Summary
Under 10 U.S.C. 2466, the military departments and defense agencies can use no more than 50 percent of annual depot maintenance funding for work performed by private-sector contractors. The Department of Defense (DOD) must submit a report to Congress annually on the division of depot maintenance funding between the public and private sectors during the preceding fiscal year and projected distribution for the current and ensuing fiscal years. As required, GAO reviewed the report submitted in April 2005 and is, with this report, submitting its views to Congress on whether (1) the military departments complied with the "50-50 requirement" for fiscal year 2004 and (2) the projections for fiscal years 2005 and 2006 represent reasonable estimates. Additionally, GAO is assessing whether the data currently provided in DOD's annual 50-50 report are useful to Congress in exercising its oversight role.
As in previous years, systemic weaknesses in DOD's financial systems and persistent deficiencies in 50-50 data reporting processes continue to prevent GAO from determining whether the military departments complied with the 50-50 requirement for public- and private-sector depot maintenance funding allocations for fiscal year 2004. Persistent deficiencies, such as inadequate management attention and review to ensure accurate and complete reporting, limited independent review and validation of data by audit services or other third parties, and inadequate training for those responsible for data gathering and reporting, continue to limit the quality of the 50-50 data submitted to Congress. GAO's previous reports over the last 7 years identified similar problems and recommended corrective actions, but DOD and the military services have failed to consistently implement corrective actions sufficient to resolve the deficiencies and alleviate data accuracy problems. The recurring nature of these problems indicates a management control weakness as defined under the Federal Managers' Financial Integrity Act. Reported projections do not represent reasonable estimates of public- and private-sector depot maintenance funding allocations for fiscal years 2005 through 2006 because some data errors and omissions in DOD's prior-year report are carried into the projected years. It is difficult to project out-year data due to factors such as changing depot maintenance requirements, the ongoing consolidation of maintenance facilities, and the trend toward more contractor logistics support for new and existing weapon systems. Although DOD's current 50-50 report to Congress satisfies the annual mandate, it lacks additional detail that might be useful to Congress as it exercises its oversight role. The report currently submitted by DOD contains data that are aggregated at a high level and provides no analysis of changes from the prior years or long-term trends. The report also does not identify actual funding and workload distribution variances from year to year, nor explain the reasons behind them. Furthermore, it does not contain information as to the methodologies used to prepare the current and future year projections.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
William M. Solis
Government Accountability Office: Defense Capabilities and Management
(202) 512-8365
Matters for Congressional Consideration
Recommendation: If Congress determines, for oversight purposes, that improvements are needed in the reliability and usefulness of DOD's annual report on depot maintenance funding allocations, Congress may wish to require the Secretary of Defense to enhance its annual 50-50 report to Congress as stated in our recommendations. Specifically, this enhanced reporting should include (1) variance analyses of significant changes in depot maintenance workload allocations from the prior year's report and the reasons for these variances; (2) analysis of historical workload allocation trends; (3) explanation of the methodologies used to estimate workload allocation projections; and (4) plans to ensure continued compliance with the 50-50 requirement, including the identification of decisions on new weapon systems maintenance workload sourcing that could be made to support remaining within the 50 percent threshold. Additionally, the enhanced reporting should address the corrective actions DOD is taking to improve the persistent deficiencies we have identified in DOD's 50-50 data reporting processes.
Status: Implemented
Comments: While Congress has not amended the annual 50-50 reporting requirement as we recommended, it has been reevaluating the 50-50 reporting requirement as an oversight tool. Specifically, the Senate Report on the National Defense Authorization Act for Fiscal Year 2008 required GAO to review and make recommendations regarding the reports, assessments, analyses, and documents used for determining the compliance of DOD and the military departments with the 50-50 percentage limitation. The committee expressed particular interest in learning whether there are better methods than the current system for meeting its oversight responsibilities of DOD compliance with the 50-50 requirement. In response to the Senate Report, we issued a briefing document in May 2008 (GAO-08-761R).
Recommendations for Executive Action
Recommendation: The Secretary of Defense, in future accountability reports, should disclose a management control weakness in DOD's 50-50 data reporting processes along with planned corrective actions to improve management control in (1) management review, attention, and policies sufficient to ensure accurate and complete 50-50 reporting; and (2) independent review and validation of 50-50 data by service audit agencies or other third parties, with auditor-identified data inaccuracies corrected prior to submission of the annual report to Congress; and (3) annual training on 50-50 policies and procedures for all individuals participating in data gathering and reporting.
Agency Affected: Department of Defense
Status: Not Implemented
Comments: DOD partially concurred with this recommendation, stating that systemic changes to the 50-50 reporting process had already been made in response to previous recommendations. On the basis of this response, we recommended to Congress that it require DOD to report annually on corrective actions taken to address persistent deficiencies we had identified in 50-50 reporting.
Recommendation: The Secretary of Defense should enhance DOD's annual 50-50 report submitted to Congress. This enhanced reporting should include (1) variance analyses that identify significant changes in depot maintenance workload allocations from the prior year's report and the reasons for these variances; (2) analysis of historical trends in depot maintenance workload allocations; (3) explanation of the methodologies used to estimate workload allocation projections for the current and ensuing fiscal years; and (4) the military departments' plans to ensure continued compliance with the 50-50 requirement, including the identification of decisions on new weapon systems maintenance workload sourcing that could be made to support remaining within the 50 percent threshold.
Agency Affected: Department of Defense
Status: Not Implemented
Comments: DOD, in partially concurring with this recommendation, stated that producing this type of information would require a massive undertaking and may be of limited value. We disagreed, and on the basis of DOD's response added a matter for Congressional consideration suggesting that Congress require the Secretary of Defense to enhance the department's annual 50-50 report as stated in this recommendation.
