Summary
The five Army depot maintenance activities support combat readiness by providing services to keep Army units operating worldwide. From fiscal years 2004 through 2007, the amount of new orders received to perform work increased 100 percent from $2.6 billion to $5.2 billion. The number of new orders is a factor in the amount of work the depots carry over from one fiscal year to the next. While past congressional defense committees recognize the need for carryover, the committees have raised concerns that carryover may be more than needed. GAO was asked to determine (1) the growth in reported total carryover from fiscal years 2004 through 2007 and the actions the Army is taking to reduce the carryover, (2) whether reported carryover amounts exceeded carryover ceilings for fiscal years 2006 and 2007 and adjustments made to reduce those amounts, and (3) the primary reasons for the increased carryover at the five Army depots. GAO analyzed reported carryover and related data at the five depots.
From fiscal years2004 through 2007, the Army depots' total carryover significantly increased from $1.1 billion to $2.7 billion--about 7.6 months of work. The amount of carryover increased because new orders received (about $9.5 billion) by the depots significantly outpaced the work performed (about $7.8 billion) in fiscal years 2006 and 2007. GAO analysis of the Army's plan to reduce carryover showed that the depots performed $293 million more work in the first 3 months of fiscal year 2008 than they performed during the same period a year earlier, but the depots missed their planned goal by $173 million. The Army depots reported that they were under the carryover ceiling by $67 million in fiscal year 2006 but over the ceiling by $96.8 million in fiscal year 2007. GAO identified two factors that affected reported carryover amounts. First, the Army Materiel Command directed the Tobyhanna Army Depot to deobligate $30 million at the end of fiscal year 2006 and reobligate the same amount at the beginning of the next fiscal year, which artificially lowered reported carryover and was not in accordance with existing DOD policy. Second, the Army excluded about $299.7 million in fiscal year 2007 orders from the carryover calculations. The exemptions for fourth quarter orders from other services and long lead time material did not provide the right incentives for DOD to resolve long-standing problems. GAO analysis of reports and discussions with Army officials identified four primary reasons for growth in carryover: (1) the Army depot maintenance budget underestimated the amount of new orders during fiscal years 2006 and 2007 by about $1.7 billion and $1.5 billion, respectively; (2) the depots accepted orders late in the fiscal year that generally could not be completed by the end of the fiscal year; (3) the depots experienced parts shortages; and (4) the depots did not receive assets that had been scheduled for repair.
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:
Paula M. Rascona
Government Accountability Office: Financial Management and Assurance
(202) 512-9816
Recommendations for Executive Action
Recommendation: In order to (1) improve the reliability and level of detail of carryover amounts reported to Congress and DOD decision makers and (2) reduce carryover associated with the Army depot maintenance working capital fund activities, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to establish a mechanism to monitor whether activities are not following the existing July 2003 policy that prohibits the deobligating and reobligating of funds at year-end for the sole purpose of reducing carryover balances and take appropriate actions, such as reducing future funding designated for these activities, if they do not follow the policy.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order to (1) improve the reliability and level of detail of carryover amounts reported to Congress and DOD decision makers and (2) reduce carryover associated with the Army depot maintenance working capital fund activities, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to establish procedures requiring evaluations of future exemption requests on carryover to consider the impact these requests have on the actual carryover balances reported to Congress and whether granting such exemptions substantially reduces the visibility over and financial incentive to resolve long-standing issues, such as spare parts problems.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The Secretary of Defense should direct the Secretary of the Army to direct the Army headquarters budget office to compare the amounts contained in the Army's carryover reduction plan to reported actual execution data on a monthly basis to determine (1) if the depots met established targets and (2) if the overall plan's execution has the desired effect of reducing fiscal year 2008 year-end carryover, and work with the Army Materiel Command and the Army depots to identify ways to further reduce fiscal year 2008 carryover if monthly revenue goals are not met.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The Secretary of Defense should direct the Secretary of the Army to establish procedures for separately identifying the allowable and reported actual amounts of carryover for the Army depot maintenance activities in the Army's annual budget to Congress (as was done prior to fiscal year 2005).
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The Secretary of Defense should direct the Secretary of the Army to issue guidance, in accordance with existing DOD-wide guidance, that prohibits the Army Industrial Operations activity group from deobligating reimbursable customer orders at the end of the fiscal year and reobligating them in the next fiscal year for the sole purpose of reducing carryover balances that are ultimately reported to Congress.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The Secretary of Defense should direct the Secretary of the Army to develop a mechanism to monitor the Army depot maintenance activities' compliance with the requirements in DOD Financial Management Regulation 7000.14-R governing acceptance of orders, particularly when work is not expected to (1) begin without delay (usually within 90 days of acceptance) and (2) be completed within the normal production period for the specific work ordered.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The Secretary of Defense should direct the Secretary of the Army to establish procedures requiring Army headquarters and Army Materiel Command to compare budgeted orders to actual orders that the depots received from customers and consider these trends in developing the following year's budget estimates on new orders to be received from customers.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The Secretary of Defense should direct the Secretary of the Army to develop quantifiable measures to determine the effectiveness of actions taken by the Army and DLA to resolve spare parts shortages, such as analyzing the information on customer orders with insufficient spare parts in the critical maintenance repair parts reactive system at the end of fiscal year 2008 and comparing the results to those of prior fiscal years.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
