Drug Control: DOD Operated Aerostat Ship Although Conferees Denied Funds
(Letter Report, 09/10/93, GAO/NSIAD-93-213).

Beginning in the late 1980s, the U.S. Army and the U.S. Coast Guard
began operating a small fleet of leased commercial vessels with tethered
blimps, called aerostats, to detect and monitor boats and airplanes
suspected of drug smuggling.  This report discusses (1) the Pentagon's
efforts to combine Army and Coast Guard missions in the Caribbean and
(2) the Defense Department's use of funds in fiscal year 1992 for the
operation and maintenance of sea-based aerostat ships for purposes not
authorized by Congress.

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

 REPORTNUM:  NSIAD-93-213
     TITLE:  Drug Control: DOD Operated Aerostat Ship Although Conferees 
             Denied Funds
      DATE:  09/10/93
   SUBJECT:  Drug trafficking
             National defense operations
             Budget authority
             Funds management
             Intelligence gathering operations
             Agency missions
             Reprogramming of appropriated funds
             Budget reapportionment
             Defense appropriations
             Defense budgets
IDENTIFIER:  Army Small Aerostat Surveillance System
             Caribbean
             
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Cover
================================================================ COVER


Report to Congressional Requesters

September 1993

DRUG CONTROL - DOD OPERATED
AEROSTAT SHIP ALTHOUGH CONFEREES
DENIED FUNDS

GAO/NSIAD-93-213

Drug Control

(395221)


Abbreviations
=============================================================== ABBREV

  DOD - Department of Defense
  SBA - Sea-Base Aerostat
  SASS - Small Aerostat Surveillance System

Letter
=============================================================== LETTER


B-252952

September 10, 1993

The Honorable Daniel K.  Inouye
Chairman, Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable John P.  Murtha
Chairman, Subcommittee on Defense
Committee on Appropriations
House of Representatives

Between 1989 and 1993, the U.S.  Army operated three Small Aerostat
Surveillance System (SASS) ships to detect and monitor ships and
aircraft suspected of drug smuggling.  The U.S.  Coast Guard
conducted similar operations between 1987 and 1991, using Sea-Based
Aerostat (SBA) ships.  In fiscal year 1992, the Department of Defense
(DOD) Appropriations conferees directed the transfer of the Coast
Guard's five SBA ships to the Department of Defense's (DOD)
operational control to support Coast Guard operations.  While the
conferees approved funding for the operation of the five SBA ships,
they approved funding for only two of the SASS ships. 

The fiscal year 1993 DOD Appropriations Conference Report (H.  Rpt. 
102-1015) directed us to report on (1) DOD's efforts to combine SBA
and SASS missions in the Caribbean and (2) DOD's use of funds
appropriated in fiscal year 1992 for the operations and maintenance
of SBA ships for purposes not authorized by Congress. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

As intended by the 1992 conferees, DOD took operational control of
the five Coast Guard SBA ships in December 1991 and combined SBA and
SASS counterdrug missions in the Caribbean in the following month. 
Although the conferees funded the operation of seven ships, DOD
decided to operate only four ships:  three SASS ships and one SBA
ship in support of the Coast Guard mission.  It placed three other
SBA ships into storage and used one SBA ship for an SBA/SASS
comparison test of operational capabilities. 

In implementing this decision, DOD spent about $4.5 million of its
fiscal year 1992 funds to operate the third SASS ship (called SASS
III).  DOD took this action even though the fiscal year 1992
appropriations conferees declined to fund the third ship, and without
processing the funding as a reprogramming.  By doing so, DOD moved
funds provided for specifically requested projects to a project for
which funds were specifically denied. 

In addition, by failing to properly record this expenditure, DOD
officials could not show us which fiscal year 1992 account was used
to fund SASS III operations from January through September 1992 or
how DOD realized savings it stated were achieved within the
counterdrug program. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The SBA and SASS ships are small, 200-foot, leased commercial vessels
with tethered blimps called aerostats (see fig.  1 and fig.  2). 
Radars mounted on the aerostats are capable of detecting and
monitoring ships and aircraft suspected of drug smuggling.  SASS
ships supported the Army's military counterinsurgency mission in the
Caribbean and Central America until 1989, when DOD assigned the ships
to the counterdrug mission.  Between 1987 and 1991, the Coast Guard
deployed SBA ships to intercept illegal maritime drug and immigration
traffic. 

   Figure 1:  An SBA Ship

   (See figure in printed
   edition.)

   Source:  U.S.  Army.

   (See figure in printed
   edition.)

   Figure 2:  A SASS Ship

   (See figure in printed
   edition.)

   Source:  U.S.  Army.

   (See figure in printed
   edition.)


   DOD COMBINED SBA AND SASS
   MISSIONS
------------------------------------------------------------ Letter :3

DOD combined the SBA and SASS counterdrug missions in January 1992, 1
month after it took operational control of the five Coast Guard SBA
ships.  The conferees intended that DOD operate the SBA ships to
support the Coast Guard's counterdrug mission.  Although the
conferees funded the operation of seven ships, DOD decided to reduce
the total number to five to meet its requirement in the Caribbean. 
The Army believed the SASS ships to be more capable than the SBA
ships and therefore decided to operate one SBA and three SASS ships
in a counterdrug role, use one SBA ship for an SBA/SASS comparison
test of operational capabilities, and place three SBA ships into
storage. 

After comparing both the costs and operational effectiveness of the
SBA and SASS ships, the Army concluded in the summer of 1992 that the
SBA ships were a better value than the SASS ships and opted to retire
the three SASS ships instead.  By the spring of 1993, the Army had
terminated the operation of all three SASS ships.  The Army currently
operates all five SBA ships in the Caribbean to support the
counterdrug mission.  The fifth SBA ship was deployed on July 9,
1993.  In order to provide the equipment to allow military command
and control, the Army removed military radios from SASS ships and
installed them on SBA ships. 


   DOD CONTINUED SASS III
   OPERATIONS EVEN THOUGH
   CONFEREES DID NOT FUND SASS III
------------------------------------------------------------ Letter :4

DOD contracted to operate the third SASS ship--SASS III--even though
the congressional conferees, on the fiscal year 1992 defense
appropriations, had provided no funds for the project.  We believe
that DOD's actions committed it to a reprogramming; however, DOD did
not process the funding transaction as a reprogramming. 


      ARMY AWARDED A CONTRACT,
      ALTHOUGH FUNDS WERE NOT
      APPROVED
---------------------------------------------------------- Letter :4.1

DOD's fiscal year 1992 appropriation\1 included a total of $38.4
million to operate the SBA and SASS ships:  $19.4 million for the SBA
ships and $19 million for SASS I and SASS II.  DOD requested $16.2
million to operate SASS III and a fourth ship, SASS IV, but the
conferees provided no funds for this purpose.  Table 1 shows the
congressionally approved operation and maintenance funding levels and
project codes for the SASS and SBA ships. 



                                Table 1
                
                Fiscal Year 1992 Funds Approved for the
                 Operations and Maintenance of SASS and
                               SBA Ships

                         (Dollars in millions)

                                                                Amount
Project                                   Code                approved
----------------------------------------  --------------  ------------
SASS I                                    2312                   $10.9
SASS II                                   2306\                    8.1
SASS III/IV                               2311                   0.0\a
SBA                                       None                    19.4
======================================================================
Total                                                          $38.4\b
----------------------------------------------------------------------
Note:  Fiscal year 1992 DOD Appropriations Conference Report (H. 
Rpt.  102-328), November 18, 1991. 

\a DOD requested $16.2 million for SASS III/IV, but the conferees did
not include funds for this project. 

\b According to the SBA Product Manager, $2.3 million was
reprogrammed on September 12, 1992, from the "Drug Interdiction and
Counterdrug Activities - Defense" account to cover unanticipated
costs to conduct SBA/SASS comparison tests and install SASS military
radios on SBA ships.  This brought the fiscal year 1992 total
expenditure for SBA and SASS to $40.7 million. 

Table 1 shows clearly that no funds were approved for the third SASS
ship--SASS III.  Notwithstanding the conferees' denial of funds for
SASS III, the Army awarded a contract that included operating funds
for SASS III.  The contract was awarded on December 31, 1991--1 month
after the conference report was issued (Nov.  18) and the
appropriations act became law (Nov.  26).  DOD spent about $4.5
million to operate SASS III from January through September 1992. 

Although Army officials confirmed that the contract was signed after
the denial of SASS III funding, officials from the Office of the
Secretary of Defense told us they were not aware of the December 1991
contract\2 and that contract execution is the responsibility of Army
program officials. 

The Chairmen of the Subcommittees on Defense, Senate and House
Appropriations Committees, in a joint letter dated March 18, 1992, to
the Secretary of Defense, explained their position regarding the
funding of SASS III.  (See app.  I.) The Chairmen stated that because
the conferees had denied funding for SASS III and IV for fiscal year
1992, no funds could be transferred to these projects during the
fiscal year and that DOD's failure to operate the SBA ships (in
support of the Coast Guard counterdrug mission) was a "clear
violation" of the conferees' intent.  The Chairmen specifically
objected to "standing down" the Coast Guard ships.  In addition,
according to the Coast Guard, DOD's deactivation of SBAs was
unresponsive to its counterdrug requirements. 


--------------------
\1 Public Law 102-172, November 26, 1991. 

\2 The Army operated SASS I, II, and III from October through
December 1991 by extending an existing fiscal year 1991 contract. 
This contract expired on December 31, 1991. 


      DOD DID NOT FOLLOW
      REPROGRAMMING REGULATIONS
---------------------------------------------------------- Letter :4.2

DOD regulations define reprogramming actions as changes in the
application of financial resources from the purpose originally
contemplated and budgeted for, testified to, and described to
Congress in budget requests.  The regulations set forth specific
procedures that must be followed when funds are reprogrammed,
including seeking approval from House and Senate Armed Services and
Appropriations Committees in some circumstances and notifying the
Committees in others.\3

DOD had requested specific funding from Congress for SASS I, SASS II,
SASS III/IV, and the SBA ships.  The appropriations conferees
responded to DOD's request in a similarly specific format, providing
funds for all but SASS III/IV, for a total of $38.4 million.  DOD
then placed three SBAs in storage, used one for operational testing,
operated the remaining SBA, and continued to operate SASS III,
although no funds were approved. 

The Army's obligation of funds in the December 31, 1991, contract
award to continue operation of SASS III from January through
September 1992 committed the Army to a reprogramming, since the
conferees had specifically denied funds for SASS III.  Given the
conferees' action and DOD's knowledge of their interest in the
SBA/SASS mission, DOD should have processed the funding of SASS III
as a reprogramming action. 


--------------------
\3 DOD Directive 7250.5, "Reprogramming of Appropriated Funds," Jan. 
9, 1980, and DOD Instruction 7250.10, "Implementation of
Reprogramming of Appropriated Funds," Jan.  10, 1980. 


   DOD FINANCIAL CONTROLS NOT
   ADHERED TO
------------------------------------------------------------ Letter :5

The Army project office obligated funds and signed a SASS contract
(including SASS III) without a valid Funding Authorization Document. 
Army officials told us that they contracted for SASS III based on
verbal authorization from headquarters Army officials.  However,
under DOD and Army regulations, funds cannot be obligated or
contracts entered into without a Funding Authorization Document.\4

Although DOD officials subsequently provided us with two Funding
Authorization Documents, neither document supported the contract
award.  One document was issued in March 1992, 3 months after the
contract was awarded, and although it addressed counterdrug projects,
it did not specifically include the operation of SASS III.  The other
document, issued in early December 1991, addressed SASS III
operations prior to December 31, 1991.  The Army extended a contract
on October 1, 1991, under fiscal year 1992 Continuing Resolution
authority\5 for SASS operations for the first quarter of the fiscal
year. 

Because DOD did not properly document the source of funds used to
operate SASS III from January through September 1992, it could not
show whether the funds came from the fiscal year 1992 "Drug
Interdiction and Counterdrug Activities--Defense" or some other
defense account. 

Although DOD stated that it funded SASS III operations from savings
in other areas, without the proper documentation, the source and
amount of such savings cannot be determined. 


--------------------
\4 DOD Accounting Manual, 7220.9-M, chapter 25, October 1983 (Change
9, June 6, 1988); Army Regulation 37-1, Army Accounting and Fund
Control, chapter 6, April 30, 1991. 

\5 Public Law 102-109, September 30, 1991. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

DOD disagreed with our report, stating that it did not violate the
intent of Congress regarding the operation of SASS III during fiscal
year 1992.
(See app.  II.) DOD believed that while Congress did not fund SASS
III operations for fiscal year 1992, it did so for budgetary reasons
rather than a desire to prohibit SASS III operations.  Consequently,
DOD believed that because it funded SASS III operations from savings
in other parts of the program, it did not contravene the intent of
Congress. 

In our opinion, DOD's decision to store three SBAs and to fund SASS
III was a significant departure from the fiscal year 1992 conference
report.  Under these circumstances, we think DOD at a minimum should
have sought clarification from Congress on this matter.  In fact,
while DOD may have believed that funds for SASS III were denied
strictly for budgetary reasons, it concedes that the conferees'
denial of funds could reasonably have been viewed as a denial of SASS
III operations.  Moreover, the March 18, 1992, letter sent to the
Secretary of Defense by the Chairmen of the Subcommittees on Defense
of the Senate and House Appropriations Committees clarified their
intent that SASS III was not to be operated during fiscal year 1992. 

DOD also stated that its reprogramming regulations were not
applicable to SASS III because its operations were funded through SBA
savings within the same program element, thus representing a
reprioritization of funds rather than a reprogramming.  However,
reprioritization generally refers to funding changes within program
elements that are often necessitated by, for example, delays in
contract performance or increases due to changed priorities.  These
changes are usually considered to be minor and not controversial. 
Because the conferees specifically denied fiscal year 1992 funding
for SASS III and because the Chairmen expressly stated in March 1992
that no funds were to be transferred to SASS III during the fiscal
year, we believe the SASS III funding change could not be viewed as
minor or noncontroversial.  Further, absent funding documentation,
DOD has not been able to show that the $4.5 million transferred to
SASS III came from savings within the program element.  In our view,
terming its action a reprioritization instead of a reprogramming does
not alter the fact that DOD moved funds provided for specifically
requested projects to a project for which funds were specifically
denied. 

DOD also suggested that Congress endorsed suspension of reprogramming
procedures to the counterdrug mission based on a statement in the
conference report that some flexibility is needed to transfer funds
between appropriations and that "the Committees must be able to track
these transfers without going through the reprogramming process." DOD
said that the report thus "clearly indicates that regular
reprogramming procedures were not applicable to the counterdrug
program for FY 1992."

The conference report explicitly states that "Formal reprogramming
procedures will need to be followed for .  .  .  any adjustments to
Congressional interest items." In fact, DOD applied reprogramming
procedures to another counterdrug funding transfer between the same
two accounts.  DOD formally reprogrammed $2.3 million from the Drug
Interdiction and Counterdrug Activities - Defense account to the
Operations and Maintenance, Army, account to conduct SBA/SASS tests. 
Thus, DOD's view that regular reprogramming procedures were not
applicable to the $4.5 million SASS III transaction is inconsistent
with its reprogramming of the $2.3 million. 

DOD also said that it kept congressional oversight committees
thoroughly and continually informed in a timely manner about its
management decisions regarding SASS III operations in fiscal year
1992.  However, when we asked DOD officials for documentation to
support this statement, they referred to notes indicating contact
with appropriations committees shortly before counterdrug oversight
hearings in March 1992, 3 months after the conference report was
issued.  DOD officials agreed that the notes did not show or in any
way suggest the Committees' approval to continue SASS III operations. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7

We met with and received documents from the U.S.  Army Product
Manager, Ocean-Based Aerostats.  We also met with officials and
reviewed documents from the Office of the Secretary of Defense, the
Joint Staff, the U.S.  Commander in Chief Atlantic and its Joint Task
Force 4, and the U.S.  Coast Guard.  We analyzed these documents,
compared available budget and financial data, and reviewed pertinent
legislation. 

We conducted our review from December 1992 to June 1993 in accordance
with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :7.1

We are sending copies of this report to the Chairmen, Senate and
House Committees on Appropriations; the Secretaries of Defense and
the Army; the Commandant, U.S.  Coast Guard; and the Director, Office
of Management and Budget.  We will also make copies available to
others on request. 

Please contact me at (202) 512-3504 if you or your staff have any
questions concerning this report.  Major contributors to this report
were Gary K.  Weeter, Assistant Director; Elizabeth G.  Mead,
Evaluator-in-Charge; and Richard B.  Kelley, Evaluator. 

Richard Davis
Director, National
Security Analysis


Appendix I LETTER FROM DEFENSE
APPROPRIATIONS SUBCOMMITTEE
CHAIRMEN ON AEROSTAT SHIP
OPERATIONS
============================================================== Letter 


Appendix II COMMENTS FROM THE
DEPARTMENT OF DEFENSE
============================================================== Letter 









*** End of document. ***