Kentucky, and
Maryland; and representatives of private sector environmental groups with
interest in these issues. We also met with state environmental officials in
Colorado, Indiana, Kentucky, Maryland, Oregon, and Utah to discuss and
collect data on environmental and legal issues related to the disposal
programs.

To determine whether the Chemical Demilitarization Program will meet the
Chemical Weapons Convention's time frames within the costs projected, we
reviewed and analyzed program cost and schedule data related to the program
and its elements: the Chemical Stockpile Disposal Project, the Chemical
Stockpile Emergency Preparedness Project, the Nonstockpile Chemical Materiel
Product, the Alternative Technologies and Approaches Project, and the
Assembled Chemical Weapons Assessment Program. We reviewed the Chemical
Weapons Convention to determine disposal requirements and time frames.
Further, we examined implementation plans and schedules, status reports,
disposal rates and data, cost and schedule risk assessments, cost
containment studies, and inventory data on the stockpile of chemical agents
and munitions, binary chemical weapons, miscellaneous chemical warfare
materiel, recovered chemical weapons, former production facilities, and
suspected chemical burial sites. We compared the data to what the Army
reported as destroyed and expected to be destroyed by the 2007 deadline.

To assess the risk of schedule slippages and cost increases, we interviewed
program officials to (1) determine the reasons for differences between the
Army's official schedules and cost positions, (2) identify potential
problems that may affect current cost and schedule estimates, (3) assess the
causes of previous schedule slippages and cost increases, and (4) determine
how state laws may impact the disposal schedule and cost. To assess the
factors that have affected or may affect the program schedule and costs in
the future, we reviewed (1) disposal rate data and lessons learned at
Johnston Atoll and Tooele, Utah; (2) reasons for the public concerns about
incineration of chemical agents; (3) the Army's efforts to obtain
environmental permits; (4) the views of officials on current issues
affecting the program; (5) obstacles in the environmental compliance and
permit approval process; (6) the status of environmental permits; and (7)
state environmental laws and regulations. We interviewed program officials,
state environmental officials, citizen advisory commission members, and DOD
and Army acquisition officials concerning the potential factors that may
affect the Army's ability to meet the 2007 deadline and cost estimates. We
did not assess the validity of individual cost estimates included in the
Army's $14.9 billion life cycle cost estimate.

To determine whether obligations and liquidations of funds appropriated for
the Chemical Demilitarization Program have been adequately managed, we
reviewed the program's funding records and analyzed the budget authority,
obligated and unobligated balances, and the unliquidated obligations for
fiscal years 1993-99. These records and documents included all categories of
funds for the program: operations and maintenance, procurement, research and
development, and military construction. We focused our analysis on the
status of unliquidated obligations for fiscal years 1993-98. We did not
analyze prior-year appropriations no longer available for new obligations
and that had been closed, and we did not focus on fiscal years 1999-2000
appropriations because insufficient time had elapsed for these funds to be
obligated and liquidated.

Due to the large number of purchase requests during this period, we limited
our review to a sample of purchase requests for which there were no
disbursements, a negative balance, or an unliquidated obligation of $20,000
or more as of September 30, 1999. Our review included 428 military
interdepartmental purchase requests with $495.1 million in unliquidated
obligations, or 99.4 percent of the total reported $498 million in
unliquidated obligations, for fiscal years 1993-98. To determine the
requirements for these funds, primary causes for the unliquidated
obligations, and actions that have affected or will reduce reported
unliquidated balances, we conducted extensive interviews with program and
site officials and contractor personnel and reviewed documents, status
reports, and spending plans. We asked them to verify the amounts reported in
the financial records and to provide supporting documents showing how much
had actually been spent if different from the reported amount. In some
instances they could not provide us with documents to support the status of
unliquidated obligations because the program does not have a systematic
approach for monitoring and reporting funding. We established February 2,
2000, as a cutoff date for receiving further input from the Army on the
status of unliquidated obligation balances.

To assess whether the management structure of the Chemical Demilitarization
Program allows for coordinated accountability of the program, we assessed
the organizational structure and lines of authority of the program.
Specifically, we analyzed DOD and Army organization charts for the program,
mission statements, roles and responsibilities guidance, and program
objectives and reviewed contractor-prepared assessments, annual status
reports, and other Army and DOD reports that addressed the organization and
management of the program. Three different offices in the chain of command
gave us three different organization charts for our review. Further, we
analyzed the organization and evolution of the Chemical Demilitarization
Program, with emphasis on the Assembled Chemical Weapons Assessment Program,
since its inception to determine which office or offices were accountable
for the programs during various time frames. Because we reported on the
effectiveness of the Chemical Stockpile Emergency Preparedness Project in
1999 and 1996,61 we did not assess the management structure and lines of
authority of the project during this review.

To identify congressional direction and concerns regarding the Chemical
Demilitarization Program, we reviewed pertinent legislation and legislative
history on the Chemical Stockpile Disposal Project, the Chemical Stockpile
Emergency Preparedness Project, the Nonstockpile Chemical Materiel Product,
the Alternative Technologies and Approaches Project, and the Assembled
Chemical Weapons Assessment Program.

To identify management alternatives for effective program organization and
alignment, we reviewed literature on best business practices, government
performance standards, and results-based management techniques. In addition,
we interviewed DOD and Army officials to discuss issues and concerns about
the program's evolution and management and the organizational challenges the
Army has experienced in the past and may continue to experience in the
future. We also evaluated DOD and Army initiatives to improve program
management. We interviewed state and local officials associated with the
program to determine their understanding of management roles,
responsibilities, and lines of authority for the program and their opinions
on ways to improve or streamline the management structure and assign
accountability for performance.

In performing this review, we used the same accounting records and financial
reports DOD and the Army use to manage and monitor the Chemical
Demilitarization Program. We did not independently determine the reliability
of the reported financial information. However, our recent audit of the
federal government's financial statements, including DOD's and the Army's
statements, questioned the reliability of reported financial information
because not all obligations and expenditures are recorded to specific
financial accounts.

We performed our review from September 1999 through March 2000 in accordance
with generally accepted government auditing standards.

Comments From the Department of Defense

Comments From the Federal Emergency Management Agency

GAO Contacts and Staff Acknowledgments

David Warren (202) 512-8412
Donald Snyder (202) 512-7204

In addition to those named above, Mark Little, Claudia Dickey, Dennis
De Hart, James Ohl, Bonita Oden, Lee Cooper, Gary Kunkle, John Brosnan, Adam
Vodraska, Stephanie May, and Nancy Ragsdale made key contributions to this
report.

Related GAO Products

Financial Management: Differences in Army and Air Force Disbursing and
Accounting Records (GAO/AIMD-00-20, Mar. 7, 2000).

Chemical and Biological Defense: Chemical Stockpile Emergency Preparedness
Program for Oregon and Washington (GAO/NSIAD-00-13, Oct. 26, 1999).

Chemical Demilitarization: Funding Status of the Chemical Demilitarization
Program (GAO/NSIAD-99-232R, July 29, 1999).

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

Financial Management: Problems in Accounting for Navy Transactions Impair
Funds Control and Financial Reporting (GAO/AIMD-99-19, Jan. 19, 1999).

Financial Management: Improved Reporting Needed for DOD Problem
Disbursements (GAO/AIMD-97-59, May 1, 1997).

Chemical Weapons and Materiel: Key Factors Affecting Disposal Costs and
Schedule (GAO/NSIAD-97-18, Feb. 10, 1997).

Chemical Weapons Stockpile: Emergency Preparedness in Alabama Is Hampered by
Management Weaknesses (GAO/NSIAD-96-150, July 23, 1996).

Chemical Weapons Disposal: Issues Related to DOD's Management
(GAO/T-NSIAD-95-185, July 13, 1995).

Chemical Weapons: Army's Emergency Preparedness Program Has Financial
Management Weaknesses (GAO/NSIAD-95-94, Mar. 15, 1995).

Chemical Stockpile Disposal Program Review (GAO/NSIAD-95-66R,
Jan. 12, 1995).

Chemical Weapons: Stability of the U.S. Stockpile (GAO/NSIAD-95-67,
Dec. 22, 1994).

Chemical Weapons Disposal: Plans for Nonstockpile Chemical Warfare Materiel
Can Be Improved (GAO/NSIAD-95-55, Dec. 20, 1994).

Chemical Weapons: Issues Involving Destruction Technologies
(GAO/T-NSIAD-94-159, Apr. 26, 1994).

Chemical Weapons Destruction: Advantages and Disadvantages of Alternatives
to Incineration (GAO/NSIAD-94-123, Mar. 18, 1994).

Arms Control: Status of U.S.-Russian Agreements and the Chemical Weapons
Convention (GAO/NSIAD-94-136, Mar. 15, 1994).

Chemical Weapon Stockpile: Army's Emergency Preparedness Program Has Been
Slow to Achieve Results (GAO/NSIAD-94-91, Feb. 22, 1994).

(709447)

Figure 1: Original Stockpile of Chemical Agents and Munitions
(prior to the start of disposal operations at Johnston Atoll
in June 1990) 21

Figure 2: Nonstockpile Chemical Materiel 25

Figure 3: Status of the Army's Efforts to Destroy Its Chemical
Stockpile 36

Figure 4: Schedules for Disposal Operations at the Nine Chemical Stockpile
Sites 38

Figure 5: Organization Structure for the Chemical Demilitarization Program
67

Table 1: Nonstockpile Chemical Materiel 24

Table 2: Status of the Army's Efforts to Destroy Its Nonstockpile
Chemical Materiel 42

Table 3: Nonstockpile Transportable Treatment Systems 43

Table 4: Working Life Cycle Cost Estimates and Appropriated Funds
for the Chemical Demilitarization Program 47

Table 5: Reported Budget Authority and Unobligated, Obligated, and
Unliquidated Obligations for the Chemical Demilitarization Program for
Fiscal Years 1993-98 53

Table 6: Unliquidated Obligations for 428 Military Interdepartmental
Purchase Requests for Fiscal Years 1993-98 55
  

1. 50 U.S.C. 1521.

2. A unitary chemical weapon is a munition containing a single lethal
chemical agent.

3. Binary weapons are formed from two nonlethal elements through a chemical
reaction after the munitions are fired or launched. The weapons are
manufactured, stored, and transported with only one of the chemical elements
in the weapon. The second element is to be loaded into the weapon at the
battlefield.

4. Federal agencies must have budget authority prior to incurring
obligations of appropriated funds. Obligations are the amounts of orders
placed, contracts awarded, services received, and similar transactions
during a given period that will require disbursements (payments) during the
same or future period. As services are rendered or goods delivered, an
agency makes the required disbursements to liquidate the obligation.
Appropriation laws usually make budget authority available for one or more
fiscal years but do not require agencies to liquidate obligations during the
specific years the budget authority is available. The liquidation can occur
after the appropriation has expired but must occur prior to closing the
account--5 years after the appropriation has expired.

5. These interagency orders are used by the program offices (ordering
agency) to obtain goods and services from another agency (the servicing
agency), such as the U.S. Army Corps of Engineers or the U.S. Army Soldier
and Biological Chemical Command, that has the capability or expertise
necessary to perform the needed work. The servicing agency in turn typically
awards contracts to third parties, uses its existing contracts, or uses its
own resources to fill the order. The orders are made on either a
reimbursable order basis or by advancing funds of the ordering agency. For
reimbursable orders, the ordering agency obligates funds upon acceptance of
the order by the servicing agency. These obligations are liquidated as the
servicing agency bills the ordering agency for the work performed under the
contract or as the servicing agency completes the work itself and payments
are made. For direct orders, once the servicing agency accepts the order,
funds from the ordering agency are obligated and advanced for the resulting
contract or for the work done by the servicing agency. The obligation is
liquidated as payments are made to the contractor or the servicing agency as
work is performed.

6. Because nonstockpile chemical materiel includes a large variety of items,
such as recovered chemical weapons and materiel and former production
facilities, the Army is unable to assign percentages to the total amount of
nonstockpile materiel destroyed.

7. The proposed disposal facilities in Maryland and Indiana will pilot test
alternative technologies selected under the Alternative Technologies and
Approaches Project.

8. Public Law 106-79 section 8159.

9. House Report No. 106-162, page 63.

10. 50 U.S.C. 1521.

11. The National Defense Authorization Act for Fiscal Year 1993 (P.L.
102-484, sec. 176).

12. The neutralization process involves mixing mustard agent with hot water;
the process results in the destruction of the agent and the generation of a
byproduct comprised primarily of thiodiglycol. This byproduct is readily
biodegradable and results in an effluent of salts and bacteria waste
products.

13. Mixing nerve agent with water and sodium hydroxide solution destroys it.
The resultant byproduct mainly comprises water and phosphorous- and
sulfur-containing compounds. Supercritical water oxidation is used to
convert the neutralization byproduct to carbon dioxide, water, and inorganic
salts.

14. Public Law 104-201 section 142.

15. Assembled chemical weapons represent the part of the chemical weapons
stockpile that is configured with fuzes, explosives, propellants, chemical
agents, shipping and firing tubes, and packaging materials.

16. Omnibus Consolidated Appropriations Act, 1997 (P.L. 104-208).

17. Pubic Law 105-261 section 142.

18. Public Law 106-65 (House Conference Report No. 106-301, page 590).

19. Public Law 106-79 (House Conference Report No. 106-371, page 257).

20. The Keystone Center is a nonprofit, public policy and educational
organization and is headquartered in Keystone, Colorado. The Center
identifies issues of public importance that it can constructively address
through its process of education and consensus building.

21. The Chemical Weapons Convention became effective 180 days after the 65th
nation ratified the convention.

22. A unitary chemical weapon is a munition containing a single lethal
chemical agent.

23. Chemical warfare materiel buried before January 1, 1977, is excluded
from treaty requirements as long as it remains buried. Once the materiel is
unearthed, intentionally or accidentally, it must be destroyed under treaty
requirements.

24. Chemical Weapons: Stockpile Destruction Cost Growth and Schedule
Slippages Are Likely to Continue (GAO/NSIAD-92-18, Nov. 20, 1991).

25. Chemical Weapons Disposal: Plans for Nonstockpile Chemical Warfare
Materiel Can Be Improved (GAO/NSIAD-95-55, Dec. 20, 1994).

26. Chemical Weapons and Materiel: Key Factors Affecting Disposal Costs and
Schedule (GAO/NSIAD-97-18, Feb. 10, 1997).

27. Chemical Demilitarization: Funding Status of the Chemical
Demilitarization Program (GAO/NSIAD-99-232R, July 29, 1999).

28. Because nonstockpile chemical materiel includes a large variety of
items, such as recovered weapons and former production facilities, the Army
is unable to assign percentages to the total amount of nonstockpile materiel
destroyed.

29. There are ongoing legal challenges in Utah, Alabama, Oregon, and
Arkansas that have the potential to stop operations and construction
activities in those states. However, litigation has not forced delays to the
program. The Army has successfully defended these civil actions and is
confident that it will continue to rebut legal challenges to the program.

30. Recently, a former contractor employee of the Tooele Chemical Agent
Disposal Facility, Utah, came forward as a prospective witness in an ongoing
administrative challenge to the facility's environmental permit. In press
releases, he made numerous allegations concerning the information provided
in the permit application and the role of the Army, its contractors, and
state officials in the permit approval process. However, at the time of this
report, these concerns were still under review by DOD and the state of Utah.
The petitioners in the ongoing challenge in Utah have removed the former
contractor employee from the witness list, so he will not testify any
further in the proceeding. Although this proceeding has the potential to
stop operations at Tooele, program officials have expressed confidence that
the concerns will be proven false.

31. As the Army destroys chemical agents stored at Johnston Atoll and
Tooele, Utah, these percentages will change.

32. The proposed disposal facilities in Maryland and Indiana will pilot test
alternative technologies selected under the Alternative Technologies and
Approaches Project.

33. Although program officials are revising the estimated completion dates
shown in figure 4, the revisions were not completed at the time of our
review.

34. Schedule and Cost Risk Assessment of the Alternative Technologies in the
Assembled Chemical Weapons Assessment, Arthur Andersen, Limited Liability
Partnership (Sept. 17, 1999).

35. Annual Status Report on the Disposal of Chemical Weapons and Materiel
for Fiscal
Year 1998, Department of the Army (Sept. 30, 1998).

36. The Chemical Weapons Convention does not require the disposal of
chemical warfare material buried before January 1, 1977, as long as it
remains buried.

37. The legislation originally authorizing the program, codified at 50
U.S.C. 1521, provided that the chemical stockpile disposal facilities may
not be used for a purpose other than the destruction of the stockpile of
lethal chemical agents and munitions that existed on November 8, 1985. The
2000 Defense Authorization Act (sec. 141) acknowledged this prohibition but
further provided that this prohibition does not apply to items designated by
the Secretary of Defense as lethal chemical agents, munitions, or related
materials after November 8, 1985, if the state in which a disposal facility
is located issues the appropriate permit or permits for the destruction of
such items.

38. An additional $8.6 billion that is estimated to be needed to recover
buried chemical warfare materiel is no longer included in the life cycle
cost estimate for this program because the Army believes it is possible but
not probable that it will incur the cost to dispose of this buried materiel.
In addition, the responsibility for managing, processing, and treating this
buried materiel is divided among several defense organizations. For example,
military commands and installation commanders are responsible for managing
burial sites on DOD installations, and the U.S. Army Corps of Engineers is
responsible for managing burial sites no longer owned by DOD. The office for
the Nonstockpile Chemical Materiel Product is responsible for processing and
destroying the materiel after it is recovered from a burial site or test
range.

39. Remediation of chemical stockpile disposal facilities is not required by
the Chemical Weapons Convention.

40. Program officials are revising this cost estimate; however, the
revisions were not complete at the time of our review.

41. Chemical Weapons and Materiel (GAO/NSIAD-97-18, Feb. 10, 1997).

42. The closure and remediation of the chemical stockpile disposal
facilities are not required by the Chemical Weapons Convention. However, 50
U.S.C. 1521 requires that when disposal facilities are no longer needed for
the purposes for which they were constructed that they be disposed of in
accordance with applicable laws and regulations and mutual agreements
between the Secretary of the Army and the governor of the state in which the
facility is located. In addition, the environmental permits issued for the
individual sites require closure of the facilities in accordance with
permit-specific requirements.

43. Public Law 104-106 (sec. 152) required the Secretary of Defense to
conduct an assessment of the Chemical Demilitarization Program and of
measures that could be taken to reduce significantly the total cost of the
program.

44. These interagency orders are used by the program offices (ordering
agency) to obtain goods and services from another agency (the servicing
agency), such as the U.S. Army Corps of Engineers or the U.S. Army Soldier
and Biological and Chemical Command, that has the capability or expertise
necessary to perform the needed work. The servicing agency in turn typically
awards contracts to third parties, uses its existing contracts, or uses its
own resources to fill the order. The orders are made on either a
reimbursable order basis or by advancing funds of the ordering agency. For
reimbursable orders, the ordering agency obligates funds upon acceptance of
the order by the servicing agency. These obligations are liquidated as the
servicing agency bills the ordering agency for the work performed under the
contract or as the servicing agency completes the work itself and payments
are made. For direct orders, once the servicing agency accepts the order,
funds from the ordering agency are obligated and advanced for the resulting
contract or for the work done by the servicing agency. The obligation is
liquidated as payments are made to the contractor or the servicing agency as
work is performed.

45. Federal agencies must have budget authority prior to incurring
obligations. Obligations are the amounts of orders placed, contracts
awarded, services received, and similar transactions during a given period
that will require disbursements (payments) during the same or future period.
As services are rendered or goods delivered, an agency makes the required
disbursements to liquidate the obligation. Appropriation laws usually make
budget authority available for one or more fiscal years but do not require
agencies to liquidate obligations during the specific years the budget
authority is available. The liquidation can occur after the appropriation
has expired, but must occur prior to closing the account--
5 years after the appropriation has expired.

46. Chemical Demilitarization Program, Program Funding Execution Assessment,
Office of the Under Secretary of Defense (Comptroller) (July 26, 1999).

47. Chemical Demilitarization (GAO/NSIAD-99-232R, July 29, 1999).

48. Under the chemical demilitarization appropriations, operations and
maintenance funds are available for obligation for 1 year, research and
development funds are available for obligation for 2 years, and procurement
funds are available for obligation for 3 years. Military construction
appropriations associated with the program are available for obligation for
5 years.

49. The $63.1 million includes a negative $1.1 million in corrections to the
funding data and represents 12.7 percent of the total reported $498 million
in unliquidated obligations for fiscal years 1993-98.

50. In our July 1999 report on the program, we found that FEMA had not
reported its liquidation transactions in a timely manner to the Army.
However, the agency had corrected this reporting deficiency by the time of
this review.

51. Financial Management: Differences in Army and Air Force Disbursing and
Accounting Records (GAO/AIMD-00-20, Mar. 7, 2000).

52. Chemical Agents and Munitions Destruction, Office of the Under Secretary
of Defense (Comptroller), (PBD 204, Dec. 6, 1999).

53. We did not have sufficient time to examine the administration's fiscal
year 2001 budget request for the Chemical Demilitarization Program, which
was issued on February 7, 2000, and assess the potential impacts of DOD's
reductions in the Army's budget request for the program.

54. 10 U.S.C. 2430.

55. Omnibus Consolidated Appropriations Act, 1997 (P.L. 104-208).

56. House Conference Report No. 105-736, page 481.

57. Public Law 106-79.

58. House Report No. 106-162, page 63.

59. Public Law 106-65 section 141.

60. The act specified that the elements of the Chemical Demilitarization
Program include the Chemical Stockpile Disposal Project, the Chemical
Stockpile Emergency Preparedness Project, the Nonstockpile Chemical Materiel
Product, the Alternative Technologies and Approaches Project, and the
Assembled Chemical Weapons Assessment Program.

61. Chemical and Biological Defense: Chemical Stockpile Emergency
Preparedness Program for Oregon and Washington (GAO/NSIAD-00-13, Oct. 26,
1999) and Chemical Weapons Stockpile: Emergency Preparedness in Alabama Is
Hampered by Management Weaknesses (GAO/NSIAD-96-150, July 23, 1996).
*** End of document. ***