1996 DOD Budget: Potential Reductions to Operation and Maintenance
Programs (Briefing Report, 09/26/95, GAO/NSIAD-95-200BR).

GAO reviewed the Department of Defense's (DOD) and the military
services' fiscal year 1996 operation and maintenance (O&M) budget
requests, focusing on potential reductions in the amounts requested for
the O&M accounts.

GAO found that: (1) the services' O&M budget requests could be reduced
by a total of $4.9 billion; (2) Congress needs to consider whether DOD
and State Department budget requests for the Partnership for Peace
program are duplicative and whether the program is effective; and (3)
Congress could reduce the services' budget requests due to the services'
diversion of O&M funds to other purposes, unobligated balances and
backlogged work from prior fiscal years, DOD and the services'
overstatement of or failure to justify needs, the potential
consolidation or termination of certain commissary services, rengineered
DOD travel processes, the termination of the services' inappropriate
practice of funding Defense Business Operating Fund losses through
operating appropriations, the transfer of funding for the Junior Reserve
Officer Training Corps program to a nonDOD account, and the
consolidation of recruiting staffs and closing of unproductive
recruiting offices.

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

 REPORTNUM:  NSIAD-95-200BR
     TITLE:  1996 DOD Budget: Potential Reductions to Operation and 
             Maintenance Programs
      DATE:  09/26/95
   SUBJECT:  Budget cuts
             Military operations
             Military budgets
             Military appropriations
             Unobligated budget balances
             Federal property management
             Military training
             Civilian employees
             International relations
             Military inventories
IDENTIFIER:  NATO Partnership for Peace Program
             International Military Education and Training Program
             Foreign Military Sales Program
             Army Training Resource Model
             Air Force Commanders Facility Assessment Process
             Defense Business Operations Fund
             Junior Reserve Officers Training Corps
             Reserve Officer Training Corps
             National Guard Civilian Youth Opportunities Pilot Program
             National Guard ChalleNGe Program
             National Guard Starbase Program
             DOD CINC Traditional Program
             Honduras
             Army FORSCOM Environmental Compliance Project
             1996 Olympic Games
             DOD Legacy Resource Management Program
             Army Afloat Prepositioning Program
             
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Cover
================================================================ COVER


Report to Congressional Committees

September 1995

1996 DOD BUDGET - POTENTIAL
REDUCTIONS TO OPERATION AND
MAINTENANCE PROGRAM

GAO/NSIAD-95-200BR

1996 DOD Budget

(703091)


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

  AAFES - Army and Air Force Exchange Service
  ACC - Air Combat Command
  CAP - Civil Air Patrol
  CINC - Commander in Chief
  CRAMSI - Consolidated Residual Asset Management Screening
     Information
  DeCA - Defense Commissary Agency
  DBOF - Defense Business Operating Fund
  DFSC - Defense Fuel Supply Center
  DOD - Department of Defense
  FORSCOM - U.S.  Forces Command
  JROTC - Junior Reserve Officers' Training Corps
  LMSR - Large Medium Speed Roll-on/Roll-off
  NATO - North Atlantic Treaty Organization
  Nexcom - Navy Exchange Command
  O&M - operation and maintenance
  OPTEMPO - operating tempo
  PACAF - Pacific Air Forces Command
  ROTC - Reserve Officers' Training Corps
  TRM - Training Resource Model
  USAREUR - U.S.  Army, Europe

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


B-258888

September 26, 1995

Congressional Committees

This report evaluates the military services' and Department of
Defense's (DOD) fiscal year 1996 operation and maintenance (O&M)
budget requests totaling $70.3 billion.  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.  Air Forces, Europe; Air Combat
Command; Air Materiel Command; and the Atlantic and Pacific Fleets. 
We also reviewed selected activities managed at the headquarters of
the Army, Navy, and Air Force, as well as some DOD-managed
activities.  The specific commands were included in our review
because they were the larger recipients of O&M funds.  Specific
programs were included because (1) O&M funding levels are increasing,
(2) our ongoing or issued reports identified O&M implications, or (3)
congressional committees have expressed a specific interest in the
program. 

As shown in table 1, we identified potential reductions of about $4.9
billion to the services' and DOD activities' fiscal year 1996 O&M
budget requests.  In addition, there is a program issue that we
believe you should be aware of because funding for the program is
divided between the DOD and the Department of State budgets.  As a
result, there is no one Committee that has complete program oversight
to ensure that program efforts are effective and not duplicative. 
The program, referred to as Partnership for Peace, is designed to
encourage joint planning, training, and military exercises with North
Atlantic Treaty Organization (NATO) forces and to promote greater
partner interoperability.  The fiscal year 1996 DOD-wide O&M budget
request includes $40 million for the program for partner exercise
expenses and interoperability programs, including an information
management system, regional airspace initiative, defense resource
management program, and unit exchanges.  At the same time, $60
million is being requested by the Department of State for this same
program for International Military Education and Training and Foreign
Military Sales. 



                                     Table 1
                     
                     Potential Reductions to the Fiscal Year
                       1996 O&M Budget Requests by Program
                                     Category

                              (Dollars in millions)

Category                    Army        Navy   Air Force     Defense       Total
--------------------  ----------  ----------  ----------  ----------  ==========
Depot maintenance          $27.0      $339.0      $522.6                  $888.6
Operating tempo            840.0                                           840.0
Civilian pay               350.2        13.8        88.1       $74.7       526.8
Unobligated funds          264.8       113.2       127.5                   505.5
Real property                                      481.4                   481.4
 maintenance
Bulk fuel                   69.0       136.0       129.0        52.0       386.0
Commissaries                                                   331.5       331.5
Travel                                                         220.0       220.0
O&M pass through to         53.5       158.0                               211.5
 Defense Business
 Operating Fund
Junior Reserve              74.5        24.4        25.4                   124.3
 Officers' Training
 Corps
Spare and repair            46.7        38.4                                85.1
 parts
Youth programs                                                  61.4        61.4
Flying hours                 9.0        14.0        11.1                    34.1
Commander in Chief          20.0         8.0         5.0                    33.0
 program
Soto Cano                   24.6                     7.2                    31.8
 facilities,
 Honduras
Environmental               19.5                                            19.5
 compliance
Recruiting                  18.4                                            18.4
Support aircraft                                    18.1                    18.1
Special events                                                  15.0        15.0
Legacy programs                                                 10.0        10.0
Prepositioning               5.0                                             5.0
 afloat program
Civil Air Patrol                                                 4.0         4.0
================================================================================
Total                   $1,822.2      $844.8    $1,415.4      $768.6    $4,851.0
Pilot training\a                                                             0.0
--------------------------------------------------------------------------------
\a Because information was not available to determine how many pilot
candidates should be trained, we could not determine what the budget
reductions should be. 

In May, June, and July 1995, we provided your staff with the
preliminary results of our work.  This report summarizes and updates
that information.  The following sections briefly discuss each of the
potential reductions. 


   DEPOT MAINTENANCE FUNDING
------------------------------------------------------------ Letter :1

The fiscal year 1996 depot maintenance funding levels for the Army,
Navy, and Air Force can be reduced by $888.6 million for the
following reasons: 

  Large amounts of money provided by Congress to the Army and the
     Navy for depot maintenance are used for other purposes.  For
     fiscal years 1993 to 1995, the Army and the Navy received $591
     million more than they requested for depot maintenance, and for
     fiscal years 1993 and 1994, the amount of depot maintenance
     performed by the two services was $838 million less than the
     amount provided and $418 million less than the amount
     requested.\1 The funds not used for depot maintenance were used
     to fund contingency operations, base support, and real property
     maintenance.  Army and Navy officials told us that even though
     the amount of depot maintenance executed was less than the
     amount of funds requested, the readiness of the forces has not
     yet been affected.  They said, however, that there could be some
     long-term effect if funding levels were reduced to a point where
     the services could not repair needed inoperable equipment and
     stock levels of major components and assemblies are drawn down
     rather than the equipment being repaired. 

Based on a percentage comparison of the amount requested and the
level of execution in fiscal year 1994 (the last full year for which
execution data was available), we estimate that, the Army's requested
funding level for fiscal year 1996 could be reduced $27 million and
the Navy's could be reduced $339 million.  The proposed reduction is
the difference between the Army's and the Navy's requests for fiscal
year 1994 and what they executed in the same fiscal year. 

  The amount of funded depot maintenance work carried forward from
     fiscal year 1994 to 1995 by the Air Force exceeded the amount of
     work that can be performed by the depots during the fiscal year. 
     Air Force officials believe that a workload carryover of about 3
     months for in-house maintenance work and about 4 months of
     contract maintenance work is needed to transition from one
     fiscal year to the next.  Our analysis showed that the actual
     carryover from fiscal year 1994 to fiscal year 1995 represented
     4 months of in-house work and about 7 months of contract work. 
     The difference between what is needed for the transition and
     what was actually carried over equates to about $368.5 million. 
     Congress has repeatedly expressed concerns about providing funds
     for maintenance work that cannot be completed in the fiscal year
     for which the funds are appropriated.  Accordingly, the Air
     Force's fiscal year 1996 budget request could be reduced by
     $368.5 million. 

  The amount of funds requested by the Air Force exceeds the funding
     level guidance Congress provided in the conference report that
     accompanied the fiscal year 1995 DOD appropriations act.  In
     that report, Congress directed the services to fund future depot
     maintenance programs at a level equal to at least 80 percent of
     their depot maintenance requirements.  The Air Force Chief of
     Staff has testified that the funding level for fiscal year 1995
     represented 80 percent of the depot maintenance requirements,
     and that the unfunded requirements (61 aircraft and 201 engines)
     represent an acceptable risk given the current world situation. 
     The Chief of Staff went on to say that no aircraft would be
     grounded as a result of deferred maintenance or lack of
     serviceable engines.  For fiscal year 1996, the Air Force
     requested $1.4 billion for depot maintenance--90 percent of its
     depot maintenance requirements of about $1.541 billion.  In view
     of congressional guidance and the fact that the prior year's
     funding level of 80 percent of requirements did not adversely
     impact readiness, Congress could reduce the Air Force's request
     by $154.1 million. 

In commenting on a draft of this report, a Navy official said that
the situation that occurred in fiscal year 1994 where the Navy moved
a large portion of its depot maintenance funds to other programs was
atypical.  He said that the funds were needed to pay for the Navy
flying hour program and contingencies in Haiti and Cuba, and that the
funds were available from the depot maintenance account primarily
because the Navy force structure was being reduced.  He went on to
say that the budget request for fiscal year 1996 was adjusted to
reflect the reduced force structure and that depot maintenance funds
would not be readily available to fund other programs. 

While it is premature to determine what the situation will be in
fiscal year 1996, it should be noted that the situation that occurred
in fiscal year 1994 was not atypical.  The same thing occurred in
fiscal year 1993 where the Navy did not use all of its depot
maintenance funding for that purpose.  Therefore, we believe our
analysis of potential budget reductions in the depot maintenance area
remains valid. 

The Army and the Air Force did not provide any information that would
lead us to change our position on this matter. 


--------------------
\1 Depot Maintenance:  Some Funds Intended for Maintenance Are Used
for Other Purposes (GAO/NSIAD-95-124, July 6, 1995). 


   ARMY'S OPERATING TEMPO BUDGET
   REQUEST
------------------------------------------------------------ Letter :2

The Army uses the Training Resource Model (TRM) to compute its
operating tempo (OPTEMPO) requirements.  OPTEMPO refers to the pace
of operations and training that units need in order to achieve a
prescribed level of readiness.  TRM contains outdated assumptions
concerning the (1) type and frequency of training exercises to be
conducted, (2) number of miles to be driven, and (3) availability of
gunnery ranges and maneuver areas.  In April 1995, we reported\2 that
TRM overstated the training requirements needed for Army units to
achieve their prescribed level of readiness.  We reported that during
fiscal years 1993 and 1994, Army units diverted about one-third of
their training funds--about $1.2 billion of the $3.6 billion they
received for the two fiscal years--to other purposes, such as base
operations, real property maintenance, and contingency operations. 
More specifically, in fiscal year 1993, Army units diverted about
$384 million, or 24 percent of their training funds, and in fiscal
year 1994 they diverted about $868 million, or 42 percent of their
training funds.  Although the Army had trained at a level less than
that supposedly needed to attain the top readiness level for at least
the last 2 years, the units had consistently reported achieving the
desired readiness level.  The only exception to this was during the
last quarter in fiscal year 1994 when two of the four divisions in
our review reported degraded readiness conditions due to the lack of
training funds.  However, the total funds shortage was $30
million--about 3.5 percent of the $868 million of training funds that
the Army diverted from the divisions during the year for other
purposes. 

In commenting on a draft of this report, Army officials said that
they believed that fiscal year 1994 was an atypical year because the
Army was forced to use OPTEMPO funds to meet other funding
shortfalls.  Although the Army contends that fiscal year 1994 was
atypical, it is important to note that the Army also diverted funds
in fiscal year 1993 and according to the Army's second quarter report
on readiness limitations, the fiscal year 1995 OPTEMPO program will
also be underexecuted.  However, we could not determine the extent of
underexecution for the full year. 

For fiscal year 1996, the Army has requested $2.52 billion for ground
OPTEMPO.  Based on the average percentage of OPTEMPO funds that the
Army diverted to other purposes in fiscal years 1993 and 1994 (33
percent), we estimate the Army's fiscal year 1996 request could be
reduced about $840 million. 


--------------------
\2 Army Training:  One-Third of 1993 and 1994 Budgeted Funds Were
Used for Other Purposes (GAO/NSIAD-95-71, Apr.  7, 1995).  This
report was based on our review at two major commands--U.S.  Forces
Command and U.S.  Army, Europe, which account for about 80 percent of
the Army's OPTEMPO funding. 


   CIVILIAN PERSONNEL REQUIREMENTS
------------------------------------------------------------ Letter :3

The Army, Navy, Air Force, and DOD fiscal year 1996 budget requests
for civilian personnel could be reduced $526.8 million\3 for the
following reasons: 

  The projected civilian personnel levels at the beginning of fiscal
     year 1996 are less than the services used for determining their
     budget requests--$243.8 million. 

  The amount of funds needed for separation incentives is less than
     requested because the services will not have to separate as many
     personnel as originally expected--$43.1 million. 

  The amount requested in the budget submission differs from the
     amount shown in the budget justification documents--$239.9
     million. 

Based on the actual number of personnel onboard as of March 1995, we
estimate that the actual end-strength at the end of fiscal year
1995--the beginning figure for fiscal year 1996--will be about
13,000\4 less than the figure used by the services in determining
their fiscal year 1996 budget request.  Because the services used a
larger beginning figure, the number of work years used in the budget
request is also overstated by about
6,700 work years.  The overstated personnel requirements equate to
about $320 million.  After adjusting the total overstatement to
reflect program changes that the services expect to occur during the
fiscal year, the overstatement is reduced to $243.8 million. 

Because there will be fewer personnel at the beginning of fiscal year
1996, the services will have to separate fewer personnel to achieve
their budgeted end-strength at the end of the fiscal year. 
Consequently, the services will have to pay out less in separation
incentives than was requested in the budgets.  Based on the number of
personnel the services expected to pay separation incentives to in
fiscal year 1996, we estimate that the amount of separation
incentives in the budget requests are overstated by $43.1 million. 

We also found that the amounts shown in the President's budget were
greater than the amount shown in the justification documents.  The
total effect of these differences in all the services was about
$239.9 million.  For example, the Army's O&M budget request included
101,862 direct-hire/direct-funded work years in its budget
submission.  According to Army officials, the correct
direct-hire/direct-funded work years should have been 96,724 work
years--a difference of 5,138 work years with a value of about $231.7
million.  The officials stated that a coding error caused direct
funding for civilian personnel to be overstated and direct funding
for contracts to be understated by the same amount.  The officials
also said it would be unfortunate to reduce the request due to an
administrative error and that further reductions would require them
to cut contracts for (1) end item management; (2) power projection
command, control, communications, and computer infrastructure; (3)
real property maintenance; and (4) environmental compliance. 

According to the documentation submitted in support of the budget
request, the overstated work years should have been reflected in the
reimbursable section, not the contract section.  If, in fact, the
work years should have been shown in the reimbursable section, the
Army would not need funds appropriated for these work years because
some other military department or appropriation would pay the Army
for the services provided. 

Table 2 shows the net effect of the overstatement of work years,
separation incentives, and the variance between the President's
budget presentation and the supporting documentation. 



                                                                        Table 2
                                                        
                                                          Civilian Personnel Overstatement in
                                                            Fiscal Year 1996 Budget Requests

                                                                 (Dollars in thousands)


                                                                  Difference
                                                                converted to
                                                                     reflect
                                                             overstated work                                                  Overstatement
                 Projected personnel    Personnel strength     years used in                 Adjustments                     between budget
                         strength at     used in preparing         preparing                         for      Overstated         submission
                 beginning of fiscal   budget estimate for  fiscal year 1996  Overstated   known program      separation     and supporting
Service                    year 1996      fiscal year 1996   budget estimate  work years         changes      incentives      documentation       Total
--------------  --------------------  --------------------  ----------------  ----------  --------------  --------------  -----------------  ==========
Army                         265,549               269,673             2,062     $97,526              \a         $21,000         $231,716\b    $350,242
Navy                         252,281               254,154             1,164      59,239       ($52,600)             952              6,200      13,791
Air Force                    186,258               190,061             1,902      88,771        (23,847)          21,181              1,991      88,096
DOD activities               149,789               153,039             1,574      74,700              \a              \a                 \a      74,700
=======================================================================================================================================================
Total                        853,877               866,927             6,702    $320,236       $(76,447)         $43,133           $239,907    $526,829
-------------------------------------------------------------------------------------------------------------------------------------------------------
\a Information not readily available. 

\b The $231.7 million represents only O&M Army.  The other amounts
are for all appropriations.  However, information was not readily
available to show a breakdown of the overstatements by
appropriations. 

A Navy official, in commenting on a draft of this report, said that
the $6.6 million difference between the columns "overstated work
years" and "adjustments for known program changes" was based on March
1995 data provided by the Navy.  He said that more recent data shows
that the Navy's work years are only overstated by about $5 million
rather than the $6.6 million shown in the report. 


--------------------
\3 While the vast majority of the reductions apply to the O&M
appropriation, there are reductions that apply to other
appropriations.  Neither we nor DOD could readily identify the
specific amounts for each appropriation. 

\4 According to DOD calculations, the 13,000 personnel equates to
about 6,700 work years. 


   UNOBLIGATED BALANCES FROM PRIOR
   YEARS' O&M APPROPRIATIONS
------------------------------------------------------------ Letter :4

Unobligated balances of prior years' O&M appropriations are generally
not available for new obligations and may only be used for
adjustments to existing obligations for the specific fiscal year of
the appropriation and to fund projected foreign currency
fluctuations.  The unobligated balances may be carried forward for 5
years. 

As of September 30, 1994, the Army, Navy, and Air Force had
unobligated balances from prior years' O&M appropriations totaling
$2.3 billion.  Service officials stated that the unobligated balances
were needed to satisfy upward adjustments to obligations incurred in
that fiscal year but have not been liquidated. 

Our analysis showed that unobligated balances have been increasing
rather than decreasing and that the average annual increase over the
last
4 fiscal years has been $264.8 million in the Army, $113.2 million in
the Navy, and $127.5 million in the Air Force.  The reason for the
increasing balances is that the amount of the liquidations is
generally less than the amount initially obligated. 

This overall trend indicates that services' estimates of O&M funds
needed for obligational authority are overstated.  Therefore,
Congress could reduce the services' O&M funding requests by $505.5
million. 

In commenting on a draft of this report, a DOD official said that it
is not possible to determine in advance what obligations may be
liquidated in an amount less than initially obligated.  Therefore,
DOD considers the fact that unobligated balances from prior years'
appropriations keep increasing as a "cost of doing business."


   AIR FORCE REAL PROPERTY
   MAINTENANCE
------------------------------------------------------------ Letter :5

For the fiscal year 1996 budget process, the Air Force determined its
real property maintenance requirements by using a prioritization
process called the Commanders' Facility Assessment.  This process
required commanders at each installation to identify the highest
priority maintenance problems and evaluate the impact of the problems
on their mission. 

For fiscal year 1996, the Air Force requested $1.5 billion, an
increase of $470 million over the fiscal year 1995 funding level. 
According to Air Force officials, the additional funds are needed to
compensate for prior years' underfunding.  Actually, however, real
property maintenance spending in prior years has been greater than
the amount appropriated because funds from other O&M activities have
been diverted to the real property maintenance account. 

According to the budget justification documents supporting the fiscal
year 1996 request, the Air Force stated that the Commanders' Facility
Assessment process ensures that real property maintenance dollars are
allocated to the most critical mission needs of field
commanders--Preservation Maintenance and Level I problems (emphasis
added). 

At the Air Force Materiel Command and Air Mobility Command, which
account for 24 percent of the Air Force real property maintenance
funding, we found that the two commands plan to spend 31.4 percent of
their real property maintenance funds on facilities and projects
rated Level II (degraded) or Level III (adequate) rather than Level I
projects.  Additionally, some of the projects rated Level I are
questionable in terms of having a critical effect on mission: 
renovating an Air Force band recording studio, repairing a baseball
field that floods when it rains, repairing a heating and air
conditioning system in a golf course clubhouse, and landscaping an
area surrounding visiting officers quarters. 

The questionable ratings of some Level I projects and the fact that
the two commands we reviewed plan to spend one-third of their real
property maintenance funds on other than Level I projects raises
questions about the requested funding level.  If the Air Force plans
to spend over 30 percent of its funds on other than Level I projects,
then Congress could reduce its request by $481.4 million ($1.533
billion multiplied by 31.4 percent). 


   SERVICES' BULK FUEL
   REQUIREMENTS
------------------------------------------------------------ Letter :6

Each service buys its fuel from the Defense Fuel Supply Center (DFSC)
and requests the funds it will need through their respective O&M
budgets.  The DFSC purchases the fuel needed to meet the services'
requirements based on the services' estimates adjusted for historical
usage.  In addition to estimating fuel sales to its customers, DFSC
calculates the amount of fuel it will need to maintain its inventory
at acceptable levels. 

Based on our review of budget requests and estimates provided by
comptroller officials, the services budgeted for 126.8 million
barrels of fuel at a cost of about $4.013 billion for fiscal year
1996.  However, based on our review of the services' historic fuel
usage, which includes reimbursements from sales to other users, we
estimate the services will need 116.8 million barrels of fuel costing
$3.679 billion--about $334 million less than the amount requested.  A
break down of the $334 million by service follows:  Navy--$136
million, Air Force--$129million, and Army--$69 million. 

In addition, DFSC plans to meet some of the services' fuel needs in
fiscal year 1996 by reducing its inventory by about 200,000 barrels,
which would result in a DOD savings of $5 million. 

Finally, the services are also evaluating a DFSC suggestion that fuel
supplies in transit be considered in meeting war reserve
requirements.  If approved, 1.9 million barrels of fuel could be used
to meet the war reserve requirement and $47 million could be saved. 

While the vast majority of reductions apply to O&M appropriations,
there are reductions that apply to other appropriations.  Neither we
nor DOD could readily identify the specific amounts for each
appropriation. 


   APPROPRIATED FUND SUPPORT FOR
   COMMISSARIES
------------------------------------------------------------ Letter :7

DOD's fiscal year 1996 O&M budget request includes about $900 million
for appropriated fund support to commissaries and about $250 million
for support to the Army and Air Force Exchange Service (AAFES) and
the Navy Exchange Command (Nexcom). 

We estimate that appropriated fund support to the commissaries and
exchanges could be reduced about $331.5 million by merging some
commissaries and exchanges ($319.5 million) and closing certain other
commissaries ($12 million). 


      MERGING COMMISSARIES AND
      EXCHANGES
---------------------------------------------------------- Letter :7.1

AAFES recently completed a study\5 to identify cost savings that
could be achieved by merging commissaries and exchanges under one
management structure.  The study's assumptions were as follows: 

  AAFES would continue to reimburse the installation for the same
     services that it now pays. 

  Commissary employees would be converted to nonappropriated fund
     employees. 

  All purchasing and accounting would be in accordance with
     nonappropriated fund instructions. 

  AAFES would receive appropriated fund support to offset losses at
     locations where the commissaries and exchanges were merged. 

  The AAFES pricing structure would remain as it is now. 

  The basic allowance for subsistence would be increased for
     active-duty personnel to compensate for increased prices that
     would occur if the commissaries and exchanges were merged. 

  Contributions to the morale, welfare, and recreation fund would be
     increased to compensate for reduced contributions that would
     otherwise occur under a merger. 

The study showed that annual appropriated fund support to the merged
facilities could be reduced $319.5 million.  The merged facilities
would still receive over $500 million of appropriated fund support to
cover any operating losses; provide additional basic allowance for
subsistence; and compensate for morale, welfare, and recreation
contributions.  According to AAFES, the biggest savings would come
from converting the commissary employees to nonappropriated fund
employees.  Doing so gives AAFES the option of using part-time
employees and adjusting their work hours to meet the needs of the
merged operations. 

A DOD official, in commenting on a draft of this report, said that
DOD supports any initiative that improves service to the service
members, maintains non-pay compensation benefits at current levels,
reduces appropriated fund support and maintains dividends for needed
morale, welfare, and recreation programs.  He went on to say that the
figures cited in the unreleased study have not been validated. 


--------------------
\5 Internal unreleased study on AAFES operation of Defense Commissary
Agency commissaries. 


      CLOSING COMMISSARIES
---------------------------------------------------------- Letter :7.2

During 1995, the Defense Commissary Agency (DeCA) identified nine
commissaries for proposed closing in fiscal year 1996.  It used as
criteria (1) stores with annual sales of $15 million or less and (2)
stores that are within 20 miles of another commissary.  According to
DeCA officials, closing the nine commissaries would reduce the need
for appropriated fund support by $12 million.  In response to this
issue, DOD officials reiterated the comments made during our
discussion of commissary-exchange mergers. 


   REENGINEERING DOD'S TRAVEL
   PROCESSES
------------------------------------------------------------ Letter :8

In March 1995, we reported that for fiscal year 1993, DOD's travel
costs were about $3.5 billion.  We also reported that DOD estimates
that it costs an additional 30 percent (about $1 billion) to
administer travel.\6 This is well above the private industry standard
of 6 percent. 

DOD officials told us that they plan to implement new travel
processing procedures in fiscal year 1996 that should make the
administration of travel less cumbersome.  They also indicated that
they plan to contract with a travel agency to achieve travel cost
savings. 

If DOD reduced its travel processing costs from 30 percent to 10
percent, which would bring it closer to the private industry
standard, it could reduce its processing costs from about $1 billion
to $350 million, a savings of $650 million a year.  In commenting on
a draft of this report, DOD officials expressed concerns about
whether the entire savings could be achieved in fiscal year 1996
because the reengineering effort is still ongoing.  We agree that it
may not be possible to achieve the full savings in the first year. 
Therefore, we have adjusted the amount of savings in fiscal year 1996
to $220 million on the assumption that it will take about 3 years to
fully achieve the savings. 


--------------------
\6 Travel Process Reengineering:  DOD Faces Challenges in Using
Industry Practices to Reduce Costs (GAO/AIMD/NSIAD-95-90, Mar.  2,
1995). 


   REQUEST FOR O&M FUNDS TO
   COMPENSATE FOR DEFENSE BUSINESS
   OPERATING FUND LOSSES
------------------------------------------------------------ Letter :9

The Defense Business Operating Fund (DBOF) is a revolving account
that provides various types of services and materials to the military
and is reimbursed by the military department with O&M funds. 

The Navy's fiscal year 1996 O&M budget request includes a one-time
increase of about $695 million to offset DBOF losses from fiscal
years 1992 through 1994 and the estimated losses for fiscal year 1995
as a result of closing Navy shipyards and aviation depots.  The Navy
plans to pass these funds directly through to DBOF in lieu of DBOF
recovering its losses by increasing the prices it charges to its
customers.  However, $158 million of the operating losses for fiscal
years 1993 and 1994 should have been recovered from DBOF price
increases in subsequent years. 

In addition, the Army's fiscal year 1996 O&M budget request includes
$53.5 million to fund DBOF operation of underutilized plant capacity. 
Like the Navy, the Army plans to pass the funds directly to DBOF so
that DBOF will not have to increase its prices.  The Army's rationale
for this funding request is that while the excess, unutilized, or
underutilized capacity is not required for support of a reduced
active component force, it may be required to surge the mobilization
base in the event of a national emergency.  Army officials also said
that they are merely following Office of the Secretary of Defense
guidance that the funds should be passed to DBOF rather than DBOF
increasing its prices to its customers. 

In a June 1994 report, we concluded that the practice of services
using their appropriation process to finance DBOF losses and
associated price increases was inappropriate.\7 In our opinion, this
practice causes a loss of focus on DBOF's actual results of
operations, diminishes the incentive for DBOF to operate efficiently,
and makes it more difficult to evaluate and monitor DBOF operations. 
We believe that DBOF managers should be required to request and
justify separate DBOF appropriations to cover operating losses. 
Doing so provides Congress with better oversight of DBOF operations
and provides DBOF managers with incentives to develop and implement
more efficient operations. 

Congress could reduce the Navy's fiscal year 1996 O&M budget request
by $158 million and the Army's budget request by $53.5 million and
direct the services to request separate appropriations to cover any
future DBOF operating losses and costs associated with operating and
maintaining excess plant capacity. 

In commenting on a draft of this report, a Navy official stated that
the direct pass through to DBOF was so that prices to the customers
would not have to be increased.  We agree that the reason cited by
the official is the reason for the direct pass through.  However,
this does not mitigate the fact that handling DBOF losses in this
manner does not provide any incentive to DBOF to make its operations
more efficient to avoid or reduce future losses.  This incentive
might be provided if DBOF managers had to request and justify funding
for the losses and explain how they planned to reduce future years'
losses through more efficient operations. 


--------------------
\7 Defense Business Operations Fund:  Improved Pricing Practices and
Financial Reports Are Needed to Set Accurate Prices (GAO/AIMD-94-132,
June 22, 1994). 


   JUNIOR RESERVE OFFICERS'
   TRAINING CORPS PROGRAM
----------------------------------------------------------- Letter :10

The National Defense Act of 1916 established the Junior Reserve
Officers' Training Corps (JROTC) program for high schools and private
secondary schools.  The primary purpose of the program was to
disseminate military knowledge among the secondary school population
of the United States.  The ROTC Vitalization Act of 1964 expanded the
JROTC program and required the Secretary of each military department
to establish and maintain JROTC units.  In the wake of the August
1992 Los Angeles riots, the President and the Chairman of the Joint
Chiefs of Staff made plans to double the size of the JROTC program
within 5 years. 

The services' fiscal year 1996 O&M requests include $124.3 million
for the JROTC program, an increase of $16.8 million, which will be
used in part to add an additional 78 schools to the program. 
According to service officials, the current program is essentially a
stay-in-school program and is operated in about 2,300 high schools in
the United States and overseas.  The program objectives are to teach
military and citizenship subjects.  In addition, the Army operates a
summer camp and O&M funds are used to help pay instructors' salaries. 
Service officials emphasized that JROTC is not viewed as a recruiting
tool for the services. 

While the JROTC program may provide worthwhile benefits to the
community and the public in general, the question is whether DOD
should be involved in funding this type program or whether the
program should be funded by a non-DOD appropriation account.  If
Congress decides that this is not a defense-related program, it could
reduce the services' fiscal year 1996 O&M request by $124.3 million
as follows:  Army by $74.5 million, Navy by $24.4 million, and Air
Force by $25.4 million. 


   ARMY AND NAVY SPARE AND REPAIR
   PART INVENTORIES
----------------------------------------------------------- Letter :11

The Army and the Navy fiscal year 1996 O&M budget requests for spare
and repair parts could be reduced by $46.7 million and $38.4 million,
respectively, because excess and unneeded inventories are being
retained at retail-level activities. 

In the Army, we found that spare parts that are repaired and stocked
at the installation level are also being stocked at the division
level.  Our review\8 at three installations that support four Army
divisions showed that the divisions were stocking $46.7 million of
the same items that are also stocked at the installation level. 

If the divisions relied on the installations for support for these
items, they could reduce their inventory investment by $46.7 million. 
This one-time savings could be achieved by the divisions using up and
not replacing their inventory levels for the reparable items. 

In the Navy, we found that repair activities have accumulated excess
inventory from various sources such as the overhaul and
decommissioning of ships and submarines.  The excess inventories are
recorded in the Consolidated Residual Asset Management Screening
Information (CRAMSI) database and are available to all authorized
users free of charge.  As of June 30, 1994, the CRAMSI database
contained an inventory of over 131,000 items valued at about $400
million. 

The O&M request for spare parts is based on the anticipated demand
for items that the retail activities expect to purchase from the
wholesale supply system.  Our analysis showed that each year, the
Navy reissues about $60 million of the excess inventory to meet fleet
and outfitting requirements.  Consequently, the Navy's O&M request is
overstated by an amount equal to the value of the items that retail
level customers are receiving from the CRAMSI. 

A Navy official, in commenting on a draft of this report, said that
the Navy decreased its spare parts budget request by $36 million to
reflect the redistribution of inventory in the CRAMSI program. 
However, after further review, Navy officials were only able to
demonstrate that $21.6 million of the $36 million claimed savings was
taken as a budget reduction.  Therefore, we believe that the Navy's
request can be reduced $38.4 million ($60 million minus $21.6
million). 


--------------------
\8 Army Inventory:  Reparable Exchange Items at Divisions Can Be
Reduced (GAO/NSIAD-95-36, Dec.  28, 1994). 


   NATIONAL GUARD YOUTH PROGRAMS
----------------------------------------------------------- Letter :12

In 1992, Congress authorized the National Guard to undertake a pilot
program in 10 states to determine if the life skills and employment
potential of high school dropouts could be improved through
military-based training.  In fiscal year 1993, Congress provided the
first funds to conduct the Civilian Youth Opportunities pilot
program.  Known as ChalleNGe, this program is a 5-month residential
program with a 1-year post-residential mentoring segment aimed at
high school dropouts.  Currently, the program operates in 15 states
and has an enrollment of about 3,716 youths.  The DOD fiscal year
1996 O&M budget request includes $56.65 million for this program. 

A second program, called Starbase, is a 5-week course that focuses on
math, science, and technology for in-school youths in grades
kindergarten through 12.  This program operates in 14 states at 17
locations.  The fiscal year 1996 budget request includes $4.75
million for this program. 

While these programs may provide worthwhile benefits to the community
and the public in general, the question is whether DOD should be
involved in funding this type of program or whether the program
should be funded by a non-DOD appropriation account.  If Congress
decides that other funding sources are more appropriate, it could
reduce DOD's fiscal year 1996 O&M request by $61.4 million. 


   FLYING HOUR PROGRAMS
----------------------------------------------------------- Letter :13

In their fiscal year 1996 O&M budget requests, (1) the Air Force
requested $826.4 million to fund flying hours for fighter aircraft
for the Air Combat Command (ACC) and the Pacific Air Forces Command
(PACAF), (2) the Army requested $159 million to fund USAREUR's fixed-
and rotary-wing flying hour program, and (3) the Navy requested $2.14
billion for its flying hour program. 

The flying hour formula used by ACC to compute its flying hour
requirements assumed a 50 to 50 ratio of experienced and
inexperienced pilots.  According to the ACC flying hour program
manager, the command's ratio of experienced to inexperienced pilots
is closer to 80 to 20.  PACAF, which also uses the formula, has a
ratio of about 70 to 30.  Changing the ratio of experienced to less
experienced pilots from 50 to 50 to 80 to 20 or 70 to 30 has the
effect of requiring fewer total flying hours for the pilots to
maintain their proficiency.  Using the established ACC formula, we
recalculated the flying hour requirements for ACC and PACAF based on
the 80 to 20 and 70 to 30 ratios, respectively.  This recomputation
showed that the amount of flying hour funds requested in the budget
for ACC was overstated about $19.4 million.  With regard to PACAF,
the recomputation had the effect of reducing, by $8.3 million, the
underfunded flying hour requirement for the command. 

According to USAREUR documentation, the command's flying hour
requirements for fiscal year 1996 is $150 million rather than the
$159 million included in the budget request. 

Our review indicated that the Navy's flying hour program in the
fiscal year 1996 budget request includes funds for an F-14A squadron
that is scheduled for decommissioning in October 1995 rather than
fiscal year 1997 as was planned at the time the budget was submitted. 
As a result, the Navy's fiscal year 1996 flying hour program budget
is overstated by $14 million, the amount budgeted to fund this
squadron in fiscal year 1996. 

In total, the Air Force's, Army's, and Navy's budget requests for
flying hours are overstated by $34.1 million.  Congress could reduce
the Air Force's, Army's, and Navy's fiscal year 1996 O&M request by
$11.1 million ($19.4 million overstatement less $8.3 million
understatement), $9 million, and $14 million, respectively. 


   FUNDING FOR COMMANDER IN CHIEF
   TRADITIONAL PROGRAMS
----------------------------------------------------------- Letter :14

In fiscal year 1995, DOD requested $46.3 million to fund the
military-to-military contacts program.  This represented a
significant expansion to the prior year's program.  We recommended
against the increase on the grounds that DOD had not justified the
expanded program and because it created a new bureaucracy without any
apparent increase in program efficiency.  Congress funded the program
at $12 million in the fiscal year 1995 Foreign Operations
Appropriation. 

Neither the State Department nor the DOD fiscal year 1996 budget
request includes funds for the military-to-military contact program. 
Instead, DOD has requested $45 million for a program called Commander
in Chief (CINC) Traditional Programs.  DOD maintains that the new
program is more than the previous military-to-military contacts
program.  However, the activities to be funded by the CINC
Traditional Program--bilateral conferences, military unit exchanges,
and military observers--do not differ significantly from the
activities that were funded by the military-to-military contact
program. 

In view of the above, Congress could reduce the services' O&M
requests by $33 million (Army--$20 million, Navy--$8 million, and Air
Force--$5 million) to bring the program funding level in line with
last year's funding level. 

The Navy disagreed with this potential reduction but did not provide
any additional information to support its position. 


   FUNDING FOR FACILITIES IN SOTO
   CANO
----------------------------------------------------------- Letter :15

Since 1983 the United States has maintained a military presence at
Honduras' Soto Cano Air Force base.  The U.S.  presence was
established there to support U.S.  military and political interests
in Central America, which were threatened by communist expansion in
the area.  Since the end of the Cold War, the major mission of the
U.S.  personnel at Soto Cano has been to support military training
exercises.  In February 1995, we reported\9 that a continuing U.S. 
presence at Soto Cano, Honduras, was not critical to U.S.  government
activities in Central America.  Although current data on the cost of
the U.S.  presence is not available, fiscal year 1994 O&M costs were
about $31.8 million.  Since that time, activities at Soto Cano have
not changed substantially. 

In view of the above, Congress could reduce the Army's and the Air
Force's fiscal year 1996 O&M requests by $24.6 million and $7.2
million, respectively. 


--------------------
\9 Honduras:  Continuing U.S.  Presence at Soto Cano Base Is Not
Critical (GAO/NSIAD-95-39, Feb.  8, 1995). 


   ENVIRONMENTAL FUNDING AT
   FORSCOM
----------------------------------------------------------- Letter :16

The Army's fiscal year 1996 O&M budget request includes $152 million
for FORSCOM class I, II, and III environmental compliance projects. 
Class I and II projects are referred to as "must fund" projects
because funds are needed to bring a project into compliance with
environmental laws
(class I) or a noncompliance condition will occur if corrective
action is not taken (class II).  Class III projects are those that
are not specifically required to attain/maintain environmental
compliance. 

According to FORSCOM officials, the Command's total environmental
compliance requirements are about $292 million as compared to the
$152 million that FORSCOM expects to receive from the Army.  The
Command has allocated $132.5 million of the $152 million to "must
fund" projects (class I and II) and $19.5 million for class III
projects.  The $19.5 million is broken down as follows:  $15 million
for training area management and $4.5 million for pollution
prevention projects. 

FORSCOM officials could not provide a list of specific projects that
it expects to conduct.  They said that once the funds are allocated
to the installations, the Command does not have control of the funds
or oversight of how the funds are actually spent.  The officials also
said that if a planned class I or II project cannot be conducted for
some reason, the installation will often fund a lower priority
project rather than return the funds to the Command for
redistribution.  Examples of lower priority projects that have been
conducted in the past include such things as cultural and historic
resource studies, environmental awareness activities, and pest
control. 

In view of the fact that FORSCOM plans to fund other than "must fund"
projects, Congress could reduce the Army's budget request for
environmental compliance funding by $19.5 million. 


   ARMY RECRUITING FUNDS
----------------------------------------------------------- Letter :17

The Army, as the executive agent for recruiting facilities, is
responsible for requesting funds for all recruiting offices.  For
fiscal year 1996, the Army's O&M budget request includes $102.6
million for leasing costs associated with the recruiting facilities. 

We estimate that leasing costs could be reduced about $5.1 million by
collocating the supervisory personnel with the recruiters rather than
maintaining separate facilities for the supervisors.  According to
DOD officials, in fiscal year 1994, all of the Army's and about
one-half of the Navy's and the Air Force's supervisory personnel
occupied separate office space.  In contrast, the Marine Corps
locates its supervisory recruiting personnel with its recruiters. 

An additional $13.3 million of leasing costs could be saved if the
least productive recruiting offices were closed.  In our December
1994 report,\10 we noted that 518 counties, out of a total of 1,036
counties in which recruiting offices are located, accounted for only
13.5 percent of the services' accessions.  Of this total,
approximately 290 counties each produced only 1 recruit during the
first 5 months of 1994.  On the other hand, 259 counties, or 25
percent of the total counties, produced 70 percent of all service
accessions. 

If the services closed the recruiting offices in the least productive
50 percent of counties, that is, offices in the 518 counties
discussed above, it could reassign approximately 2,800 recruiters and
save $13.3 million dollars in annual leasing costs. 

In view of the above, Congress may want to direct that supervisory
recruiting personnel be collocated with the recruiting personnel and
that the least productive recruiting offices be closed.  Taking these
actions would enable Congress to reduce the Army's O&M request by
$18.4 million. 


--------------------
\10 Military Recruiting:  More Innovative Approaches Needed
(GAO/NSIAD-95-22, Dec.  22, 1994). 


   AIR FORCE OPERATIONAL SUPPORT
   AIRCRAFT
----------------------------------------------------------- Letter :18

DOD Directive 4500.43 states that a service's operational support
aircraft inventory will be based solely on wartime readiness
requirements.  The Air Force's fiscal year 1996 budget request
includes $93.5 million for
81 primary authorized operational support aircraft.  As we reported
in June 1995,\11 the Air Force recently completed a study that shows
that it needs fewer operational support aircraft to meet its wartime
requirements than are currently in inventory.  Reducing the Air
Force's operational support aircraft inventory to its wartime
requirements would enable it to save $18.1 million in O&M costs. 
Therefore, Congress could direct the Air Force to reduce its
operational support aircraft inventory to its wartime requirements
and reduce its O&M budget request by $18.1 million. 


--------------------
\11 Government Aircraft:  Observations on Travel by Senior Officials
(GAO/NSIAD-95-168BR, June 5, 1995). 


   DOD FUNDING SUPPORT FOR THE
   1996 OLYMPICS
----------------------------------------------------------- Letter :19

The DOD Office of Special Events is responsible for managing all
Defense support to international special events such as the 1996
Olympics.  DOD assistance is primarily directed toward helping state
and local law enforcement agencies responsible for security at the
events.  According to regulations, DOD assistance may be provided
after state and local authorities have executed all other possible
means to obtain the needed assistance. 

From fiscal years 1992 to 1995, Congress appropriated $20.4 million
for DOD assistance to special events and extended the period of
availability of the funds to September 30, 1997, for expenses for the
1996 Summer Olympics.  As of March 31, 1995, the special events
account had an unobligated balance of about $11 million, which is
available for the 1996 Olympics. 

For fiscal year 1996, DOD has requested an additional $15 million for
Olympic security activities.  However, DOD officials could not
identify the specific requirements supporting this request nor
provide us with any information on how the request was estimated. 

In view of the unobligated funds remaining in the special events
account and the lack of specifics for the fiscal year 1996 request,
Congress could reduce DOD's fiscal year 1996 request by $15 million. 
Congress may also want to stipulate that in those cases where the
special event makes a profit, the event organizers should reimburse
DOD for the assistance provided. 

In commenting on a draft of this report, a DOD official said that the
threat level to the Olympic Games will ultimately determine how
extensive a role DOD plays and it is impossible to predict the threat
level at this time or how the requested funds will be utilized. 


   LEGACY RESOURCE MANAGEMENT
   PROGRAM
----------------------------------------------------------- Letter :20

The Legacy Resource Management Program was created in 1990 to protect
and preserve the natural and cultural resources on DOD-owned land. 

In fiscal year 1995, DOD requested $10 million for the Legacy
Program.  Congress appropriated $50 million but the DOD Comptroller
has only released $30 million for use by the Legacy Program. 
Examples of activities funded during fiscal year 1995 by the Legacy
Program include preservation of historic documents related to the Air
Force band, a study of Peregine falcon migration, research on German
Prisoners of War murals, restoration and rehabilitation of a historic
adobe structure, and salmon rearing. 

For fiscal year 1996, DOD has requested $10 million for the programs. 
While the Legacy Program may be worthwhile, the question is whether
funding this program represents the best use of DOD funds.  By
eliminating funds for this program, Congress could reduce DOD's
request by $10 million. 


   ARMY'S AFLOAT PREPOSITIONING
   PROGRAM
----------------------------------------------------------- Letter :21

The Army's current fleet of prepositioning ships consist of seven
ships that were activated from the Ready Reserve Fleet.  The Army
plans to use these ships until it takes delivery of five Large Medium
Speed Roll-on/Roll-off (LMSR) ships.  The Army will then transfer the
prepositioned materials from the seven existing ships to the five
LMSR ships.  After the current ships are unloaded, they will be
deactivated and returned to the Ready Reserve Fleet. 

The Army estimates that it will cost about $1 million to deactivate
each ship, and the Army's fiscal year 1996 O&M budget request
includes $7 million for this purpose.  During our review we learned
from Army officials that the Army will only be able to deactivate two
ships in fiscal year 1996 because deliveries of some of the LMSR
ships have slipped from fiscal year 1996 to fiscal years 1997 and
1998. 

In view of the fact that the Army plans to deactivate only two of the
seven ships in fiscal year 1996, Congress could reduce the Army's
fiscal year 1996 budget request by $5 million. 

Army officials acknowledged that they would not need the $5 million
for ship deactivation but stated that they could use the funds for
other unfunded requirements. 


   CIVIL AIR PATROL
----------------------------------------------------------- Letter :22

The Civil Air Patrol (CAP) is a nonprofit corporation comprised of
private citizens who assist in national and local emergencies, such
as inland search and rescue missions, emergency air transport,
counter drug surveillance, and humanitarian airlift missions.  The
Air Force has been providing financial support and some management
personnel to CAP for a number of years. 

In response to congressional concerns about CAP funding, the Air
Force proposed a reorganization to reduce (1) the number of active
duty military and Air Force civilian employees who provide support to
CAP and (2) the need for funding by $3 million a year.  The
reorganization, begun in January 1995, has resulted in a need for
more, not less, O&M funding.  The reason for this is that the number
of employees (about 250 before the reorganization) was not
significantly reduced and state liaisons, who were once paid from the
military pay appropriation, are now paid from O&M funds. 

After the reorganization is complete, there will be 75 Air Force
military and civilian employees supporting CAP.  In addition, there
will be 162 CAP employees paid with appropriated funds.  Included in
this total are
90 retired military who serve as wing liaisons in each of the 50
states, the District of Columbia, and Puerto Rico.  These individuals
will be compensated with O&M funds at a rate equal to the difference
between their retirement pay and what their active duty pay would be
if they were still on active duty. 

For fiscal year 1996, the Air Force requested $17.5 million of O&M
funds to provide support to CAP.  This represents an increase of $4
million over the fiscal year 1995 funding level. 

In view of the fact that the reorganization has not achieved the
intended savings, Congress could reduce the Air Force's request for
funds to support CAP by $4 million--the increase over last year's
funding level. 


   AIR FORCE PILOT TRAINING
   REQUIREMENTS
----------------------------------------------------------- Letter :23

The Air Force plans to train 525 pilots in fiscal year 1996 at a cost
of $244.8 million.  The Air Force believes it needs to train at least
500 pilots each year to keep the pilot training pipeline running
smoothly and fill non-flying pilot designated positions.  However,
there is no objective analysis to support this assumption. 

Our analysis showed that 3,207 of 14,495, or 22 percent, of the pilot
designated positions are non-flying positions and an additional 50
percent require only infrequent flying.  Since fiscal year 1993 the
number of pilots assigned to non-flying positions has increased from
2,094 to 2,391.  Examples of non-flying pilot-designated positions
include international analysts in the Office of the Secretary of
Defense and pilot accession coordinators. 

Between fiscal year 1996 and fiscal year 1999, the Air Force staff
plans to reduce the number of non-flying pilot designated positions
by 20 percent.  The planned cut is based on a subjective
determination not supported by any objective analysis. 

The Air Force has not determined which, if any, non-flying pilot
positions must be filled with pilots and has not determined the
minimum number of pilots that must be trained each year to maintain
the training base.  In the absence of such information, we could not
determine the amount of the potential budget reduction. 

The Air Force had no comment on this issue. 


   SCOPE AND METHODOLOGY
----------------------------------------------------------- Letter :24

This review is one of a series that examines defense budget issues. 
Our review approach consisted of interviews with program and budget
officials responsible for managing the programs and/or preparing the
budget requests; reviews and analyses of financial, budget support,
and program documents related to the O&M issue being reviewed; an
analysis of prior-year funding levels and expenditures to identify
trends; and reviews of our recently issued reports and ongoing
assignments to identify O&M issues that could affect the fiscal year
1996 budget requests. 

Our review was performed at Army, Navy, Air Force, and DOD
headquarters; U.S.  Forces Command; U.S.  Army, Europe; Atlantic
Fleet; Pacific Fleet; U.S.  Air Forces, Europe; Air Combat Command;
Air Mobility Command; and Air Force Materiel Command.  We performed
our review from January to July 1995 in accordance with generally
accepted government auditing standards. 


--------------------------------------------------------- Letter :24.1

Representatives from the services and DOD were given an opportunity
to comment on the issues in this report.  Their comments were
incorporated in the report where appropriate. 

We are sending copies of this report to the Secretaries of Defense,
the Army, the Navy, and the Air Force; the Director, Office of
Management and Budget; the Chairmen and Ranking Minority Members of
the House and Senate Committees on Appropriations, Senate Committee
on Armed Services, and House Committee on National Security; 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. 
Major contributors to this report are listed in appendix I. 

Henry L.  Hinton, Jr.
Assistant Comptroller General


List of Congressional Committees

The Honorable Ted Stevens
Chairman, Subcommittee on Defense
Committee on Appropriations
United States Senate

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

The Honorable John McCain
Chairman, Subcommittee on Readiness
Committee on Armed Services
United States Senate

The Honorable John Glenn
Ranking Minority Member
Subcommittee on Readiness
Committee on Armed Services
United States Senate

The Honorable John R.  Kasich
Chairman, Committee on the Budget
House of Representatives

The Honorable Martin Olav Sabo
Ranking Minority Member
Committee on the Budget
House of Representatives

The Honorable Herbert H.  Bateman
Chairman, Subcommittee on Military Readiness
Committee on National Security
House of Representatives

The Honorable Norman Sisisky
Ranking Minority Member
Subcommittee on Military Readiness
Committee on National Security
House of Representatives
The Honorable C.  W.  Bill Young
Chairman, Subcommittee on National Security
Committee on Appropriations
House of Representatives

The Honorable John P.  Murtha
Ranking Minority Member
Subcommittee on National Security
Committee on Appropriations
House of Representatives


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix I


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
--------------------------------------------------------- Appendix I:1

Sharon A.  Cekala
Robert J.  Lane
Carole F.  Coffey
Kerry A.  O'Brien
Donna M.  Rogers


   ATLANTA REGIONAL OFFICE
--------------------------------------------------------- Appendix I:2

Kevin C.  Handley
Harry F.  Jobes


   CINCINNATI REGIONAL OFFICE
--------------------------------------------------------- Appendix I:3

Bruce D.  Fairbairn
Leonard L.  Benson


   EUROPEAN OFFICE
--------------------------------------------------------- Appendix I:4

Bettye J.  Caton
Barry J.  DeWeese
John C.  Wren
Joanne L.  Jurmu


   NORFOLK REGIONAL OFFICE
--------------------------------------------------------- Appendix I:5

Thomas A.  Pantelides
Robert C.  Mandigo, Jr.
Raul S.  Cajulis
Robert W.  Wagner
Tracy W.  Banks
Dawn R.  Godfrey