Military Bases: Potential Reductions to the Fiscal Year 1997 Base Closure
Budget (Letter Report, 07/15/96, GAO/NSIAD-96-158).

Pursuant to a legislative requirement, GAO reviewed the Department of
Defense's (DOD) Base Realignment and Closure (BRAC) accounts, focusing
on: (1) the accuracy of BRAC budget estimates; and (2) opportunities to
reduce the fiscal year 1997 BRAC budget.

GAO found that: (1) because BRAC expenditures vary substantially from
budget submissions, Congress cannot be assured that appropriated BRAC
funds will be used as requested; (2) past DOD budget requests have
understated environmental costs and overstated other BRAC costs for
military construction and operation and maintenance; (3) DOD had $342
million in unobligated budget balances as of December 1995; (4) although
Congress has rescinded some of these high unobligated balances, DOD
continues to request funds in advance of its needs; (5) the DOD fiscal
year 1997 budget request can be reduced by about $148 million, since
funds from prior year appropriations will be available to fund future
expenditures; (6) reducing the fiscal year 1997 budget would help
control the amount of unobligated funds in the BRAC account; (7) about
$144 million in 1996 O&M funds are not supported by valid Army
requirements; (8) the DOD Inspector General (IG) identified additional
reductions that are possible by eliminating or reducing certain BRAC
construction projects; and (9) if the DOD IG identifies reductions in FY
1997 construction projects similar to the reductions identified in 1996
and 1995, the amount of unneeded funds would total $60 million.

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

 REPORTNUM:  NSIAD-96-158
     TITLE:  Military Bases: Potential Reductions to the Fiscal Year 
             1997 Base Closure Budget
      DATE:  07/15/96
   SUBJECT:  Military bases
             Military cost control
             Budget cuts
             Unobligated budget balances
             Base closures
             Construction costs
             Military facility construction
             Reprogramming of appropriated funds
             Future budget projections
             Defense audits
IDENTIFIER:  DOD Base Realignment and Closure Account
             
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Cover
================================================================ COVER


Report to Congressional Committees

July 1996

MILITARY BASES - POTENTIAL
REDUCTIONS TO THE FISCAL YEAR 1997
BASE CLOSURE BUDGET

GAO/NSIAD-96-158

Military Bases

(709168)


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

  BRAC - Base Realignment and Closure
  DOD - Department of Defense
  IG - Inspector General
  O&M - operations and maintenance

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


B-271898

July 15, 1996

The Honorable Conrad Burns
Chairman
The Honorable Harry M.  Reid
Ranking Minority Member
Subcommittee on Military Construction
Committee on Appropriations
United States Senate

Senate Report 104-116, dated July 19, 1995, asked us to continue our
annual review of the Base Realignment and Closure (BRAC) accounts and
make recommendations on the validity of the Department of Defense's
(DOD) proposed budget request for base closure activities.  This
report focuses on the accuracy of DOD's BRAC budget estimates and on
opportunities to reduce the fiscal year 1997 BRAC budget. 


   BACKGROUND
------------------------------------------------------------ Letter :1

Changing national security needs and DOD's recognition that its base
structure was larger than required led to a decision to close
numerous bases around the country.  Consequently, the Congress
enacted legislation that instituted base closure rounds in 1988,
1991, 1993, and 1995.  The BRAC legislation also established closure
accounts to finance the closures of bases identified in the base
closure process. 

DOD annually sends the Congress detailed budget submissions to
justify its BRAC funding requests.  The budget submissions contain
six subaccounts:  military construction, family housing,
environmental, operations and maintenance (O&M), military permanent
change in station, and other.  The budget is used by the Congress to
make separate appropriations for each BRAC round.  BRAC
appropriations need not be obligated in the year of appropriation
and, except for the environmental subaccount prior to fiscal year
1996, they need not be used in the subaccount for which they were
requested.\1

DOD is requesting $2.5 billion for the BRAC accounts in fiscal year
1997. 


--------------------
\1 Prior to fiscal year 1996, legislation established a "floor" for
the environmental subaccount that required DOD to spend "not less
than" the amount requested in the BRAC budget submission for
environmental costs.  Consequently, the specified minimum amount
could not be shifted to other subaccounts.  In fiscal year 1996,
however, legislation established a "ceiling" for the environmental
subaccount that prohibited DOD from spending "more than" the amount
requested in the BRAC budget justification for environmental costs
unless it notifies the Congress.  This allows environmental funds to
be shifted to other subaccounts. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

The Congress cannot be assured, except for pre-fiscal year 1996
environmental funds, that appropriated BRAC funds will be used as
requested in DOD's budget submissions.  BRAC expenditures vary
substantially from budget submissions.  In past budget submissions,
environmental costs have been understated, while costs for other BRAC
subaccounts, such as military construction and O&M, have been
overstated. 

The DOD fiscal year 1997 budget request can be reduced by about $148
million (about 6 percent) because funds from prior year
appropriations will be available to fund future expenditures. 
Additional reductions are possible because mandated annual DOD
Inspector General (IG) audits of BRAC construction projects identify
projects that can be eliminated or reduced in scope.  If the fiscal
year 1997 IG audit identifies reductions in projects proportionate to
the reductions identified in 1996 and 1995, the amount would be about
$60 million. 


   BRAC EXPENDITURES VARY FROM
   BUDGET SUBMISSIONS
------------------------------------------------------------ Letter :3

Budgets are an important financial tool for monitoring costs. 
However, past BRAC budget submissions are not as effective as they
can be for monitoring BRAC expenditures because they historically
overstate O&M and military construction costs and understate
environmental costs. 

DOD decreased the funds allocated to the BRAC O&M and military
construction subaccounts for the 1991 round while it increased funds
allocated to the environmental subaccount.  Through fiscal year 1995,
DOD had requested $4.3 billion for the 1991 closure round costs.  As
of December 1995, $3.6 billion was allocated for 1991 closure round
costs.  While the overall amount allocated was $686 million (16
percent) less than requested, the amount allocated for environmental
costs was $112 million (12 percent) more than requested.\2 At the
same time, DOD allocated $503 million (26 percent) less for military
construction and $138 million (13 percent) less for O&M than
requested. 

DOD also reallocated funds among the environmental, O&M, and military
construction subaccounts for the 1988 round.  It allocated $340
million
(22 percent) less for military construction and $126 million (23
percent) less for O&M costs than initially planned.  At the same
time, it allocated $453 million (86 percent) more for environmental
costs than originally planned. 

DOD continues to transfer BRAC funds from overprogrammed O&M
subaccounts to underprogrammed environmental subaccounts.  In 1995,
$20.8 million in O&M funds, the entire amount DOD requested for O&M
for the 1988 round, was transferred to the environmental subaccount. 
Presently, Army officials indicate they plan to transfer O&M funds
requested for the 1991 round in fiscal year 1996 to the environmental
subaccounts.  They said that the $144 million no longer needed for
O&M requirements
(see p.  4) will be transferred to environmental subaccounts to fund
1988 round and 1991 round environmental costs. 


--------------------
\2 The amount allocated included appropriated funds and land sale
revenues.  Allocated funds are less than initial budget estimates
because land sale revenues have not been realized, funds have been
transferred from the 1991 round to fund costs in the 1993 round, and
the Congress has not always appropriated the full amount requested. 


   UNOBLIGATED BALANCES INDICATE
   THAT FUNDS ARE REQUESTED IN
   ADVANCE OF NEEDS
------------------------------------------------------------ Letter :4

The Senate Committee on Appropriations has expressed concern
regarding the slow pace of BRAC obligations and the resultant high
unobligated balances.  Congressional rescissions and improved DOD
financial management have reduced the amount of unobligated funds. 
Still, our analysis shows that some funds continue to remain
unobligated beyond the year for which they were appropriated.  In
total $342 million, appropriated before fiscal year 1996, was
unobligated as of December 1995.  Our analysis shows that $148
million of that has remained available, on average, for over 3 years. 

Congressional actions have helped reduce large unobligated balances
in the BRAC accounts.  In February 1994, the Congress rescinded
$507.7 million in BRAC funds.  In April 1995, the Congress rescinded
an additional $32 million. 

DOD has taken actions to reduce unobligated balances in the BRAC
accounts.  First, it directed the services to use unobligated
balances before requesting new appropriations.  For example, in
fiscal year 1995, the Air Force used $82.7 million in prior year
appropriations rather than requesting new funds for the 1991 round. 
Second, in fiscal year 1995, DOD obligated BRAC funds in a more
timely manner.  For example, as of March 1994, $1.4 billion, or 31.7
percent, appropriated in prior years remained unobligated, while, as
of December 1995, only $342 million, or 3.6 percent, appropriated
before fiscal year 1996, remained unobligated. 

Because DOD guidance indicates the services should only request BRAC
funds that they intend to use in the budget year, we analyzed
unobligated balances in the BRAC accounts to determine if they had
remained unobligated beyond the budget year.  We found that as of
December 31, 1995, $2.84 billion of the $3.18 billion unobligated
balance had been appropriated in fiscal year 1996.  Of the remaining
$342 million, most was from the prior fiscal year.  However, $148
million that was available on or before October 1993 had remained
unobligated for an average of
37 months.  Based on recent obligation rates, the $148 million will
not be fully obligated for another 22 months. 

DOD accounting data, obtained after our draft report was sent to DOD
for comment, indicate that prior year unobligated balances have
declined but, overall BRAC account unobligated balances have
increased in 1996.  For example, from March 31, 1995, to March 31,
1996, unobligated balances increased from $1.98 billion to $2.7
billion.  If obligation rates are not increased over the last half of
fiscal year 1996, the balances carried forward from prior years will
be much higher at the beginning of fiscal year 1997 than fiscal year
1996. 

Reducing the fiscal year 1997 budget by $148 million (the amount of
long-term unobligated BRAC balances as of December 31, 1995) would
help control the amount of unobligated funds in the BRAC account. 
While DOD has obligated a portion of the $148 million, overall,
unobligated funds in the BRAC account have increased due to slow
fiscal year 1996 obligations.  If the fiscal year 1997 appropriation
is reduced, prior year unobligated balances are more likely to be
used.