1994 DOD Budget: Potential Reductions to the Operation and Maintenance
Programs (Briefing Report, 09/16/93, GAO/NSIAD-93-295BR).

In reviewing the military services' operation and maintenance budget
requests for fiscal year 1994, GAO identified potential reductions and
rescissions totaling about $6.7 billion.  The potential reductions cover
a variety of functions, everything from spare and repair parts to
underseas surveillance and counter-drug efforts.  The main reasons for
the reductions include the following: An excessive amount of funds
remained unobligated from prior years' appropriations.  The budget
request for fiscal year 1994 included an amount anticipating
congressional cuts.  The amount of funding that the services expect to
receive from other countries was not offset against the fiscal year 1994
budget request.  The services implemented cost-saving recommendations
for improving inventory management that are not reflected in the fiscal
year 1994 budget request.  Factors affecting the requested budget
amounts changed from the time the budget requests were submitted, and
these changed factors reduced the amount of funds needed.  The services
expect to spend less than the amount of funds requested for the specific
purposes used to justify the budgeted amount.

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

 REPORTNUM:  NSIAD-93-295BR
     TITLE:  1994 DOD Budget: Potential Reductions to the Operation and 
             Maintenance Programs
      DATE:  09/16/93
   SUBJECT:  Defense cost control
             Defense appropriations
             Budget authority
             Budget administration
             Future budget projections
             Unobligated budget balances
             Budget authority rescission
             Budget cuts
             Defense operations
             Maintenance costs
IDENTIFIER:  Korea
             Japan
             B-52G Aircraft
             B-2 Aircraft
             TF30 Aircraft
             F-111 Aircraft
             DOD Global Cooperative Initiative
             National Guard Civilian Youth Opportunities Pilot Program
             Navy Sound Surveillance System
             DOD Undergraduate Pilot Training Program
             DOD Morale, Welfare, and Recreation Program
             
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Cover
================================================================ COVER


Briefing Report to Congressional Requesters

September 1993

1994 DOD BUDGET - POTENTIAL
REDUCTIONS TO THE OPERATION AND
MAINTENANCE PROGRAMS

GAO/NSIAD-93-295BR

1994 DOD Budget

(703000)


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

  DOD - Department of Defense
  FORSCOM - U.S.  Forces Command
  GAO - General Accounting Office
  IUSS - Integrated Undersea Surveillance System
  MWR - morale, welfare, and recreation
  NATO - North Atlantic Treaty Organization
  O&M - operation and maintenance
  OPTEMPO - operating tempo
  ROTC - Reserve Officer Training Corps
  SOSUS - Sound Surveillance System
  TDY - temporary duty
  UPT - undergraduate pilot training
  USAFE - United States Air Forces, Europe
  USAREUR - United States Army, Europe

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


B-249828

September 16, 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

The Honorable Earl Hutto
Chairman, Subcommittee on Readiness
Committee on Armed Services
House of Representatives

This report responds to your requests that we review the military
services' operation and maintenance (O&M) budget requests for fiscal
year 1994.  Our objective was to determine whether the O&M accounts
should be funded in the amounts requested.  We reviewed selected O&M
accounts for U.S.  Army, Europe (USAREUR); U.S.  Forces Command
(FORSCOM); U.S.  Army Training and Doctrine Command; U.S.  Air
Forces, Europe (USAFE); Air Combat Command; Air Logistics Command;
Air Materiel Command; and the Atlantic and Pacific Fleets.  In
addition, we reviewed selected accounts at the headquarters level for
the Army, Navy, Air Force, National Guard, and Defense activities. 
In June and July 1993, we provided your staff with the preliminary
results of our work.  This report summarizes and updates that
information. 

As shown in table 1, we identified potential reductions and
rescissions of about $6.7 billion to the services' and the Department
of Defense activities' fiscal year 1994 O&M budget. 



                                     Table 1
                     
                     Potential Reductions and Rescissions to
                     the Fiscal Year 1994 O&M Budget Request
                         by Service and Program Category

                              (Dollars in millions)

                                           Air    National
Category              Army      Navy     Force       Guard   Defense       Total
----------------  --------  --------  --------  ----------  --------  ==========
Unobligated         $511.9    $219.1    $239.0                 $10.3      $980.3
 funds (see p.
 22)
Budget reserve                 200.0   1,000.0                           1,200.0
 (see p. 24)
Burden sharing       257.6               155.0                             412.6
 (see p. 24)
Spare and repair   1,540.0       3.0     783.0       $70.0               2,396.0
 parts (see p.
 26)
Residual value       179.8                                                 179.8
 (see p. 32)
Depot                  1.1      30.2     274.3                   0.9       306.5
 maintenance
 (see p. 33)
Operating tempo      226.0                                                 226.0
 (see p. 38)
Flying hours          67.5                12.3                              79.8
 (see p. 40)
Travel (see p.       148.0      16.3       3.3                             167.6
 42)
Global                                                          98.0        98.0
 initiatives
 (see p. 45)
Transportation                                                  21.0        21.0
 (see p. 46)
Youth programs                                      11.5\a                  11.5
 (see p. 47)
Composite wings                            1.2                               1.2
 (see p. 47)
Training (see p.      28.3               134.2                             162.5
 48)
Civilian pay         194.0      55.0      56.2                             305.2
 (see p. 50)
Special events                                                 5.1\a         5.1
 (see p. 53)
Repair and                                35.8                              35.8
 maintenance
 (see p. 54)
Underseas                       12.8                                        12.8
 surveillance
 (see p. 54)
Counter-drug                                                    78.6        78.6
 efforts (see p.
 55)
Support to                      65.0                                        65.0
 morale,
 welfare, and
 recreation (see
 p. 56)
================================================================================
Total             $3,154.2    $601.4  $2,694.3       $81.5    $213.9    $6,745.3
--------------------------------------------------------------------------------
\a Rescission. 

As shown in table 1, the potential reductions cover a variety of O&M
functions and activities.  The primary reasons for the reductions are
as follows: 

  -- An excessive amount of funds remain unobligated from prior
     years' O&M appropriations. 

  -- The budget request for fiscal year 1994 included an amount in
     anticipation of congressional reductions. 

  -- The amount of funds that the services expect to receive from
     other countries was not offset against the fiscal year 1994
     budget request. 

  -- The services implemented cost-saving recommendations for
     improving inventory management that are not reflected in the
     fiscal year 1994 budget request. 

  -- Factors affecting the requested budget amounts changed from the
     time the budget requests were submitted, and these changed
     factors reduced the amount of funds needed. 

  -- The services expect to spend less than the amount of funds
     requested for the specific purposes used to justify the budgeted
     amount. 

The following sections briefly discuss each of the potential
reductions shown in table 1.  A more detailed discussion is presented
in appendix I. 


   UNOBLIGATED FUNDS FROM PRIOR
   YEARS' APPROPRIATIONS EXCEED
   NEEDS
------------------------------------------------------------ Letter :1

From fiscal years 1989 through 1992, the Army, Navy, Air Force, and
Defense Mapping Agency had $1.197 billion of unobligated O&M funds. 
The unobligated balances of O&M appropriations are not available for
new obligations and may only be used for adjustments to existing
obligations for the specific fiscal year of the appropriation. 

Department of Defense and service officials claim that they need the
unobligated balances to satisfy upward adjustments to obligations and
to fund the foreign currency fluctuation account and the foreign
national employees separation trust fund.  By using prior year
unobligated balances to fund these accounts, current year funds are
freed up for other purposes. 

Irrespective of the use of these funds, our review showed that the
prior years' unobligated balances continue to increase with each
passing year.  For example, between September 1991 and April 1993,
the unobligated balances for fiscal years 1989 through 1992 increased
from $320 million to $1.9 billion--an increase of $81.7 million a
month, or about $980 million a year.  This increase indicates that
fewer unobligated funds are needed. 

On the basis of this, Congress could reduce the fiscal year 1994 O&M
request for the Army by $511.9 million, the Navy by $219.1 million,
the Air Force by $239 million, and the Defense Mapping Agency by
$10.3 million. 


   BUDGET REQUESTS INCLUDE A
   RESERVE FOR EMERGING
   REQUIREMENTS AND ANTICIPATED
   CONGRESSIONAL REDUCTIONS
------------------------------------------------------------ Letter :2

The Air Force's fiscal year 1994 O&M budget request included 5.3
percent ($1 billion) in anticipation of congressional reductions.  In
planning for the execution of the fiscal year 1994 budget, the Air
Force advised its commands to plan for a lesser amount than the
amount included in the budget request.  Consequently, the budget
execution plans are based on the assumption that the budget request
of $19.8 billion will be reduced by $1 billion. 

The Navy's fiscal year 1994 O&M budget request was developed based on
requirements identified by the Navy commands.  However, the Navy
plans to withhold $200 million as a reserve for emergent
requirements.  The commands will be asked to develop budget execution
plans based on $200 million less than the budget request. 

Because Congress is being asked to approve budget requests that
include reserves that may be used for unspecified emergent
requirements, Congress may want to reduce the Air Force's and Navy's
fiscal year 1994 O&M budget requests by $1.2 billion. 


   AIR FORCE'S AND ARMY'S BUDGET
   REQUESTS DO NOT REFLECT
   ANTICIPATED RECEIPTS FOR BURDEN
   SHARING
------------------------------------------------------------ Letter :3

The Army expects to receive burden-sharing payments from Korea and
Japan totaling about $257.6 million in fiscal year 1994.  However,
budget documentation in support of the fiscal year 1994 request does
not show that the Army reduced its O&M budget request to reflect the
anticipated payments.  Army officials agreed that the budget
presentation documents do not provide full disclosure of the
anticipated burden-sharing transactions. 

The Air Force's budget request reflects the fact that host countries'
burden-sharing contribution should be about $441 million in fiscal
year 1994.  Air Force budget officials told us that, on the basis of
historical payment data, the Air Force will probably receive about
$269 million rather than the $441 million.  However, the Air Force
only reduced its budget request by $114 million rather than the $269
million it realistically expects to receive.\1

Its budget request was not reduced by the $269 million because, in
the Air Force's opinion, if it does not receive the $269 million, it
will have to make up the difference from other O&M accounts. 

Using a conservative approach, the two services' budget requests
should be reduced by $412.6 million--$257.6 million for the Army and
$155 million ($269 million less $114 million) for the Air Force--to
accurately reflect anticipated burden-sharing payments. 


--------------------
\1 The $114 million represents the increase in burden-sharing
requirements from fiscal years 1993 to 1994. 


   BUDGET REQUESTS FOR SPARE AND
   REPAIR PARTS DO NOT RECOGNIZE
   SAVINGS AVAILABLE THROUGH
   IMPROVED INVENTORY MANAGEMENT
   PRACTICES
------------------------------------------------------------ Letter :4

Budget reductions totaling about $2.4 billion are possible in the
Army's, Air Force's, Navy's, and National Guard's O&M budget requests
for spare and repair parts. 


      ARMY
---------------------------------------------------------- Letter :4.1

The Army's O&M budget request for fiscal year 1994 could be reduced
$1.5 billion for the following reasons. 

  -- The Army has overstated its wholesale level requirements at two
     locations by $1.6 billion because it (1) has not adjusted its
     war reserve requirements to reflect its current needs, (2) has
     included demands in the requirements determination process that
     should not be included, (3) has not reduced its projected needs
     by the number of serviceable inventory items returned to the
     depots, and (4) classified inventory as being needed to meet
     current requirements when the inventory should have been
     classified as economic retention inventory--inventory not needed
     to meet current requirements.  The overstated requirements
     equate to a potential O&M budget reduction of about $1.1 billion
     based on a congressionally imposed requirement that the services
     could replenish only 70 percent of their wholesale-level sales. 

  -- On-order inventory valued at $364 million is not needed to meet
     current operating requirements.  Congress could make an
     appropriate adjustment as an incentive for the Army to take
     actions that would reduce the amount of unneeded inventory. 

  -- An inventory investment of at least $56 million at its retail
     activities does not qualify to be stocked at the activities and
     should be eliminated.  Congress could make an appropriate
     reduction as an incentive for the Army to streamline its
     inventory stocking practices. 


      AIR FORCE
---------------------------------------------------------- Letter :4.2

The Air Force's O&M budget request could be reduced by about
$783 million for the following reasons: 

  -- The Air Force has excess inventory valued at $107 million at its
     retail activities that the wholesale level is not aware of and
     therefore cannot redistribute to other activities that may have
     a need for the items.  Redistributing the excess items would
     allow the Air Force to reduce its procurement of items and
     thereby reduce its need for O&M funds in fiscal year 1994. 

  -- The Air Force had not eliminated invalid inventory back orders
     valued at $73 million.  Eliminating these back orders would
     reduce the Air Force's need for a like amount of inventory that
     it would otherwise have to procure. 

  -- The Air Force double counted back order requisitions in its
     requirements determination process.  Furthermore, the Air Force
     does not consider on-hand inventory items at its maintenance
     depots in determining future buy requirements.  Correction of
     these deficiencies would allow the Air Force's fiscal year 1994
     request to be reduced by $203 million. 

  -- The Air Force did not reduce its budget request to reflect
     terminated contracts for items due in that are no longer needed. 
     In the past, the Air Force has been able to free up an average
     of $400 million annually in stock fund obligation authority. 
     However, the Air Force did not reduce its request for stock fund
     authority by the amount of funds freed up.  To compensate for
     this, the Air Force's O&M request can be reduced by up to $400
     million. 


      NAVY
---------------------------------------------------------- Letter :4.3

The Navy could reduce its fiscal year 1994 O&M request by at least $3
million if it recorded all the inventory at its retail activities on
inventory records.  The Navy does not know that the inventory exists
when it does not keep these records and, therefore, makes unnecessary
procurements. 


      NATIONAL GUARD
---------------------------------------------------------- Letter :4.4

The National Guard could reduce its fiscal year 1994 O&M request by
$70 million if it used the active Army's supply system to meet its
inventory needs rather than maintaining its own system of supply
points.  Eliminating these supply points would not affect supply
responsiveness to the Guard and would contribute to the Army's
overall efforts to establish a single supply system. 


   ARMY'S BUDGET REQUEST DOES NOT
   REFLECT RECEIPT OF FUNDS
   EXPECTED FROM INSTALLATIONS
   TURNED BACK TO HOST COUNTRIES
------------------------------------------------------------ Letter :5

The Army expects to receive $142.9 million in residual value payments
during fiscal year 1994, and, according to an Army official, it is
unsure as to how these funds will be used when they are received. 
Additionally, the anticipated residual payments are not reflected in
the President's budget as an offset to its appropriation request. 
Therefore, we believe that the Army's O&M appropriation request can
be reduced by $142.9 million. 

The Army's budget justification book identified $28.1 million in
residual payments as a source of funds for base support operations. 
However, the Army did not reduce its appropriation request to reflect
the $28.1 million.  As a result, the Army's O&M appropriation request
can be reduced an additional $28.1 million. 

Furthermore, the Defense Overseas Military Facility Investment
Recovery Account currently contains $3.4 million for residual
payments already received.  An additional $5.4 million of payments
has been negotiated with Canada and Italy.  The funds in the Defense
account can be used as directed by the Secretary of Defense for
repair and maintenance of facilities in the United States and
overseas. 

In total, the fiscal year O&M budget request could be reduced by
$179.8 million to reflect the anticipated payments as well as the
payments already received. 


   SERVICES' DEPOT MAINTENANCE
   REQUIREMENTS ARE OVERSTATED
------------------------------------------------------------ Letter :6

The services' requests for depot maintenance in fiscal year 1994 can
be reduced about $306.5 million. 

The Air Force overstated its needs by $274.3 million for the
following reasons: 

  -- The Air Force included about 4.4 months of workload carryover
     from fiscal year 1993 even though, according to Air Force budget
     officials, only a 2.5-month to 3.5-month carryover is needed to
     ensure a continuation of operations during the transition from
     one year to the next.  The value of the excess carryover for 0.9
     months is estimated at about $203.4 million. 

Air Force officials told us that the fiscal year 1993 carryover is
now estimated at 3.2 months rather than 4.4 months and, therefore,
the budget request should not be reduced.  In our opinion, even if
the carryover is now 3.2 months, it is still about 0.7 months greater
than the minimum amount needed to provide a smooth transition from
one fiscal year to the next.  For that reason, the budget request can
still be reduced approximately the same amount. 

  -- Funds ($28 million) appropriated in fiscal year 1993 for depot
     maintenance on B-52G aircraft will not be used for that purpose. 
     According to Air Combat Command officials, no depot maintenance
     will be performed on the aircraft in either fiscal year 1993 or
     fiscal year 1994. 

  -- Funds requested for fiscal year 1994 for depot level maintenance
     of reparable items ($9.4 million) are not needed.  Air Combat
     Command officials told us that requirements for five programs,
     totaling $9.2 million, have not been identified even though Air
     Force headquarters included these funds for the Command in the
     fiscal year 1994 budget request.  For three other programs,
     totaling $246,000, the officials could not explain why the
     programs were included in the budget. 

  -- The Air Force included $36.6 million for support (maintenance,
     supply, and operational testing and evaluation) of the B-2
     bombers.  The commands responsible for providing support to the
     aircraft have budgeted only $15.7 million, or $20.9 million less
     than the amount requested for fiscal year 1994. 

  -- The Air Force included $112.2 million for maintenance on TF30
     aircraft engines.  The revised maintenance requirements for the
     engine are now $99.6 million, or $12.6 million less than
     requested. 

The Navy's request can be reduced by $30.2 million because the
overhaul of five ships for which funds were requested has been
deferred until fiscal year 1995. 

The Army's request can be reduced $1.1 million because it routinely
overhauls items at two depots when a lesser level of repair would
suffice. 

Included in Defense's fiscal year 1994 O&M budget request are funds
for the U.S.  Special Operations Command's testing of six new coastal
patrol boats that were to enter the inventory in the fiscal year. 
The request also included $3.3 million of operations funds for 10
patrol boats, including the 6 new boats that were to enter the
inventory.  According to a Navy official, two of the six new patrol
boats will not be delivered in fiscal year 1994.  Because two of the
patrol boats scheduled for delivery will not be delivered, testing
and operations funds for the boats will not be needed.  In total, we
estimate the budget request for fiscal year 1994 can be reduced about
$913,000 ($436,000 for testing and $477,000 for operations). 


   ARMY UNITS ARE NOT TRAINING AT
   THE LEVEL FUNDED BY CONGRESS
------------------------------------------------------------ Letter :7

Over the past several years, Congress has fully funded Army ground
operating tempo at an annual rate of 800 miles.  According to the
Army, this level of training is necessary to maintain its ground
forces in a ready condition.  In its fiscal year 1994 request, the
Army again asked for funding at the 800-mile level.  Major commands,
however, are not funding their units at this level.  For example,
USAREUR is funding its units at 600 miles, and FORSCOM is funding its
units at 720 miles.  Review of readiness reports showed that the
reduced funding levels had not resulted in units reporting lower
readiness rates.  For example, the vast majority of the FORSCOM units
have maintained a readiness posture that allows them to deploy to
meet national security needs. 

In view of the fact that the major commands are not funding their
units at the operating tempo level for which Congress provided funds,
the fiscal year 1994 request could be reduced by $226 million--$110
million for USAREUR and $116 million for FORSCOM. 


   SERVICES' REQUESTS FOR FLYING
   HOURS EXCEED REQUIREMENTS
------------------------------------------------------------ Letter :8

The Army's and Air Force's flying hour programs can be reduced in
fiscal year 1994 by about $79.8 million.  In the Army, we found that
the flying hour requirements were overstated by $67.5 million for the
following reasons: 

  -- The Army's requirements are $44.7 million less than the amount
     included in the Army's budget request.  Army budget officials
     told us that the reduction is expected to be achieved through
     increased efficiencies, such as improved maintenance procedures
     and aircraft that require fewer maintenance hours for each
     flying hour. 

  -- The Army's budget request included $10.6 million for flying
     hours for drug interdiction efforts, when the Army receives
     funding for the flying hour allocation from the Department of
     Defense's Drug Interdiction and Counter Drug appropriation. 

  -- USAREUR plans to fly fewer aircraft than the number used to
     determine the budget requirement, and, historically, the Command
     has not been able to fly all the hours included in the flying
     hour program.  For these reasons, the Command's program is
     overstated by $12.2 million. 

The Air Force's flying hour program can be reduced by $12.3 million
because headquarters included in the Air Combat Command's budget
4,133 flying hours that the Command does not plan to fly.  The
additional hours were part of the Air Force's efforts to increase the
aircraft crew ratio for the F-111 aircraft.  Command officials told
us that they do not plan to fly these additional hours because to do
so would increase the utilization rate for the particular aircraft by
30 percent and they believe such an increase is unrealistic. 


   FUNDS FOR PERSONNEL ON OFFICIAL
   TRAVEL CAN BE REDUCED
------------------------------------------------------------ Letter :9

Personnel in a travel status often stay in on-base housing for which
they are charged a fee.  Our review showed that personnel staying in
Army transient lodging facilities have been overcharged.  With regard
to Navy personnel, we found that they had been allowed to stay in
off-base facilities when on-base facilities were available.  In
contrast to the policy followed by the Army and the Navy, Air Force
personnel and families involved in permanent change-of-station
situations are housed in temporary lodging facilities that are
supported by appropriated funds.  Department of Defense policy
provides that the O&M of such facilities be paid for from
nonappropriated funds. 

The effect of the above actions is that O&M appropriated funds are
being used to subsidize facilities that are intended to be operated
and maintained primarily with nonappropriated funds or that commands
are expending more O&M funds than necessary by allowing personnel to
stay in off-base facilities when they could be housed on-base. 

We identified a total of $167.6 million ($148 million for the Army,
$16.3 million for the Navy, and $3.3 million for the Air Force) that
could be reduced from the services' O&M request for travel funds in
fiscal year 1994 if the services adhered to Department of Defense
policy regarding fees for transient lodging facilities. 


   FUNDS REQUESTED FOR GLOBAL
   COOPERATIVE INITIATIVES CAN BE
   REDUCED
----------------------------------------------------------- Letter :10

The Department of Defense's fiscal year 1994 O&M budget request
includes $98 million for humanitarian assistance ($48 million) and
disaster assistance ($50 million) as part of the Global Cooperative
Initiatives.  The Department has a $100-million revolving fund that
was established to provide up-front funding for providing
humanitarian assistance.  Therefore, Congress could reduce the
Department's Global Cooperative Initiatives request by $98 million. 


   TRANSPORTATION COSTS PAID TO
   COMMERCIAL TRANSPORTERS CAN BE
   REDUCED
----------------------------------------------------------- Letter :11

Air Force cargo aircraft flying regular overseas missions have an
unutilized capacity of about 36 percent.  At the same time,
low-priority Department of Defense cargo is being transported by
commercial surface transportation.  The Department could save $21
million annually in payments to commercial transporters by using the
unutilized capacity on its cargo aircraft. 


   FUNDS PROVIDED FOR NATIONAL
   GUARD YOUTH PROGRAMS COULD BE
   RESCINDED
----------------------------------------------------------- Letter :12

The National Guard received $44 million in fiscal year 1993 to
conduct the Civilian Youth Opportunities Pilot Program in 10 states. 
The National Guard Bureau planned to ask Congress to expand the
program to
14 states.  At the time we finished our field work in August 1993,
Congress had not approved the extension of the program to the
additional states.  According to Guard officials, if the program is
not extended to the additional four states, $8.5 million will not be
needed in the current fiscal year. 

The National Guard also received $3 million for the Urban Youth Corps
and Youth Conservation Corps.  The Guard does not want to establish
these programs in the 10 states that are participating in the
Civilian Youth Opportunities Pilot Program.  Instead it plans to
request congressional approval to establish the programs in 11 other
states.  As of August, Congress had not approved the Guard's request
to establish the programs in the other states.  According to Guard
officials, the program will not be implemented in the other states,
and $3 million will not be needed in the current fiscal year. 

Because Congress has not approved the Guard's request for the program
changes, Congress could rescind $11.5 million of the fiscal year 1993
funds appropriated for National Guard youth programs. 


   VIABILITY OF COMPOSITE WING
   CONCEPT IS QUESTIONABLE
----------------------------------------------------------- Letter :13

The Air Force plans to obligate about $3.7 million of O&M funds
during fiscal years 1994 through 1996 to establish composite wings
(aircraft of various types) at Mountain Home, Pope, and Moody Air
Force bases. 

In May 1993, we issued a report that raised concerns about the (1)
lack of analysis supporting the decision to build peacetime force
projection composite wings, (2) relative utility of the mix of
aircraft in these wings, and (3) viability of the concept. 

The Air Force believes that the three force projection composite
wings represent a significant enhancement over current deployment
capabilities, responsiveness, and military effectiveness. 
Additionally, the Air Force believes that military judgment and the
operations of analogous composite forces are a sufficient basis for
implementing the composite wing concept. 

Until the benefits of force projection composite wings have been
analyzed and the above concerns resolved, Congress may not want to
approve any additional funding for the composite wing concept.  If
so, Congress can reduce the Air Force's fiscal year 1994 O&M request
by $1.2 million. 


   REQUEST FOR TRAINING FUNDS CAN
   BE REDUCED
----------------------------------------------------------- Letter :14

The Air Force and the Army can reduce their fiscal year 1994 O&M
budget requests for pilot training and Reserve Officer Training Corps
(ROTC) by $162.5 million. 

The Air Force is training more pilots than it needs and is incurring
unnecessary costs.  More pilot candidates are being sent through the
Undergraduate Pilot Training program than are needed to fill
available cockpit assignments.  As a result, about half of the pilots
completing the program are temporarily assigned nonflying positions. 
This is referred to as "banking" pilots.  These banked pilots may
remain in nonflying positions for up to 3 years. 

According to the Air Force, 503 pilot candidates who are scheduled to
enter the pilot training program between August 1993 and fiscal year
1995 are expected to be banked.  The Air Force will spend $273.7
million to train these pilots.  Of the 503 pilots, 229 will receive
their pilot training in fiscal year 1994 at a cost of $131.1 million. 
Congress can direct the Air Force to delay sending the pilot
candidates to Undergraduate Pilot Training and reduce the Air Force
O&M budget by the $131.1 million. 

In discussing this issue with Air Force officials, they told us that
the Air Force had revised its plans so that all pilot candidates
entering Undergraduate Pilot Training in fiscal year 1994 will have
flying positions upon graduation.  The revised plans include
assigning a third pilot to tanker aircraft and increasing the air
crew ratio.  However, they did not provide documentation to support
these changes.  For these reasons, we believe that the Air Force O&M
request can still be reduced. 

The Army may also be training more pilots than it needs.  The Army
plans to spend $257.4 million in fiscal year 1994 to provide
undergraduate training to 2,299 pilots and graduate training to 2,122
pilots.  In July 1993, the Army revised its fiscal year 1994 force
structure requirements downward by 693 aircraft--an 11-percent
reduction.  Accordingly, we believe that the Army can reduce its
pilot training requirements by 11 percent, or about $28.3 million. 

With regard to ROTC scholarships, the Air Force has requested an
increase of 164 scholarships in fiscal year 1994 over the fiscal year
1993 baseline of 3,019 scholarships.  These additional scholarships
will cost about $3.1 million.  The Air Force's justification for the
increase was that 1,600 ROTC graduates would be commissioned into the
service in fiscal year 1994 as compared with 1,515 in fiscal year
1993.  After the budget was submitted, the number of ROTC graduates
that will be commissioned in fiscal year 1994 was revised downward to
1,350.  The downward trend in the number of graduates expected to be
commissioned does not justify an increase in the number of
scholarships.  Therefore, the $3.1 million increase requested for
additional ROTC scholarships will not be needed. 


   FUNDS REQUESTED FOR CIVILIAN
   PERSONNEL ARE OVERSTATED
----------------------------------------------------------- Letter :15

The Army's, Navy's, and Air Force's fiscal years 1994 budget requests
for civilian personnel can be reduced by a total of $305.2 million
due to the following reasons: 

  -- The Army's budget request for civilian personnel is overstated
     by $194 million.  Documentation submitted to Congress in support
     of the President's budget showed that the Army had reduced its
     civilian personnel requirements to $7.6 billion--$194 million
     less than the amount requested in the budget.  Although the
     requirements were reduced, the total amount of the budget
     request remained the same.  Therefore, the budget request
     includes $194 million of budget authority that is not
     represented by specific programs. 

According to an Army budget official, the difference between the $7.6
billion and the $7.8 billion is because of timing.  The official said
that the President's budget is due to the Office of the Secretary of
Defense and Congress prior to final adjustments being made to the
Army's data base.  As adjustments occur, disconnects between the
President's budget submission and justification books increase. 

  -- At the end of fiscal year 1993, the Navy's O&M civilian
     personnel end strength is estimated to be 3,337 personnel less
     than what was planned and used to develop the budget request for
     fiscal year 1994.  Whenever the actual end strength is less than
     planned, the following year's work-year level is adjusted by
     one-half of the amount by which the actual number was lower than
     the planned number.  Accordingly, the fiscal year 1994 work-year
     level used in determining the budget request was overstated by
     1,668.5 work years or about $55 million. 

  -- The Air Force's request can be reduced by $56.2 million.  In the
     fiscal year 1993 Defense Appropriations Act, Congress included a
     provision that reduced the number of overseas civilian personnel
     positions that could be funded by 25 percent.  The intent of
     this provision was to encourage overseas commands to obtain
     funding from the host country.  In fiscal years 1992 and 1993,
     the USAFE funded foreign national pay at 70 percent of the total
     requirement.  In its fiscal year 1994 budget submission, the Air
     Force requested funding for 70 percent of USAFE's foreign
     national pay requirement.  After the budget submission, the Air
     Force added $56.2 million to the USAFE budget to increase its
     foreign national pay account to $142.6 million--94.7 percent of
     the requirement.  Because Congress' intent seems to be to reduce
     funding for foreign national personnel, Congress may want to
     reduce the Air Force's budget request by $56.2 million to return
     it to the 70-percent level. 


   ALL THE FUNDS APPROPRIATED FOR
   SPECIAL EVENTS ARE NOT NEEDED
----------------------------------------------------------- Letter :16

In fiscal years 1992 and 1993, Congress provided $22 million for
Department of Defense support of international special events such as
the 1993 World University Games, the 1994 World Cup Games, and the
1996 Olympics.  The Department's support to these events is supposed
to be for security-related devices, equipment, and services that are
unique to the Department and not available from other sources. 
However, the types of equipment provided by the Department--fences,
detection devices, and others--are not unique to the Department and
are generally available from other sources. 

Of the $22 million appropriated, the Department expects to spend $8.8
million by the end of the current fiscal year and about $8.1 million
in fiscal year 1994, leaving an unobligated balance of $5.1 million. 
No additional funds were requested by the Department for fiscal year
1994, but it plans to seek congressional approval to extend the
availability of unobligated funds until they are expended. 

Officials responsible for providing Department of Defense support
told us that they do not request reimbursement from event sponsors
for the security equipment and services provided because Congress
appropriated the funds for use in the special events.  The officials
said, however, that if Congress mandated that they seek reimbursement
from the event sponsors, they would do so. 

The types of equipment provided by the Department--fences, detection
devices, and others--are not unique to the Department and are
generally available from other sources.  Therefore, Congress may want
to rescind the unobligated balance of $5.1 million and consider
authorizing the Department to seek reimbursement from the event
sponsors for items already provided. 


   REPAIR AND MAINTENANCE FUNDS
   REQUESTED FOR A BASE EXPECTED
   TO BE CLOSED
----------------------------------------------------------- Letter :17

In June 1993, the Defense Base Closure and Realignment Commission
identified Plattsburgh Air Force Base for closure.  The Air Force's
fiscal year 1994 budget request included about $3.1 million for major
repairs and minor construction projects at the base.  In view of the
fact that the base is scheduled to be closed, Congress may want to
reduce the Air Force's request for repair and maintenance funds by
$3.1 million.  The Air Force's fiscal year 1994 O&M budget request
also included $115.7 million for real property repair and maintenance
at USAFE for utilities, contract engineering, maintenance and repair,
and minor construction.  Of this amount, the Command plans to spend
$83 million for these purposes.  The remaining $32.7 million will be
used for purposes other than real property maintenance.  Because the
Command does not plan to use the funds for the purposes for which
they were budgeted, Congress may want to reduce the Air Force's O&M
budget by $32.7 million. 


   O&M SUPPORT FOR SOUND
   SURVEILLANCE SYSTEM EXCEEDS
   NEEDS
----------------------------------------------------------- Letter :18

The Sound Surveillance System (SOSUS) is an underwater acoustics
system used to track enemy submarines.  In fiscal year 1993, $129.4
million of O&M funds was apportioned to SOSUS. 

Our analysis showed that the program manager's estimated funding
level for the program in fiscal year 1994 was $12.8 million less than
what was included in the budget request.  Program officials agreed
that the system was overfunded but said that the funds would be used
for unfinanced requirements.  In a May 1993 report, we had previously
questioned the projected O&M funding level for fiscal years 1993 and
1994 in view of the reduced threat.  Program officials told us that
although they have consolidated portions of the system, they planned
to upgrade the technology of the system and were attempting to
identify other requirements for it--such as tracking migrating
whales. 

Because all of the funds are not needed to operate and maintain the
SOSUS system, Congress may want to reduce fiscal year 1994 O&M
funding for SOSUS by $12.8 million. 


   THE VALUE OF FLYING HOURS AND
   STEAMING DAYS FOR DRUG
   INTERDICTION EFFORTS ARE
   QUESTIONABLE
----------------------------------------------------------- Letter :19

Each year the Department of Defense allocates flying hours and
steaming days to the services as part of its effort to interdict
drugs entering the United States.  However, the flying hours and
steaming days do not significantly contribute to meeting the training
needs of the services.  Our draft report sent to the Department of
Defense for comment in August 1993 concluded that because goals have
not been established to measure the effectiveness of the drug
interdiction efforts, it is unclear whether the additional flying
hours and steaming days are making a proportional increase in the
military's contribution to the war against drugs. 

The Department considered fiscal year 1990 as the optimum level for
its drug interdiction efforts.  However, since that time the amount
of resources directed to drug interdiction has continued to increase. 
We believe that the number of flying hours and steaming days devoted
to drug interdiction efforts can be reduced to the fiscal year 1990
level.  The proposed reductions would not seriously impair the war on
drugs because it would eliminate flying hours and steaming days that
are allocated to inefficient routine surveillance patrols.  Reducing
the flying hours and steaming days to the fiscal year 1990 level
would allow Congress to reduce the amount of resources devoted to
such efforts by $78.6 million. 


   APPROPRIATED FUND SUPPORT FOR
   NONAPPROPRIATED FUND ACTIVITIES
----------------------------------------------------------- Letter :20

The Navy included $65 million in its fiscal year 1994 O&M budget
request for support of morale, welfare, and recreation (MWR)
programs.  This would free up nonappropriated funds which would be
used to fund (1) construction of MWR facilities, (2) local MWR
projects that are not eligible for funding from the central MWR fund,
and (3) MWR projects that do not generate sufficient revenue to pay
the cost of operation. 

Specific use of $23.5 million of the $65 million is to pay the salary
costs of 971 MWR employees who are to be converted to O&M employees. 
Many of these personnel positions are in physical fitness and sport
facilities.  Shifting the MWR personnel costs to O&M frees up MWR
funds for other purposes. 

At the present time, the Department of Defense is reviewing MWR
projects to determine which should be funded with O&M funds.  As of
August 1993, the Department had not reached a decision.  In view of
the questionable nature of the use of O&M funds for MWR projects,
Congress may want to reduce the Navy's O&M budget request by $65
million. 


--------------------------------------------------------- Letter :20.1

We discussed the aforementioned issues with responsible program
officials during the course of our review and included their comments
where appropriate.  Our objectives, scope, and methodology are
described in appendix II.  We plan no further distribution of this
report until 15 days after its issue date, unless you publicly
announce its contents earlier.  At that time, we will send copies to
the Secretaries of Defense, the Army, the Navy, and the Air Force;
the Director of the Office of Management and Budget; the Chairmen and
Ranking Minority Members of the House and Senate Committees on
Appropriations and on Armed Services; and other interested
congressional committees.  Copies will be made available to others
upon request. 

This report was prepared under the direction of Mark E.  Gebicke,
Director, Military Operations and Capabilities Issues, who may be
reached on (202) 512-5140 if you or your staff have any questions. 
Other major contributors to this report are listed in appendix III. 

Frank C.  Conahan
Assistant Comptroller General


POTENTIAL BUDGET REDUCTION ISSUES
=========================================================== Appendix I


   PRIOR YEAR UNOBLIGATED FUNDS
--------------------------------------------------------- Appendix I:1

Unobligated balances change continuously as adjustments are made to
prior year obligations.  These adjustments include increases or
decreases in travel costs, utility estimates, price changes,
contractor defaults, and foreign currency fluctuations.  The
unobligated balances of operation and maintenance (O&M)
appropriations that have expired (usually after 1 year) are not
available for new obligations and may be used only for adjustments to
existing obligations for the specific fiscal year of the
appropriation.  For example, the funds from fiscal year 1991 may be
used only to accommodate an increase to a fiscal year 1991
obligation.  The unobligated balances may be carried forward for 5
years for adjustments. 


      RESULTS OF ANALYSIS
------------------------------------------------------- Appendix I:1.1

Our review shows that the unobligated balances for the Army, the
Navy, the Air Force, and the Defense Mapping Agency are $1.9 billion. 
Although the services claim they need unobligated balances to satisfy
upward adjustments to obligations and to fund the foreign currency
fluctuation account and the foreign national employees separation
trust fund, our analysis shows that unobligated balances have been
increasing rather than decreasing.  For example, at the end of fiscal
year 1990, the Navy had $322,000 of fiscal year 1989 funds that were
unobligated.  At the end of fiscal year 1991, the unobligated balance
of the fiscal year 1989 appropriation had increased from $322,000 to
$45.79 million.  This trend continued through the end of fiscal year
1992 when the unobligated balance was $88.08 million.  The balance at
the end of April 1993 (the most recent figure available) was $113.24
million.  Table I.1 shows that the unobligated balances of all the
services follow this trend. 



                               Table I.1
                
                Unobligated Balances of the Services and
                       the Defense Mapping Agency

                         (Dollars in millions)


Service/agency                  1989    1990    1991    1992     Total
----------------------------  ------  ------  ------  ------  ========
Army
Sept. 1990                         0  $19.81      \a      \a    $19.81
Sept. 1991                    $71.43   19.81  $121.7      \a    213.03
                                                   9
Sept. 1992                    149.86  121.58  285.54  $127.7    684.76
                                                           8
Apr. 1993                     142.75  132.58  535.28  212.88  1,023.49
Air Force
Sept. 1990                     12.00       0      \a      \a     12.00
Sept. 1991                     12.00   47.00       0      \a     59.00
Sept. 1992                     35.00   72.00       0       0    107.00
Apr. 1993                     106.20   98.86  185.35   46.96    437.37
Navy
Sept. 1990                      0.32  214.02      \a      \a    214.34
Sept. 1991                     45.79   31.31   41.30      \a    118.40
Sept. 1992                     88.08   53.60  113.90   51.32    306.90
Apr. 1993                     113.24   86.99  190.65   74.39    465.27

Defense Mapping Agency
----------------------------------------------------------------------
Sept. 1990                        \b    0.01      \a      \a      0.01
Sept. 1991                        \b    0.67    0.01      \a      0.68
Sept. 1992                        \b    3.21    2.89    0.04      6.14
Apr. 1993                         \b    7.05    8.70    1.23     16.98
----------------------------------------------------------------------
\a Not applicable. 

\b Data not provided. 

Unobligated balances are increasing because more obligations are
adjusted downward than upward when the obligations are liquidated. 
While it is impossible to predict the actual increases and decreases
in the unobligated balances of a prior year's appropriations, it
seems unlikely that the services will need the unobligated balances
to meet upward adjustments of obligations.  Therefore, Congress could
reduce the Army's fiscal year 1994 request by $511.9 million, the Air
Force's request by $239 million, the Navy's request by $219.1
million, and the Defense Mapping Agency's request by $10.3 million. 
The annual reduction totals $980.3 million. 


   NAVY BUDGET RESERVE
--------------------------------------------------------- Appendix I:2

Historically, the Navy holds in reserve about 1 percent of its O&M
budget appropriations, which would be approximately $220 million in
fiscal year 1993.  The Navy withholds these funds for unexpected
requirements that may arise during the budget year.  The Navy's O&M
budget request, however, does not indicate that any funds will be
held in reserve.  Instead, the request is based on requirements
identified by the Navy commands. 


      RESULTS OF ANALYSIS
------------------------------------------------------- Appendix I:2.1

The Navy's fiscal year 1994 O&M budget request of $20 billion could
be reduced by $200 million.  The Navy, based on requirements
identified by the Navy's commands, plans to withhold $200 million as
a reserve for emergent requirements.  In effect, the Congress is
being asked to approve a budget request which includes about $200
million in a reserve account for unanticipated requirements. 

Congress should have the benefit of full disclosure for the funds it
authorizes and appropriates.  If during the year the Navy has $200
million in unexpected requirements, Congress should have the
opportunity to assist the Navy in deciding how to fund these
unplanned needs. 


   AIR FORCE BUDGET RESERVE
--------------------------------------------------------- Appendix I:3

The Air Force expected Congress and the Department of Defense (DOD)
to reduce its fiscal year 1994 budget request and therefore developed
budget execution plans in anticipation of congressional budget
reductions.  According to Air Force officials, if the congressional
and DOD reductions are less than the 5.3 percent withheld by the Air
Force headquarters, the Air Force will use the additional funds to
offset unfunded requirements at its commands based on their
priorities. 


      RESULTS OF ANALYSIS
------------------------------------------------------- Appendix I:3.1

The Air Force's fiscal year 1994 budget request of $19.8 billion
could be reduced by $1 billion.  In anticipation of congressional and
DOD reductions to its budget request, the Air Force withheld 5.3
percent of the amount requested for fiscal year 1994 and instructed
its commands to develop their budget execution plans based on $18.8
billion--$1 billion less than the budget request.  Because the Air
Force plans to execute its fiscal year 1994 O&M programs based on a
funding level of $18.8 billion, it apparently believes that it can
function without the extra $1 billion it has requested. 


   ARMY BURDEN SHARING
--------------------------------------------------------- Appendix I:4

U.S.  allies such as Japan, Korea, and the North Atlantic Treaty
Organization nations contribute to the cost of mutual defense. 
Contributions come in the form of cash, contributions in kind, and
exclusions of taxes, customs duties, and fees on local purchases and
activities of U.S.  forces. 


      RESULTS OF ANALYSIS
------------------------------------------------------- Appendix I:4.1

The Army's fiscal year 1994 O&M budget request of $16 billion could
be reduced by $257.6 million.  This reduction includes anticipated
burden sharing payments of $117.8 million from Japan and $139.8
million from Korea. 

According to Army budget office officials, the Army expects to
receive $117.8 million in burden-sharing payments in fiscal year 1994
based on a negotiated agreement with the government of Japan.  The
Army, however, did not reduce its fiscal year 1994 O&M budget request
by $117.8 million.  The Army also expects to receive $139.8 million
from the Republic of Korea in fiscal year 1994.  Since 1988, the
Republic of Korea has provided direct cost-sharing support to the
United States and in fiscal year 1991 agreed to assume, by fiscal
year 1995, one-third of the costs of maintaining U.S.  forces
stationed in Korea.  Negotiations for the 1994 payment will not begin
until fiscal year 1994. 

Army officials contend that the anticipated burden-sharing payments
were considered in arriving at the amount requested in the budget. 
However, the officials agreed that the budget documents do not fully
disclose the burden-sharing transactions. 


   AIR FORCE BURDEN SHARING
--------------------------------------------------------- Appendix I:5

The Air Force assumed in its fiscal year 1994 O&M budget request that
it will receive $441 million in burden-sharing contributions from
U.S.  allies.  However, historically, host nations do not contribute
the full assumed burden-sharing amount.  Therefore, DOD is working
with the Department of State to seek new burden-sharing arrangements
with the allies.  As a result of these discussions, the Air Force
reduced its budget request for fiscal year 1994 by $114 million to
reflect an increase in burden-sharing contributions. 


      RESULTS OF ANALYSIS
------------------------------------------------------- Appendix I:5.1

Air Force officials believe that it is unlikely the allies will
contribute $441 million for burden sharing.  They believe a more
reasonable figure is $269 million--$146 million for foreign national
pay, $109 million for real property maintenance, and $14 million for
utilities. 

The officials said that the Air Force reduced its budget request by
$114 million as a matter of practicality.\1 To illustrate, if the Air
Force develops its O&M budget assuming full contributions from the
allies and receives less, the Air Force is forced to take money from
other O&M accounts to make up the difference.  According to Air Force
officials, it is more practical to use the anticipated burden-sharing
estimate ($269 million) for supporting the O&M budget requirements. 

In view of the fact that the Air Force expects to receive $269
million in burden sharing and has already reduced its request by $114
million, Congress could reduce the O&M budget request by $155
million, the difference between $269 million and $114 million. 


--------------------
\1 The $114 million represents the incremental increase in assumed
burden sharing from fiscal years 1993 to 1994. 


   ARMY OPERATING AND WAR RESERVE
   REQUIREMENTS FOR SPARE PARTS
--------------------------------------------------------- Appendix I:6

The Army inventory of spare parts at the wholesale level includes
operating stock and war reserve stock.  War reserves are items needed
to replace combat equipment losses after a war starts.  Operating
inventory consists of spare parts required to meet day-to-day needs
in a peacetime environment.  Together war reserve and operating
requirements are referred to as the approved force acquisition
objective.  In addition to approved force acquisition objective
inventory, the Army also maintains economic and contingency
retention-level inventory. 


      RESULTS OF ANALYSIS
------------------------------------------------------- Appendix I:6.1

Our review at two Army national inventory control points showed that
spare and repair parts requirements needed to meet current operating
and war reserve needs were overstated by $1.6 billion.\2

These overstatements resulted because (1) war reserve requirements
had not been adjusted to reflect the defense planning guidance, (2)
the demand base for determining requirements included nonrecurring
demands when only recurring demands should have been considered, (3)
items in a serviceable condition that were returned to depots were
not offset against demands used in forecasting requirements, and (4)
inventory that should have been shown as retention-level inventory
was instead shown as being needed to meet current operating
requirements. 

Overstated requirements do not necessarily result in the inventory
being overstated by a like amount.  However, the fact that the
requirements are overstated would allow the Army to procure inventory
up to the requirements levels.  Therefore, Congress could reduce the
Army's request for spare and repair parts by $1.1 billion\3 to
preclude the Army from buying up to the requirements level. 


--------------------
\2 Army Inventory:  Current Operating and War Reserve Requirements
Can be Reduced (GAO/NSIAD-93-119, Apr.  14, 1993). 

\3 The amount of the proposed reduction is based on a rate of 70
percent that Congress authorized in fiscal year 1993 for replenishing
wholesale-level stock. 


   ARMY EXCESS ON-ORDER ITEMS
--------------------------------------------------------- Appendix I:7

Wholesale-level inventories are managed by five inventory control
points.  Inventory above the approved force acquisition objective is
considered as unneeded to meet current operating and war reserve
requirements.  As of September 30, 1992, the Army's wholesale
inventory amounted to $19.1 billion, of which $4 billion exceeded the
objective. 


      RESULTS OF ANALYSIS
------------------------------------------------------- Appendix I:7.1

According to the Army's budget stratification reports, of the $4
billion in wholesale inventory that is not needed, about $364 million
of the inventory is on order and due in or is awaiting contract award
by the inventory control points (see table I.2).  These inventory
items are procured with revolving funds, not O&M funds. 
Nevertheless, the large amount of unneeded inventory is an indication
that the amount of funds made available to procure spare and repair
parts may be too high.  Congress could make an appropriate adjustment
as an incentive for the Army to take actions that would reduce the
amount of unneeded inventory on order. 



                               Table I.2
                
                 Unneeded Wholesale-Level Inventory by
                Inventory Control Point (as of September
                               30, 1992)

                         (Dollars in thousands)

                                               On   Awaiting
Inventory control point                  contract   contract     Total
-------------------------------------  ----------  ---------  ========
Armament, Munitions, and Chemical         $29,004     $6,702   $35,706
 Command
Aviation and Troop Command                 71,948     15,660    87,608
Communications-Electronics Command         62,005      4,734    66,739
Missile Command                            77,638      8,317    85,955
Tank-Automotive Command                    74,988     12,989    87,977
======================================================================
Total                                    $315,583    $48,402  $363,985
----------------------------------------------------------------------
Note:  On-order inventory includes inventory that is under contract
to be delivered and planned procurements awaiting contract award. 


   ARMY INVENTORIES AT THE RETAIL
   LEVEL
--------------------------------------------------------- Appendix I:8

The Army's authorized inventories at retail-level activities--
installations, divisions, and other units--total about $4 billion in
nondemand- and demand-based items.  Nondemand-based items are not
stocked based on the frequency of demand but rather are stocked at
management's discretion.  An item must be requested at least nine
times during a 12-month period to be stocked at the retail level as a
demand-based item.  Once a demand-based item is stocked, it must be
requested at least three times a year to continue to stock it. 


      RESULTS OF ANALYSIS
------------------------------------------------------- Appendix I:8.1

Our review at six Army divisions showed that the divisions were
maintaining about $29 million in inventory items categorized as
demand-based items, even though the items did not meet the
prerequisite criteria--three requests a year.\4 Also, the quantity of
items stocked was excess to the Army's needs.  For example, inventory
items valued at about $112 million had inventory turnover rates of
less than three times during the year, even though Army policy
indicates that demand-based items should turn over eight times a
year.\5 Therefore, the investment in inventory was at least twice
what it needed to be to meet the Army's needs.  Congress may want to
reduce the Army's request for spare parts by at least $56 million as
an inducement for the retail-level activities to streamline their
inventory stocking practices.  The proposed reduction assumes that it
would take 2 years for the divisions to reduce their stock levels to
the appropriate level. 


--------------------
\4 Army Inventory:  Divisions' Authorized Levels of Demand-Based
Items Can Be Reduced (GAO/NSIAD-93-09, Oct.  20, 1992). 

\5 Army policy allows divisions to maintain an inventory level equal
to 45 days of supply.  This stock level, in effect, means that the
inventory items should turn over eight times a year. 


   AIR FORCE INVENTORIES AT THE
   RETAIL LEVEL
--------------------------------------------------------- Appendix I:9

The Air Force supply system has a wholesale level and a retail level. 
Air Force policies require wholesale item managers to have visibility
over retail-level assets so that they can (1) reduce or eliminate
procurements when retail activities have excess items and (2) improve
operational readiness by redistributing items directly from retail
activities that have excesses to those that have shortages.  Air
Force automated systems usually give wholesale managers visibility
over relatively high-cost items that are returned to wholesale depots
for repair but not over consumable items and low-cost equipment
managed through the Systems and General Support Divisions of the Air
Force Stock Fund.  Visibility over these items is limited to periodic
reports of excess. 


      RESULTS OF ANALYSIS
------------------------------------------------------- Appendix I:9.1

We reported that Air Force retail-level activities had about $107
million of excess inventory on order that the wholesale level was not
aware of.\6 As a result, excess items have not been distributed to
other activities that may have had a need for them.  Limited
visibility over retail excess inventory is illustrated by the fact
that the wholesale level has been buying items, valued at $32
million, that were excess at the retail activities.  Congress could
reduce the Air Force's request for spare parts by $107 million
because the excess parts could be redistributed to other retail-level
activities having a need for the items and therefore reduce
procurement of these items. 


--------------------
\6 Air Force Logistics:  Improved Redistribution of Retail
Inventories Needed (GAO/NSIAD-91-165, July 10, 1991). 


   AIR FORCE INVALID BACK ORDERS
-------------------------------------------------------- Appendix I:10

When units make requisitions that cannot be filled, the item is
placed on a back order.  If it is later determined that the
requisitioned material is not needed but the requisition is not
canceled, the item continues to be shown as a valid need. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:10.1

An ongoing assignment has shown that the Air Force could reduce its
need for O&M funding to buy spare parts by at least $73 million if it
canceled invalid back orders.  The Air Force units do not do a good
job of validating their outstanding back orders for repair parts.  On
a sample basis, we found that outstanding requisitions for items
valued at $73 million were, in fact, no longer needed by the units
that submitted the original requisitions.  As a result, the Air
Force's need for O&M funds to buy these items could be reduced by
that amount. 


   AIR FORCE DUPLICATE BACK ORDERS
-------------------------------------------------------- Appendix I:11

The Air Force manages about 400,000 aircraft consumable items ranging
in cost from a few cents to thousands of dollars each.  For fiscal
year 1993, the Air Force forecasted requirements for consumable items
valued at about $4.5 billion.  To satisfy this requirement, the Air
Force is buying or plans to buy $1.8 billion of consumable items. 
The remainder will be satisfied by assets already on hand. 

In July 1991, we recommended that the Air Force achieve procurement
savings by (1) eliminating the double counting of requirements on
back order and (2) considering on-hand depot maintenance assets in
its procurement computations.\7 The Senate Appropriations Committee
stated in its report on the fiscal year 1992 Department of Defense
Appropriations Act that it expected the Air Force to implement our
recommendations. 


--------------------
\7 Air Force Requirements:  Requirement Computations for Aircraft
Consumable Items Can Be Improved (GAO/NSIAD-91-201, July 10, 1991). 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:11.1

Contrary to directions of the Senate Appropriations Committee, the
Air Force did not change its consumable items requirements
determination process.  If these changes had been made, the Air Force
could have reduced its requirements by $508 million and its
procurement by $203 million.\8 Therefore, Congress may want to
consider offsetting the $203 million procurement savings that could
have been achieved against the Air Force's fiscal year 1994 O&M
budget request. 


--------------------
\8 Air Force Requirements:  Cost of Buying Aircraft Consumable Items
Can Be Reduced by Millions (GAO/NSIAD-93-38, Nov.  18, 1992). 


   AIR FORCE EXCESS ON-ORDER ITEMS
-------------------------------------------------------- Appendix I:12

The Air Force Materiel Command and its five air logistics centers use
standard computerized systems to compute material requirements.  Each
computation cycle, these systems identify on-order material that
exceed requirements.  Item managers review these computations and,
after correcting any errors, perform an analysis to determine whether
it is more economical to terminate orders or to accept delivery of
the material. 

When the Air Force terminates a contract for material not needed, it
notifies the contractor to stop production and determine final
settlement charges.  However, negotiating final settlement charges
can take 1 to 2 years.  At that time, the Air Force deobligates
contract funds that will not be needed to cover the settlement
charges.  The stock fund is reimbursed by O&M funds for the purchase
of aircraft items.  These deobligated funds are available to the Air
Force to satisfy other procurement requirements. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:12.1

Our draft report has concluded that the Air Force is terminating more
on-order items no longer needed, but it is not making use of the
increased availability of deobligated funds from contract
terminations to reduce its annual stock fund budget and is not
determining the impact on O&M funding requests.  The Air Force
deobligated about $400 million in stock funds in fiscal years 1991
and 1992.  When the Air Force seeks annual stock fund obligation
authority, it does not consider the additional obligation authority
that is created by contract terminations.  Because Air Force units
use O&M funds to procure items from the stock fund, Congress may wish
to consider reducing the Air Force's O&M request by $400 million and
having the stock fund transfer a like amount to the service's O&M
account. 


   NAVY UNRECORDED INVENTORIES
-------------------------------------------------------- Appendix I:13

The Navy prohibits its depots from accumulating material that is not
recorded on inventory records.  Unrecorded material results when
maintenance personnel retain material that was issued, but not used,
to complete repair jobs.  Unrecorded inventory weakens internal
controls and results in waste when additional material is purchased
to meet other requirements that could have been met with the
unrecorded material. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:13.1

We reported that Navy wholesale-level depots had about $3 million in
inventory that was not recorded on its inventory records and
therefore was not available for issue to customers.\9 In addition,
there was an immediate need for $392,000 of the unrecorded inventory
by Navy customers.  Until that inventory is recorded on inventory
records, requests for like items will have to be purchased even
though the request could be met from the unrecorded inventory. 
Therefore, the Navy's request for spare parts could be reduced by $3
million to reflect the fact that more inventory is available for
issue than Navy management officials are aware of. 


--------------------
\9 Navy Supply:  Excess Inventory Held at the Naval Aviation Depots
(GAO/NSIAD-92-216, July 22, 1992). 


   NATIONAL GUARD REDUCED
   INVENTORIES
-------------------------------------------------------- Appendix I:14

The Army National Guard maintains about $215 million in retail
inventory at its 54 U.S.  Property and Fiscal Offices.  This
inventory is used to fill requests from individual Guard units and
maintenance activities.  However, in fact, about 70 percent of the
Guard's requisitions are sent to the Army's wholesale-level depots to
be filled because the Guard either is not authorized to stock the
requested items or the Guard does not have the items in stock. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:14.1

The Guard's inventory needs could be met by the active Army's supply
system.  The majority of the Guard's requisitions are already filled
directly by the Army, and the majority of the requisitions are not
high priority. 

We already recommended that the Guard's separate level of inventory
be eliminated.\10 This would reduce the Army's investment in
inventory by $215 million.  The reduced inventory investment would be
a one-time savings that would probably take 3 years to realize. 
Therefore, Congress could reduce the Guard's O&M request by at least
$70 million.  This reduction could serve as an incentive for the
Guard to take the actions necessary to achieve a more efficient way
of meeting its supply needs. 


--------------------
\10 National Guard:  Using the Army's Supply System Will Reduce the
Guard's Inventory Investment (GAO/NSIAD-93-25, Dec.  9, 1992). 


   ARMY RESIDUAL VALUE PAYMENTS
-------------------------------------------------------- Appendix I:15

Residual value is a negotiated amount that a host country will pay
the United States for U.S.  investments in the construction or major
improvement of facilities that have been used by the United States
and are being returned to the host country. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:15.1

The Army expects to receive $142.9 million in residual value payments
during fiscal year 1994, and, according to an Army official, it is
unsure as to how these funds will be used when they are received. 
Because the Army could neither identify requirements for the $142.9
million, and because requirements are not reflected in the
President's budget as an offset to its appropriation request, we
believe that the Army's O&M appropriation request can be reduced by
$142.9 million. 

The Army's O&M budget can be reduced by an additional $28.1 million
because it did not reduce its appropriation request by $28.1 million
in residual value funds it anticipates receiving.  The Army's budget
justification book identified the $28.1 million as a source of funds
for base support operations.  However, the Army did not reduce its
appropriation request to reflect the $28.1 million.  As a result, the
Army's O&M appropriation request can be reduced by $28.1 million. 

Additionally, DOD officials told us that there is currently $3.4
million in the DOD Overseas Military Facility Investment Recovery
Account\11 and that an additional $5.4 million of payments has been
negotiated with Canada and Italy.  Congress may want to direct the
Secretary of Defense to use the $8.8 million to offset its fiscal
year 1994 O&M requirements. 


--------------------
\11 Residual value payments made by host countries are deposited in
the DOD Overseas Military Facility Investment Recovery Account.  The
use of these funds is limited to facility maintenance and repair at
military installations in the United States and outside the United
States if the Secretary of Defense anticipates the installations will
be used for a long period. 


   AIR FORCE MAINTENANCE WORKLOAD
   CARRYOVER
-------------------------------------------------------- Appendix I:16

DOD industrial funds are used to finance the operations of industrial
and commercial-type activities that provide common services within
DOD.  The Air Force's depot maintenance industrial fund financed
about $3.8 billion in depot maintenance services through in-house and
contract services in fiscal year 1992.  The workload carryover in
this fund, which was about $800 million at the end of fiscal year
1987, is projected to be $1.5 billion at the end of fiscal year 1993. 
The carryover equals the estimated cost to complete ongoing work plus
the cost of funded work that has not been started. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:16.1

Air Force officials stated that some carryover work is needed to
ensure a continuous flow of work from one year to the next.  Although
the Air Force did not provide a precise estimate of the required
carryover, officials estimated the requirement at 2.5 months to 3.5
months of the average annual revenue (about $4.1 billion for fiscal
year 1993).  Using projected revenue and projected carryover,
carryover at the end of fiscal year 1993 will represent about 4.4
months of work. 

According to Air Force officials, the most revenue is generated in
September.  Also, funds remaining at the end of a fiscal year are
obligated to the depot maintenance industrial fund to avoid letting
the funds expire, even though the work will not be done until a later
fiscal year. 

In fiscal year 1993, the House Armed Services Committee (H.  Rept. 
527, 102nd Congress) took the position that there was little point in
providing funds for work that would not be accomplished in the fiscal
year for which they are appropriated.  Previously in 1982, the House
Appropriations Committee stated that the funding provided to
industrial fund customers should be consistent with the industrial
funds' ability to do the work. 

Even after allowing for a carryover of 3.5 months, the depot
maintenance industrial fund will have about $290.5 million more than
required to ensure continuous operations.  Since about 70 percent of
the revenue for the fund is from the Air Force O&M account (either
directly or indirectly through the stock fund), Congress could reduce
the Air Force O&M budget request by at least $203.4 million (70
percent of $290.5 million).  This amount represents the 0.9-month
carryover that is excess to the projected requirement to ensure
continuous operations and that will be funded by the Air Force's O&M
account. 

In commenting on this matter, Air Force officials told us that the
fiscal year 1993 carryover is now estimated at 3.2 months rather than
4.4 months and, therefore, the budget request should not be reduced. 

In our opinion, even if the carryover is now 3.2 months, it is still
about
0.7 months greater than the minimum amount needed to provide a smooth
transition from one fiscal year to the next.  For that reason, the
budget request can still be reduced approximately the same amount. 


   AIR FORCE CANCELLATION OF B-52G
   MAINTENANCE
-------------------------------------------------------- Appendix I:17

The B-52 has been a substantial element in the Air Force's bomber
inventory since 1959.  Two versions are in service today:  the B-52G
and the B-52H.  The B-52H, an improved version of the B-52G, has an
increased range and improved defensive armament.  With the deployment
of the more technically advanced B-1 bomber and the development of
the B-2A, the role of the B-52 is declining.  The Air Force plans to
retire the B-52G at the end of fiscal year 1994 and retain the B-52H. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:17.1

In fiscal year 1993, Congress appropriated about $28 million for
program depot maintenance for the B-52G.  According to Air Force
officials, program depot maintenance is not planned for B-52Gs in
fiscal years 1993-94, and the $28 million will be used to meet other
maintenance requirements.  Since the Air Force has no plans to do
program depot maintenance on the B-52G in fiscal year 1993, the $28
million could be rescinded or offset against the Air Force's fiscal
year 1994 O&M request. 


   AIR FORCE DEPOT MAINTENANCE
   REQUIREMENTS
-------------------------------------------------------- Appendix I:18

The Air Force included $9.4 million in its fiscal year 1994 O&M
budget request for depot maintenance programs for the Air Combat
Command.  However, the Command did not include these programs for the
budget amounts in its budget execution plans for fiscal year 1994. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:18.1

Air Combat Command officials told us that even though the Air Force
included $9.2 million in the budget request for five of the program
elements for depot-level reparable maintenance, the Command has not
identified maintenance requirements for these funds.  In addition,
Command officials could not explain why the President's budget
included funding for the other three program elements totaling
$246,000.  As a result, it does not plan to use the funds for the
purposes for which they were budgeted.  Since the Air Combat Command
has not identified a depot maintenance requirement for the $9.4
million, Congress could reduce the Air Force's O&M budget by a
corresponding amount. 


   AIR FORCE B-2 MAINTENANCE
   SUPPORT
-------------------------------------------------------- Appendix I:19

The Air Force will take delivery of its first four operational B-2
bombers in fiscal year 1994.  The Air Force requested $36.6 million
in its fiscal year 1994 O&M budget to support the B-2 aircraft
(maintenance, supply, and operational test and evaluation).  These
costs will be incurred by the Air Combat Command, the Air Force
Materiel Command, and the Air Force Operational Test and Evaluation
Center. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:19.1

Although the Air Force has requested $36.6 million to support the B-2
during fiscal year 1994, the Air Force commands have budgeted only
$15.7 million for fiscal year 1994 for support of the B-2. 
Therefore, Congress could reduce the Air Force's fiscal year 1994 O&M
budget by $20.9 million. 


   AIR FORCE TF30 ENGINE
   MAINTENANCE
-------------------------------------------------------- Appendix I:20

Production of the F-111 aircraft began in the mid-1960s, and the Air
Force plans to maintain some F-111s in the active inventory until
2017.  Because of problems experienced with the F-111F TF30-111
engines during Operation Desert Storm, the Air Force plans to
remanufacture the engine.  The TF30-109 engines are being repaired
under the two-level maintenance program being established in fiscal
year 1993.  Under this program, intermediate-level maintenance will
be moved from bases to depots. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:20.1

The Air Force's fiscal year 1994 O&M budget request includes $112.2
million to support maintenance on TF30 engines.  However, revised
fiscal year 1994 maintenance requirements show that the Air Force
plans to use only $99.6 million--$12.6 million less than the figure
in the budget request.  Air Staff officials agreed that funds for
specific program requirements may change after budget submissions. 
They said, however, that any funds not needed for the TF30 program
could be used for unfunded requirements.  Tables I.3 and I.4 show the
breakout of the maintenance funding requested and the revised
maintenance requirements. 



                               Table I.3
                
                 Fiscal Year 1994 Air Force O&M Budget
                  Request for TF30 Engine Maintenance

                         (Dollars in millions)

                                               Number of
Maintenance                                      engines       Funding
------------------------------------------  ------------  ------------
Minor                                                 17          $5.8
Remanufacture                                        117          90.4
Contingencies                                          a           0.9
Two-level maintenance                                 41          15.1
======================================================================
Total                                                175        $112.2
----------------------------------------------------------------------
\a Unknown. 



                               Table I.4
                
                    Revised TF30 Engine Maintenance
                              Requirements

                         (Dollars in millions)

                                               Number of
Maintenance                                      engines       Funding
------------------------------------------  ------------  ------------
Minor                                                  0             0
Remanufacture                                        103         $79.6
Contingencies                                          a           0.9
Two-level maintenance                                 52          19.1
======================================================================
Total                                                155         $99.6
----------------------------------------------------------------------
\a Unknown. 

Because the Air Force has requested funds not needed, Congress could
reduce the Air Force's fiscal year 1994 O&M request by $12.6 million. 


   NAVY DEFERRED SHIP MAINTENANCE
-------------------------------------------------------- Appendix I:21

The ship depot maintenance program finances the overhaul of naval
ships and other maintenance activities.  Ships are scheduled for
depot-level maintenance in advance of their arrival dates.  One
reason for advanced scheduling is so that material can be ordered and
on hand when the ship arrives at the shipyard. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:21.1

The Navy's fiscal year 1994 O&M request includes $30.2 million for
maintenance of ships whose scheduled maintenance has been canceled or
rescheduled to fiscal year 1995, as shown in table I.5. 



                               Table I.5
                
                Ship Maintenance Changes for Fiscal Year
                                  1994

                         (Dollars in millions)

Ship                                    Status                  Amount
--------------------------------------  --------------  --------------
AD 37                                   Rescheduled               $5.7
LKA 114                                 Canceled                   4.9
LPD 7                                   Rescheduled                6.0
LSD 43                                  Rescheduled                5.2
SSN 672                                 Rescheduled                8.4
======================================================================
Total                                                            $30.2
----------------------------------------------------------------------
Since the funds are not needed for the ships for which they were
budgeted, Congress could reduce the Navy's O&M budget request by
$30.2 million.  Ship maintenance officials at the Pacific Fleet
agreed that the fiscal year 1994 funds are no longer needed for the
maintenance of these specific ships.  However, they said the Fleet
could use the funds to reduce backlogged maintenance. 


   ARMY DEPOT MAINTENANCE
-------------------------------------------------------- Appendix I:22

Depot repair programs generally consist of three categories: 
overhaul, inspection and repair, and modernization and conversion. 
Overhaul programs involve the complete rebuilding of a weapon system
or major component.  Inspection and repair programs involve
inspecting an item and repairing only what is needed.  Modernization
and conversion programs involve changing and upgrading systems and
components to meet specific needs. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:22.1

In 1992, we reported that items were being routinely overhauled at
two Army maintenance depots even when a lesser level of repair would
have sufficed.\12 The items were not inspected to determine what
repairs were necessary.  Instead, they were submitted for complete
overhauls.  One of the depots performed a limited test and found that
it could reduce maintenance costs by $1.1 million annually if it
inspected items and performed only those repairs that were necessary
to return the items to service. 

Although we could not project the results of our review Army-wide,
the conditions found at the two depots could be a systemic problem
throughout the Army.  Therefore, the Committee could reduce the
Army's request for depot maintenance funds in fiscal year 1994 by at
least $1.1 million as an incentive for the Army to use its
maintenance resources more prudently. 


--------------------
\12 Army Maintenance:  Savings Possible by Stopping Unnecessary Depot
Repairs (GAO/NSIAD-92-176, May 5, 1992). 


   DOD COASTAL PATROL BOATS
-------------------------------------------------------- Appendix I:23

The U.S.  Special Operations Command, a unified command, is
responsible for training, maintaining, and providing special
operations forces to support contingency plans developed by five
regionally oriented commands.  To this end, the Command buys and
supports a variety of equipment, including Navy boats and ships. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:23.1

Congress could reduce the U.S.  Special Operations Command's fiscal
year 1994 O&M budget request by $913,000.  According to budget
documents, the Command was to receive 6 patrol boats in fiscal year
1994, bringing the total number to 10.  However, according to a Navy
official, two of these boats will not be delivered in fiscal year
1994.  The Command's budget included $1.3 million to complete tests
on the patrol coastal boats.  These tests are required prior to their
participation in fleet exercises or taskings.  Therefore, the fiscal
year 1994 request for these tests could be reduced $436,000. 

Furthermore, the Command included $3.3 billion for boat operations. 
Because operating costs for boats entering the fleet during the
fiscal year are included based on one-half year's annual operating
cost and because two of the planned 10 ships will not arrive until
after fiscal year 1994, the Command's budget could be reduced
$477,000. 


   ARMY OPERATING TEMPO AT U.S. 
   ARMY EUROPE
-------------------------------------------------------- Appendix I:24

Costs for ground operating tempo (OPTEMPO) include certain fixed
costs and the costs of fuel and spare parts associated with operating
tactical vehicles and other military equipment at a specified usage
rate (miles or hours) in order to achieve or sustain a prescribed
level of readiness.  The Department of the Army calculates the amount
necessary to operate its vehicles and equipment using its Training
Resource Model, which multiplies the cost per unit of usage by the
number of authorized pieces of equipment and then by the number of
miles or hours.  For example, if fuel and spare parts cost $1.50 per
mile and a command has 1,000 vehicles that it plans to operate 500
miles each during the year, the estimated ground cost for the
vehicles is $750,000. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:24.1

Our review indicated that the fiscal year 1994 budget for OPTEMPO for
U.S.  Army, Europe (USAREUR) could be reduced by $109.8 million.  The
potential reduction comprises two separate aspects:  (1) a
$62.4-million potential reduction based on unit drawdown estimates
and (2) a $47.4-million potential reduction based on different
training levels. 


         OPTEMPO COSTS ASSOCIATED
         WITH UNIT DRAWDOWNS
---------------------------------------------------- Appendix I:24.1.1

USAREUR documentation states that unit-level collective training
ceases
180 days prior to a unit's estimated departure date.  The President's
budget and USAREUR's stated requirements did not consider about $62.4
million in reductions in OPTEMPO resulting from USAREUR units leaving
Europe in fiscal year 1994.  Our analysis of the variable costs ($252
million) associated with ground OPTEMPO and the unit's estimated
departure dates showed that OPTEMPO costs could be reduced by $62.4
million.  We reduced these variable costs by either 100 percent, 75
percent, 50 percent, or 25 percent based on whether the unit will
depart the theater in the first, second, third, or fourth quarter of
the fiscal year. 


         OPTEMPO COSTS ASSOCIATED
         WITH DIFFERENT TRAINING
         LEVELS
---------------------------------------------------- Appendix I:24.1.2

In prior years, the Army has maintained that ground OPTEMPO should be
funded at the 800-mile level in order for units to maintain full
readiness rates, and Congress has fully funded this requirement. 
However, since February 1993, USAREUR has been funding its units at a
600-mile level in order to make funds available for other purposes. 

We examined readiness reports of units training at the 600-mile level
and found that these units were reporting full readiness rates. 
USAREUR officials stated, however, that readiness cannot be sustained
at the 600-mile level and in the long term, they intend to train at
the 800-mile level during fiscal year 1994.  If USAREUR units trained
at the 600-mile level in fiscal year 1994, as it has since February
1993, USAREUR's ground operating tempo could be reduced another $47.4
million, as shown in table I.6. 



                               Table I.6
                
                Potential Reduction in Fiscal Year 1994
                     Ground OPTEMPO Budget Request

                         (Dollars in thousands)

Description                                                     Amount
------------------------------------------------------  --------------
USAREUR training budget at 800-mile level                     $457,999
Potential reduction attributed to drawdown                      62,476
Subtotal                                                       395,523
USAREUR training budget at 600-mile level after                348,095
 drawdown
Potential reduction after drawdown                             $47,428
----------------------------------------------------------------------

   ARMY REDUCED OPTEMPO AT FORCES
   COMMAND
-------------------------------------------------------- Appendix I:25

The Army's fiscal year 1994 O&M budget request includes $1.16 billion
for ground OPTEMPO at Forces Command (FORSCOM).  Army headquarters
officials estimate this amount would fund ground OPTEMPO at the
traditional readiness benchmark of 800 miles.  FORSCOM officials
estimate that an OPTEMPO level of 720 to 800 miles allows units to
achieve readiness levels in the C1 to C2 range.  They consider units
reporting C1, C2, or C3 ready to deploy.\13


--------------------
\13 Commanders' assessment of a unit's training readiness is reported
as a "C" rating, ranging from C-1 to C-4, that represents an estimate
of the number of days needed for a unit to be fully trained in all
mission-essential tasks. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:25.1

Because FORSCOM units report deployable levels of readiness with a
ground OPTEMPO program estimated at 720 to 730 miles, Congress could
reduce OPTEMPO funds for the Command.  A fiscal year 1994 ground
OPTEMPO levels of 720 miles equates to $1.044 billion, or $116
million less than the Army's budget request.  As of August 1993,
FORSCOM resource management officials had estimated that Army
headquarters would provide additional funding for FORSCOM's fiscal
year 1993 ground OPTEMPO, resulting in a program funded at the level
of 720 to 730 miles.  During most of fiscal year 1993, Army
headquarters funded ground OPTEMPO at FORSCOM at about 660 miles. 

Our analysis of readiness levels reported quarterly by FORSCOM units
from January 1991 through June 1993 showed that the vast majority of
units reported deployable levels of readiness and that readiness
levels had not decreased during fiscal year 1993. 


   ARMY FLYING HOUR PROGRAM
-------------------------------------------------------- Appendix I:26

The costs of the Army's flying hour program include the cost of fuel
and repair parts for its rotary- and fixed-wing aircraft.  For fiscal
year 1994, the Army requested $829.4 million for its flying hour
program.  Included in this amount is $117.6 million for USAREUR's
program for 114,810 flying hours. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:26.1

The Army plans to allocate $784.7 million of the $829.4 million
requested to its commands.  An Army official attributes the
$44.7-million difference between the amount requested and the amount
it plans to allocate to expected increased efficiency in O&M of the
Army's flying hour program.  We believe that the $44.7 million
represents a potential reduction to the fiscal year 1994 O&M budget. 
Also included in the Army's budget request is $10.6 million for
flying hours in connection with its drug interdiction program.  This
$10.6 million represents an additional potential reduction because
DOD has a separate appropriation that is to be used to fund the
Army's drug interdiction program. 

In addition, USAREUR's flying hour program can be reduced by $12.2
million.  This reduction consists of (1) a $4.5-million potential
reduction based on USAREUR's historic training levels and (2) a
$7.7-million potential reduction based on USAREUR's plan to fly fewer
aircraft than the number used in determining the amount in the Army's
budget request. 


         PAST LEVELS OF FLYING
         HOUR TRAINING
---------------------------------------------------- Appendix I:26.1.1

USAREUR's flying hour documentation showed that since fiscal year
1990, USAREUR flew fewer hours per month than the rate shown in the
President's budget.  Based on USAREUR's detailed flying hour
information, we computed a weighted average of the flying hours
executed per month for each type of aircraft.  Combining this with
cost and aircraft density information, we determined that USAREUR had
a flying hour requirement of $113.1 million, or $4.5 million less
than included in the President's budget for USAREUR. 


         AIRCRAFT ATTACHED TO
         UNITS AFFECTED BY
         DRAWDOWN
---------------------------------------------------- Appendix I:26.1.2

The President's budget and USAREUR's stated requirement for flying
hours did not consider 107 aircraft attached to units that are
scheduled to leave Europe during fiscal year 1994.  USAREUR
documentation states that all withdrawing units will cease unit-
level collective training 180 days prior to the estimated departure
date.  If the amount included in the President's budget had been
computed based on the reduced number of aircraft, the flying hour
program could have been reduced $19 million. 

USAREUR officials told us that pilots attached to deactivating units
still require training and that USAREUR will require about $5 million
for pilot proficiency.  Accordingly, we are recommending a reduction
of $7.7 million, not the full $19 million as described above.  This
allows the $5 million needed for pilot proficiency in fiscal year
1994 and recognizes $6.3 million, which represents USAREUR's pro rata
share of the $44.7 million proposed reduction due to expected
efficiencies in maintenance and operations. 


   AIR FORCE FLYING HOUR PROGRAM
-------------------------------------------------------- Appendix I:27

The Air Force's fiscal year 1994 O&M budget request of $23 million to
accommodate a crew ratio change for selected fighter aircraft from
1.25 to 1.40 could be reduced by $12.3 million.  According to Air
Force officials, this increase is justified because (1) Desert Storm
operations required a crew ratio of approximately 2.0 to meet 24-hour
flying taskings and approximately 1.6 to meet one-half-day flying
taskings and (2) force structure reductions eliminate the flexibility
of using untasked crew to augment for crews in combat and other
contingencies.  In line with the increased ratio, the Air Force
programmed 4,133 additional Air Combat Command flying hours for the
F-111 aircraft.  This increased the Command O&M budget by $12.3
million based on the projected F-111 flying cost of $2,984 per flying
hour. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:27.1

Although the Command supports the increased crew ratio, it does not
plan to increase the flying hours for the F-111 in fiscal year 1994. 
It believes the gradual increase in the number of pilots can be
accommodated for 1 year without a flying hour increase.  In addition,
it believes that a 30-percent increase in the utilization rate for
the F-111 is not realistic for fiscal year 1994.  Congress may want
to reduce the Air Force O&M budget by
$12.3 million because the planned increased crew ratio will not
result in additional flying hours at the Air Combat Command. 


   ARMY TRAVEL FUNDS
-------------------------------------------------------- Appendix I:28

The Army has on-base housing to lodge personnel in a travel status. 
Some of the facilities known as transient lodging are deemed
mission-essential and are used by personnel who are on temporary duty
(TDY) for training or other purposes.  The transient housing
facilities are largely supported with O&M appropriated funds that
come from the transient personnel who are charged a fee for using the
facilities.  Lodging rates for TDY facilities are established at
minimum levels to provide for amenities not authorized by
appropriated funds.  Commanders have the authority to redesignate the
use of these facilities when they are no longer needed. 

Most bases have guest houses that are used mainly as interim lodging
for military personnel and their dependents making a permanent
change-of-station transfer.  These facilities are not
mission-essential and are part of the Army's morale, welfare, and
recreation (MWR) fund.  Base commanders can set guest charges to
generate profits for use by other MWR activities. 

In a 1990 report,\14 we reported that some Army installations
overcharged the travelers and their home commands an estimated $70
million for transient housing and used the excess charges to
subsidize other MWR activities that are paid for from nonappropriated
funds.  We recommended that the Army return the excess charges to the
O&M account or repay them to the U.S.  Treasury. 


--------------------
\14 Army Housing:  Overcharges and Inefficient Use of On-Base Lodging
Divert Training Funds (GAO/NSIAD-90-241, Sept.  28, 1990). 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:28.1

In a recent report,\15 we reported that the Army has not repaid the
overcharges that have accumulated from inflated transient housing
fees.  As of October 1991, the amount had increased to $157 million. 
The Army then stopped the practice of diverting funds to MWR
nonappropriated accounts and transferred $34 million to a separate
account for transient housing.  Therefore, we believe that the excess
charges of $123 million ($157 million less the $34 million) that were
diverted to and remain in the MWR nonappropriated account can be
transferred from the MWR account and be used as an offset to the
Army's fiscal year 1994 O&M budget request. 

Transient lodging charges continue to be inflated, and as of March
31, 1993, the transient housing account balance had increased to $40
million.  Army officials said that although it is contrary to DOD
policy to inflate transient housing fees, base commanders have kept
the lodging rates higher to reduce the impact of appropriated funding
reductions that support transient housing. 

According to the officials, reducing the lodging fee to a more
reasonable level should result in annual reductions of about $20
million.  They said that the savings can be realized by policy and
procedural changes that (1) direct commanders to reduce and cap
lodging service charges, (2) allow for the transfer of excess funds
from installation accounts, and (3) preclude and control the practice
of commanders to double budget for the same item in both appropriated
and nonappropriated accounts.  In view of the estimated reduction in
lodging fees currently being paid out of O&M funds, we believe that
the fiscal year 1994 O&M budget request should be reduced by an
additional $20 million. 

During our review of Army transient housing, we also found that two
commanders were redesignating TDY facilities to guest houses and then
sending TDY personnel to the converted facilities in order to
generate funds for other MWR functions.  The Army corrected this
practice in the United States.  However, Army housing utilization and
classification reports show that some USAREUR commanders redesignated
TDY facilities to guest houses when, in fact, TDY facilities were
still needed. 

Army housing officials said that the Command should not have
reclassified the TDY facilities to subsidize other MWR activities. 
As a result, these officials estimate that TDY personnel were
overcharged an estimated $5 million.  Congress may want to reduce the
Army's O&M request for fiscal year 1994 by $5 million to reflect the
reduced need for O&M funds. 


--------------------
\15 Army Housing:  Overcharges for On-Base Lodging Have Not Been
Repaid
(GAO/NSIAD-93-188, Aug.  3, 1993). 


   NAVY TRAVEL FUNDS
-------------------------------------------------------- Appendix I:29

The Navy spends millions of dollars each year housing transient
personnel who are on official travel status.  During our 1991 review
of Navy housing,\16 we found that Navy travel costs are higher than
necessary due to inadequate management controls that allow the use of
more expensive off-base lodging when on-base housing is available. 
In our report, we recommended that the Navy measure the extent to
which travel costs have been affected by authorizing off-base lodging
when facilities on base were available. 


--------------------
\16 Navy Housing:  Transient Lodging Operations Need Effective
Management Control (GAO/NSIAD-92-27, Oct.  3, 1991). 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:29.1

In 1992, the Naval Audit Service identified $16.3 million of annual
O&M costs that could be avoided if the Navy strengthens its policies
concerning the authorization of off-base lodging.  The Navy revised
its polices.  However, the Navy does not plan to reduce the amount
budgeted for travel until fiscal year 1995, even though a Navy
housing official acknowledged that lower travel costs will be
incurred during fiscal years 1993 and 1994 if this new policy is
followed. 

In view of the above, Congress may want to reduce the Navy's fiscal
year 1994 O&M budget request by $16.3 million to reflect the savings
available by implementing the Navy's lodging policy.  Also, if the
Navy adheres to this new policy, future budgets should reflect
corresponding savings. 


   AIR FORCE TRAVEL FUNDS
-------------------------------------------------------- Appendix I:30

The Air Force operates temporary lodging facilities for airmen and
officers undergoing a permanent change of station, individuals
visiting service members stationed at the installation, reservists on
various types of duty or in a non-duty status, retirees, and others. 
These facilities are similar to efficiency apartments and are
designed to house families for up to 30 days.  The Air Force is the
only service that designates temporary lodging facilities as
mission-essential facilities and maintains them primarily with
appropriated funds.  According to the Air Force, 33 percent of the
occupants of these facilities receive appropriated fund reimbursement
for the lodging fee charged. 

According to Air Force regulation, when the mission of the Air Force
requires a service member to make a permanent change of station, and
the member and his/her authorized dependents cannot immediately
obtain permanent government or private housing at the new station,
the Air Force may use appropriated funds to help support facilities
housing the member and dependents until permanent housing is
reasonably available. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:30.1

The Air Force policy contradicts an August 1987 DOD report to a
congressional committee on the recategorization of MWR activities. 
In its report, DOD designated temporary lodging facilities in support
of official travel as Category A (mission sustaining) and other types
of temporary lodging facilities as Category C (enhanced community
support) or Category D (business).  Category C was eliminated in
1990, and all temporary lodging facilities not in support of official
travel were classified as Category D.  Category A activities are
supported almost entirely by appropriated funds, while Category D
activities receive very limited appropriated fund support. 

Neither the Army nor the Navy provide appropriated fund support for
facilities used to house permanent change-of-station families.  The
Air Force has housed families involved in a permanent change of
station in Category C and D facilities, but unlike the other
services, the Air Force uses appropriated funds to maintain the
temporary facilities. 

The Air Force estimates that it will spend $4.9 million in O&M funds
on temporary lodging facilities in fiscal year 1994.  Because 33
percent of the usage of these facilities ($1.6 million) would be
reimbursed by appropriated funds, the remaining two-thirds ($3.3
million) required to maintain these facilities should be paid out of
MWR funds rather than O&M funds.  Therefore, Congress may want to
reduce the Air Force's fiscal year 1994 O&M budget request by $3.3
million. 


   DOD HUMANITARIAN AND DISASTER
   ASSISTANCE
-------------------------------------------------------- Appendix I:31

In recent natural disasters such as Hurricanes Andrew and Iniki and
Typhoon Omar, the armed forces played a major role in providing
humanitarian and disaster relief assistance.  Providing this
assistance cost the forces several hundred million dollars.  However,
DOD will be reimbursed by the Federal Emergency Management Agency for
the costs incurred. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:31.1

DOD's fiscal year 1994 O&M budget request of $98 million for
humanitarian assistance ($48 million) and disaster relief assistance
($50 million) could be denied.  These amounts are included as part of
the Global Cooperative Initiatives.  Our work on recent disasters,
namely Hurricanes Andrew and Iniki and Typhoon Omar, showed that DOD
expects to be reimbursed for the expenses incurred for humanitarian
and disaster assistance provided during these operations. 

DOD also has a $100-million revolving fund that was established to
provide up-front funding for humanitarian assistance.  However, there
is a lack of clarity within DOD concerning the circumstances under
which the fund can be used, that is, domestic and/or international
disaster assistance.  As a result, little use has been made of the
fund.  Because DOD is reimbursed for domestic disaster assistance
that it provides and a revolving fund already exists, Congress may
wish to direct DOD to use this fund for all humanitarian assistance
efforts where it can be established that the fund will be reimbursed. 
If Congress agrees, it can reduce the Global Cooperative Initiatives
request by $98 million. 


   AIR FORCE UNUSED CARGO CAPACITY
-------------------------------------------------------- Appendix I:32

DOD equips and operates a military airlift capability during
peacetime that provides training to meet military requirements during
war and contingencies.  DOD policy provides that the services will
use this airlift capability for overseas movement of goods and
materiel when it is available.  Such use helps offset the cost of
airlift readiness training, thereby reducing DOD's overall
transportation costs. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:32.1

We have reported that DOD could better coordinate its cargo shipments
with available capacity--particularly for lower priority
shipments--and save $21 million annually in payments to commercial
transportation carriers.\17 Air Force cargo aircraft flying regular
overseas missions continue to operate with substantial amounts of
unfilled capacity--about 36 percent.  At the same time, large
quantities of lower priority DOD cargo was transported overseas by
commercial surface transportation at substantial cost. 


--------------------
\17 Military Airlift:  Greater Use of Peacetime Airlift Cargo
Capacity Would Reduce Costs (GAO/NSIAD-92-263, Sept.  16, 1992). 


   NATIONAL GUARD YOUTH PROGRAMS
-------------------------------------------------------- Appendix I:33

In fiscal year 1993, Congress provided $44 million for the Civilian
Youth Opportunities Pilot Program and $3 million for the Urban Youth
Corps and the Youth Conservation Corps.  These programs were
established under the authority provided in Public Law 102-484.  The
authorizing legislation limits the programs to 10 states. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:33.1

There is a potential to rescind a total of $11.5 million from the
National Guard's fiscal year 1993 budget for these programs. 

The Guard received $44 million to conduct the Civilian Youth
Opportunities Pilot Program in 10 states.  According to
representatives of the National Guard Bureau, there are sufficient
funds to expand the program to 14 states, and the National Guard is
requesting congressional approval to expand the fiscal year 1993
program to 4 additional states.  According to a National Guard Bureau
official, because Congress did not consider expanding the programs,
$8.5 million of program funds are available for recision. 

The National Guard also received $3 million for the Urban Youth Corps
and the Youth Conservation Corps.  The Guard does not want to
establish these programs in the 10 states that are participating in
the Civilian Youth Opportunities Pilot Program.  Instead, it is
requesting congressional approval to establish these programs in 11
other states.  According to a National Guard Bureau official, because
Congress did not consider this request, there are $3 million of
program funds available for recision. 


   AIR FORCE COMPOSITE WINGS
-------------------------------------------------------- Appendix I:34

The Air Force is establishing composite wings composed of various
types of aircraft at Mountain Home Air Force Base, Idaho, and Pope
Air Force Base, North Carolina.  It is also considering establishing
a third wing at Moody Air Force Base, Georgia.  The purpose for
establishing composite wings is to test the conceptual validity of
placing a variety of aircraft types and capabilities at one base
under one commander. 

To establish the two composite wings, the Air Force plans to spend
$143 million and, as of December 31, 1992, had obligated $27.2
million ($24.5 million for O&M and $2.7 million for military
construction).  Of the remaining $116 million,\18 the Air Force plans
to obligate about $3.7 million of O&M funds during fiscal year 1994
through fiscal year 1996 ($700,000 at Mountain Home and Pope and $3
million at Moody). 


--------------------
\18 The figure includes costs for Pope Air Force Base, Mountain Home
Air Force Base, and the Environmental Impact Statement and design
costs for Moody Air Force Base.  The total does not include future
beddown costs for Moody. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:34.1

In May 1993,\19 we concluded that insufficient analysis was performed
before deciding to build force projection composite wings in the
United States.  The specific concerns related to (1) lack of analysis
supporting the decision to build peacetime force projection composite
wings, (2) relative utility of the mix of aircraft in these wings,
and (3) the viability of the concept.  For example, the Air Force has
not established clear criteria validating the concept, nor has it
determined all the costs associated with these wings.  The report
recommended that the Secretary of Defense take no further steps to
implement the force projection composite wings until the additional
analysis had been conducted. 

The Air Force did not concur with our recommendations and stated that
it believes that the three force projection composite wings represent
a significant enhancement over current deployment capabilities,
responsiveness, and military effectiveness.  Additionally, the Air
Force maintained that military judgment and the operations of
analogous composite forces are a sufficient basis for implementing
the composite wing concept. 

Because of the aforementioned issues, Congress may wish to not
authorize or appropriate $1.2 million of O&M funds, one-third of the
O&M funds to be obligated from fiscal year 1994 through fiscal year
1996, until the benefits of force projection composite wings have
been analyzed and the unanswered questions resolved. 


--------------------
\19 Air Force Organization:  More Assessment Needed Before
Implementing Projection Composite Wings (GAO/NSIAD-93-44, May 5,
1993). 


   AIR FORCE PILOT TRAINING
-------------------------------------------------------- Appendix I:35

As part of U.S.  efforts to draw down its military forces, the Air
Force is reducing the number of pilots in its force structure.  By
fiscal year 1995, the Air Force projects that it will need
approximately 15,300 pilots, down from about 22,300 in fiscal year
1989. 

Air Force pilot candidates receive two types of pilot training. 
First, they learn to fly during the 1-year Undergraduate Pilot
Training (UPT) program.  Second, they receive advanced flight
training for 2 to 8 months on a particular weapon system.  Pilots who
complete this training are fully qualified on a weapon system and are
then assigned to an operating air squadron.  The Air Force makes a
substantial investment in the training of its pilots, spending about
$500,000 per pilot in the UPT program and about $800,000 per pilot in
weapon system training. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:35.1

The Air Force's fiscal year 1994 budget request for the UPT program
can be reduced by $131.1 million.  According to our draft report sent
to DOD for comment in August 1993, the Air Force is training more
pilots than it needs and incurring costs unnecessarily.  More pilot
candidates are being sent through the UPT program than there are
cockpit assignments available.  As a result, about half of the pilots
completing the program are temporarily assigned to nonflying
positions (or "banked") before entering weapon system training. 
These banked pilots may remain in their nonflying positions for up to
3 years. 

According to the Air Force, 503 pilot candidates who are scheduled to
enter the UPT program between August 1993 and September 1995 are
expected to be banked.  The Air Force will spend $131.1 million to
send 229 of these pilots to UPT training in fiscal year 1994.  We
believe the Air Force should delay the entry of these pilot
candidates into the UPT program until a sufficient number of cockpit
assignments become available in operating air squadrons to absorb new
pilots.  Therefore, Congress may want to reduce the Air Force O&M
budget by the $131.1 million it will cost to send the 229 pilot
candidates to UPT in fiscal year 1994. 

In discussing this issue with Air Force officials, they told us that
the Air Force had revised its plans so that all pilot candidates
entering UPT in fiscal year 1994 will have flying positions upon
graduation.  The revised plans include assigning a third pilot to
tanker aircraft and increasing the air crew ratio.  However, they did
not provide documentation to support these changes.  For these
reasons, we believe that the Air Force O&M request can still be
reduced. 


   ARMY PILOT TRAINING
-------------------------------------------------------- Appendix I:36

The Army provides basic and advanced flight training to pilots for
both its rotary-wing and fixed-wing fleets.  The number of aircraft
and force structure are key factors in determining the number of
pilots to be trained.  Basic flight training, known as undergraduate
training, is entry-level training usually completed on a UH-1
aircraft.  Graduate, or advanced flight training, is used to train
Army aviators on systems more advanced than the UH-1, such as the
UH-60 Black Hawk or the AH-64 Apache. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:36.1

The Army's fiscal year 1994 budget request could be reduced by $28.3
million.  The Army plans to spend $257.4 million in fiscal year 1994
to provide undergraduate training to 2,299 pilots and to provide
graduate training to 2,122 pilots.  The number of pilots to be
trained is based in part on the number of aircraft expected to be in
the fleet in fiscal year 1994.  The number of pilots to be trained
and the Army's budget request is based on the January 1992 estimate
of force structure and aircraft levels for fiscal year 1994. 

Since the Army submitted its budget, a new aircraft level and force
structure plan has been developed.  The new fiscal year 1994 plan,
dated July 1993, calls for 693 fewer aircraft, a decrease of 11
percent, from the force structure anticipated when the training
budget was prepared.  Therefore, the number of pilot candidates could
be reduced by a corresponding amount, and the fiscal year 1994 O&M
budget request could be reduced by $28.3 million. 


   AIR FORCE RESERVE OFFICER
   TRAINING CORPS SCHOLARSHIP
-------------------------------------------------------- Appendix I:37

Air Force officers come from four sources:  the Air Force Academy,
the Reserve Officer Training Corps (ROTC), the Officer Training
Squadron, and the Airmen Education and Commissioning Program.  ROTC,
the largest source of Air Force officers, supplements academic
education with military education and training at over 147 colleges
across the country. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:37.1

The fiscal year 1994 budget request could be reduced by $3.1 million. 
The fiscal year 1994 O&M ROTC account reflects an increase of $3.1
million for 164 scholarships in addition to the fiscal year 1993
baseline of 3,019 scholarships.  The Air Force justification for its
fiscal year 1994 budget estimate was that 1,600 ROTC graduates will
be commissioned into the service in fiscal year 1994 as compared to
1,515 in fiscal year 1993.  After the budget was submitted, the
fiscal year 1993 figure decreased to 1,350 graduates due to the
drawdown within the ROTC program.  Since the ROTC program is
downsizing to reflect overall trends at DOD, we believe the Air Force
is not justified in requesting an increase to augment the ROTC
program. 


   ARMY CIVILIAN PAY
-------------------------------------------------------- Appendix I:38

The Army's fiscal year 1994 O&M budget request totaled $20.3 billion
for direct and reimbursable program authority.  The $20.3 billion
includes $7.8 billion to pay full-time, part-time, and intermittent
U.S.  civilian and direct-hire foreign national employees.  Of the
$7.8 billion, $5.7 billion is to be funded from the Army's O&M
appropriation as direct programming authority, and the remaining $2.1
billion is to be funded from anticipated reimbursements to the O&M
account. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:38.1

Our review disclosed that the Army's budget request for civilian
personnel could be reduced by $194 million because the Army expects
actual civilian personnel costs to be less than the amount requested
in the President's budget.  At the time the President's budget was
submitted to the Congress, the Army requested funding authority of
$7.8 billion for civilian personnel.  However, documentation
subsequently submitted to Congress to support the President's budget
showed that the Army had reduced its requirements to $7.6 billion--a
reduction of $194 million.  Although the civilian pay accounts were
reduced, the total amount of the budget request remained the
same--$20.3 billion.  Therefore, the budget request includes $194
million of budget authority that is not represented by specific
programs. 

According to an Army budget official, the difference in civilian pay
between the $7.6 billion and the $7.8 billion stated in the
President's budget submission is because of a timing difference.  The
official said that the President's budget, which includes personnel
data, is due to the Office of the Secretary of Defense and Congress
prior to final adjustments being made to the Army's data base.  As
adjustments occur, disconnects between the President's budget
submission and justification books increase.  He also said that he
could not tell us to what other accounts the $194 million in civilian
pay was reallocated because the budget system does not keep track of
individual budget decision changes.  Since the civilian pay account
was overstated and there is no audit trail on how and where the funds
were reallocated, Congress could reduce the Army's budget request by
$194 million. 


   NAVY CIVILIAN PAY
-------------------------------------------------------- Appendix I:39

The civilian personnel costs are developed using a work-year cost
factor for work years as derived from the end strength on board at
the end of the prior fiscal year, which is adjusted for additions and
reductions to be implemented during the current fiscal year.  For
example, the fiscal year 1994 personnel costs are based on the
budgeted fiscal year 1993 end strength adjusted for programmed
changes in fiscal year 1994. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:39.1

Because the fiscal year 1993 end strength will be less than planned,
the Navy's 1994 O&M budget could be reduced by $55 million.  Based on
a review of the Navy's O&M civilian personnel staffing pattern for
fiscal year 1993, we estimate that the Navy will have 3,337 fewer
personnel on board at the end of the fiscal year than its planned end
strength.  Whenever the actual end strength is less than the planned,
the following year's work year level is adjusted by one-half of the
amount by which the actual differed from the planned.  Accordingly,
the fiscal year 1994 work- year level used in determining the budget
request was overstated by 1,668.5 work years or about $55 million. 
Navy officials, in commenting on the overstated work-year level, said
that $7.7 million of the $55 million should be applied to the Bureau
of Naval Medicine's budget. 


   AIR FORCE CIVILIAN PAY
-------------------------------------------------------- Appendix I:40

Congress included a provision in the fiscal year 1993 Defense
Appropriations Act that, according to DOD, reduced the number of
overseas civilian personnel positions that could be funded by 25
percent.  The intent of this provision was to encourage overseas
commands to obtain funding for the remaining personnel positions from
the host country.  The reduction applied to foreign national civilian
personnel as well as U.S.  civilian personnel.  Although the
provision only covered fiscal year 1993, Congress is still interested
in the issue of foreign national personnel. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:40.1

The Air Force's fiscal year 1994 budget request of $142.6 million
could be reduced by $56.2 million.  During fiscal year 1992 and
fiscal year 1993, the U.S.  Air Force, Europe, (USAFE) funded foreign
national pay at 70 percent of the total requirement.  In its fiscal
year 1994 budget submission, the Air Force requested $92.4 million
for the USAFE's foreign national pay--70 percent of the requirement. 

After the budget submission, the Air Force added $56.2 million to the
budget to increase its foreign national pay account to $142.6
million, 94.7 percent of the requirement.  In view of the fact that
Congress' intent seems to be to reduce funding for foreign national
personnel, it may want to reduce the Air Force's budget request back
to the 70-percent level.  If so, the budget request can be reduced as
an incentive for the Command to seek funds for foreign national
payroll from the host country. 


   DOD'S REDUCED FUNDING FOR
   SPECIAL EVENTS
-------------------------------------------------------- Appendix I:41

The Assistant Secretary of Defense (Force Management and Personnel)
is responsible for managing DOD's support to international special
events.  The goal of DOD and the event organizers is to ensure
security and safety of all participants, volunteers, spectators, and
visiting dignitaries.  DOD possesses many security-related assets
that can assist communities in staging a safe and secure event. 

Congress has provided funds to DOD in support of these events.  The
focus of DOD support is to loan event organizers security-related
assets, such as communications and physical security equipment, when
resources are not available from another public or private source. 
In essence, DOD was to be the source of last resort.  Additionally,
DOD provides advice and training to event organizers and law
enforcement planners. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:41.1

At least $5.1 million in prior years' appropriations could be
rescinded.  In fiscal years 1992 and 1993, Congress appropriated $22
million for DOD support of international special events.\20 Of the
$22 million, DOD anticipates spending $8.8 million by the end of
fiscal year 1993, leaving an unobligated balance of $13.2 million. 
Rather than requesting additional appropriations for fiscal year
1994, DOD plans to seek congressional approval to extend the
availability of unobligated money into fiscal year 1994. 

Officials in the Special Events office said that they do not request
reimbursement from event sponsors because Congress appropriated the
funds for use in the special events.  Also, it is questionable that
DOD is the source of last resort for some of the equipment and
services, such as fences and detection devices, provided because
these items do not appear to be unique to DOD. 

Congress may want to rescind $5.1 million of the prior years'
appropriations--the difference between the $13.2 million unobligated
balance in fiscal year 1993 and the estimated expenses in fiscal year
1994--because this amount is not needed for estimated expenses
through fiscal year 1994.  Congress may also wish to require DOD to
seek reimbursement from event sponsors for those services and
equipment items, such as fences and detection devices, provided by
DOD that are not unique to DOD. 


--------------------
\20 Public Law 102-396, section 9104, gave DOD the authority to carry
over 1992 money through fiscal year 1993. 


   AIR FORCE REAL PROPERTY
   MAINTENANCE AT PLATTSBURGH
-------------------------------------------------------- Appendix I:42

Repair and maintenance funds are to be used for major repairs and
minor construction projects.  The Air Force's budget request for
fiscal year 1994 included $3.1 million for such projects at
Plattsburgh Air Force Base, New York.  In June 1993, the Defense Base
Closure and Realignment Commission identified Plattsburgh Air Force
Base as one of the bases to be closed. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:42.1

Our analysis showed that the Air Force had included major repairs and
minor construction projects in its fiscal year 1994 request for
repair and maintenance projects totaling $3.1 million at Plattsburgh. 
Because the base is scheduled for closure, Congress could reduce the
Air Force's request for repair and maintenance funds by $3.1 million. 


   AIR FORCE REAL PROPERTY
   MAINTENANCE AT USAFE
-------------------------------------------------------- Appendix I:43

Real property maintenance funding is used to pay the day-to-day costs
of operating, maintaining, and repairing military facilities.  The
Air Force's fiscal year 1994 O&M budget request included $115.7
million for real property maintenance activities at USAFE. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:43.1

Our review showed that USAFE's real property maintenance requirements
were overstated by $32.7 million, as shown in table I.7. 



                               Table I.7
                
                  Overstated Real Property Maintenance
                         requirements at USAFE

                         (Dollars in millions)

                                        Budget  Requiremen   Potential
Activity                               request           t   reduction
----------------------------------  ----------  ----------  ----------
Utilities                                $57.8       $56.1        $1.7
Contract engineering, maintenance,        39.2        15.6        23.6
 repair, and minor construction
Leases                                    18.7        11.3         7.4
======================================================================
Total                                   $115.7       $83.0       $32.7
----------------------------------------------------------------------
As a result, Congress could reduce USAFE's funding for real property
maintenance activities by $32.7 million. 


   NAVY UNDERSEA SURVEILLANCE
-------------------------------------------------------- Appendix I:44

The Navy's Integrated Undersea Surveillance System and one of its
components, the Sound Surveillance System (SOSUS), is an acoustic
sensor program that collects and processes undersea acoustic data. 
The system's primary purpose is to detect enemy submarine movements. 
In fiscal year 1993, $129.4 million of O&M funds were apportioned to
SOSUS. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:44.1

Our analysis showed that, based on the current actual and planned
execution of the program for fiscal years 1993 and 1994, $10.1
million in fiscal year 1993 and $12.8 million in fiscal year 1994 are
in excess of program needs.  SOSUS program officials agreed that the
program was overfunded but said that the funds were needed for other
unfunded requirements. 

In May 1993, we questioned the need for the current and future
funding levels requested for SOSUS.  We recommended reductions in the
program based on a reduced level of threat. 

The Navy plans to operate and maintain SOSUS capability at a level
higher than we had recommended because the Navy plans to upgrade the
system with enhanced technology and targets identification
capability.  Additionally, the Navy plans to use the system to
perform new functions, such as tracking migrating whales. 

In view of the above, Congress may want to reduce the Navy's fiscal
year 1994 O&M request by $12.8 million. 


   DOD COUNTER-DRUG OPERATING
   TEMPO
-------------------------------------------------------- Appendix I:45

Since fiscal year 1989, DOD has been the lead agency for detecting
and monitoring air and maritime shipments of illegal drugs in transit
to the United States.  Funds are appropriated to the DOD Drug
Interdiction and Counter Drug activity and transferred to the Army,
Navy, and Air Force.  DOD is requesting $1.1 billion in fiscal year
1994.  A portion of these funds is used to conduct surveillance
missions in support of civilian law enforcement agencies that
interdict drug traffickers. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:45.1

Based on our analysis, we believe that DOD's counter-drug OPTEMPO
request included in the appropriation for the Drug Interdiction and
Counter Drug activity can be reduced by $78.6 million.  Such a
reduction would bring the level of OPTEMPO funding for the Army, Air
Force, and Navy to the 1990 level.  Our draft report evaluating the
Air Force and the Navy concludes that counter-drug flying hours and
steaming days are not providing a reasonable return on investment. 
Since 1990, DOD's funding for OPTEMPO has more than doubled. 
Although OPTEMPO has become one of the most expensive initiatives in
the national drug control strategy, the interdiction effort it
supports is not working, and the estimated flow of cocaine in the
United States remains appreciably undiminished.  Furthermore, despite
DOD's claims to the contrary, we have found that counter-drug
operations do not provide equivalent training for the Air Force's and
the Navy's primary defense mission. 

The proposed reductions would not seriously impair the drug war
because it would eliminate flying hours and steaming days that are
allocated to inefficient routine surveillance patrols.  In addition,
we believe that such a reduction would not seriously impair military
readiness because the reduction would eliminate flying hours and
steaming days that have to be duplicated to meet training
requirements. 


   NAVY SUPPORT FOR MWR ACTIVITIES
-------------------------------------------------------- Appendix I:46

MWR programs are established to enhance the morale and well-being of
military personnel, their dependents, and eligible civilian
personnel.  MWR programs categorized as mission essential are funded
primarily with appropriated funds and some nonappropriated funds. 
Other MWR programs are funded with larger shares of nonappropriated
funds.  DOD is in the process of reviewing the various MWR programs
to determine which should be funded with appropriated and
nonappropriated funds. 


      RESULTS OF ANALYSIS
------------------------------------------------------ Appendix I:46.1

The Navy included $65 million in its fiscal year 1994 O&M budget
request to support MWR programs.  The $65 million will free up
nonappropriated funds, which would be used to fund construction of
MWR facilities, local MWR projects not eligible for funding from the
central MWR fund, and MWR projects that do not generate sufficient
funds to pay the cost of operation. 

Of the $65 million of O&M funds, $23.5 million will be used to pay
971 MWR employee positions currently paid from nonappropriated funds. 
Some of the positions to be paid for from O&M funds should be paid
with nonappropriated funds because the major beneficiaries of the
services received are dependents and other eligible personnel. 

Because of the aforementioned, Congress may want to reduce the Navy's
request for $65 million to fund MWR programs until DOD determines
what MWR projects should be supported with appropriated funds. 


OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix II

This review is one of a series that examines defense budget issues. 
Our objective was to assess the adequacy of the justifications for
certain O&M accounts included in the Army's, the Navy's, the Air
Force's, the National Guard's, and DOD's O&M budget requests for
fiscal year 1994 and to determine whether the programs should be
funded in the amounts requested. 

Our review approach consisted of interviews with program and budget
officials responsible for managing the programs and/or preparing the
budget requests; review and analysis of financial, budget support,
and program documents related to the O&M issue being reviewed;
analysis of prior year funding levels and expenditures to identify
trends; and review of recently issued GAO reports and ongoing
assignments to identify O&M issues that could affect the fiscal year
1994 budget requests. 

Our review was performed at Army, Navy, Air Force, National Guard,
and DOD headquarters; U.S.  Forces Command; USAREUR; U.S.  Army
Training and Doctrine Command; Atlantic Fleet; Pacific Fleet; USAFE;
Air Combat Command; Oklahoma City Air Logistics Center; and Air Force
Materiel Command.  We performed our review from March to August 1993
in accordance with generally accepted government auditing standards. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Norman J.  Rabkin, Associate Director
Robert J.  Lane, Assistant Director
Richard Dasher, Evaluator-in-Charge
Carole F.  Coffey, Evaluator
Alan M.  Byroade, Evaluator
Merrie C.  Nichols-Dixon, Evaluator-in-Charge
Maria J.  Santos, Evaluator

ATLANTA REGIONAL OFFICE

Harry F.  Jobes, Site Senior
Troy D.  Thompson, Evaluator

CINCINNATI REGIONAL OFFICE

Bruce D.  Fairbairn, Regional Assignment Manager
Leonard L.  Benson, Evaluator

EUROPEAN OFFICE

Elliott C.  Smith, Assignment Manager
Inez M.  Azcona, Site Senior
Jose M.  Pena, III, Evaluator
George A.  Taylor, Jr., Site Senior
Neyla Arnas, Evaluator

KANSAS CITY REGIONAL OFFICE

Virgil N.  Schroeder, Regional Assignment Manager
Denise M.  Wempe, Regional Assignment Manager
Tommy J.  Patterson, Evaluator
Gary L.  Nelson, Evaluator

LOS ANGELES REGIONAL OFFICE

Harold D.  Reich, Evaluator
James D.  Nolan, Evaluator

NORFOLK REGIONAL OFFICE

Hugh E.  Brady, Jr., Regional Assignment Manager
Thomas A.  Pantelides, Evaluator-in-Charge
Robert K, Aughenbaugh, Evaluator
Julie C.  Washington, Evaluator
Raul S.  Cajulis, Evaluator
Craig A.  Hall, Evaluator
Brenda M.  Waterfield, Site Senior
Susan J.  Schildkret, Evaluator


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