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Congress has rescinded some of these high unobligated balances, DOD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
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved. Major **
** divisions and subdivisions of the text, such as Chapters, **
** Sections, and Appendixes, are identified by double and **
** single lines. The numbers on the right end of these lines **
** indicate the position of each of the subsections in the **
** document outline. These numbers do NOT correspond with the **
** page numbers of the printed product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** <info@www.gao.gov> **
** **
** with the message 'info' in the body. **
******************************************************************
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.
<head1$144 MILLION IN FISCAL YEAR 1996 BUDGET NOT SUPPORTED BY VALID
REQUIREMENTS
Our analysis of BRAC O&M requirements shows that approximately $144
million in O&M funds allocated in fiscal year 1996 for Army bases
selected for closure in the 1991 round was not supported by valid
requirements. According to the fiscal year 1996 budget, $234.6
million was required. As of March 1996, $212 million had been
allocated.\3
According to an Army official responsible for the BRAC program, only
$68 million is now needed.
For example, the fiscal year 1996 budget submission included $44.3
million in O&M funds for the Sacramento Army Depot, which was to be
closed in March 1995, a month after the submission and 6 months
before the fiscal year was to begin. According to an Army official,
Army records indicated remaining O&M requirements at the Sacramento
Army Depot, as of August 1994, were less than $5 million. As of the
March closure date, $7.9 million, which had been appropriated in
fiscal year 1995, remained available to fund O&M costs. An Army
official responsible for BRAC funds indicated the Army was aware
there was not a need for O&M funds at the Sacramento Army Depot.
Fiscal year 1995 funds of $7.9 million were transferred to other
bases, but fiscal year 1996 funds are still held in the O&M
subaccount.
In DOD's response to a draft of this report, it indicated the $144
million was no longer needed for O&M and would be used to cover
previously unfunded environmental cleanup requirements. On May 17,
1996, DOD notified the Congress of its intention to increase the
fiscal year 1996 ceiling on the environmental subaccount so that the
savings could be applied to environmental requirements. Because the
notification was sent after our draft report was distributed for
comment, we did not have an opportunity to validate the environmental
requirements.
--------------------
\3 The amount allocated as of March 1996 was lower than the budgeted
amount due to transfers between subaccounts and land sales revenues
not materializing.
DOD IG AUDITS IDENTIFY
REDUCTIONS IN NEEDS FOR
CONSTRUCTION FUNDS
------------------------------------------------------------ Letter :5
The DOD IG evaluates BRAC construction costs for each budget year and
submits a report on the results of its work to the Congress.
Recently completed IG audits indicate that some of the construction
projects submitted as justification for the fiscal year 1995 and 1996
budgets should be canceled.
The design of regular military construction projects is required to
be 35-percent complete prior to submission to the Congress for
funding, but this requirement does not apply to BRAC construction.
Because BRAC construction is time critical, funding is requested
before the 35-percent design point is reached. Thus, construction
cost estimates that are a basis for BRAC budget requests are not as
accurate as cost estimates for regular military construction.
IG auditors reviewed 219 proposed construction projects valued at
$1.6 billion for fiscal years 1995 and 1996. The auditors reported
that
49 projects totaling over $315 million were not valid. The services
have agreed to cancel 29 projects totaling over $124 million--$97
million and $27 million, respectively, for fiscal years 1995 and
1996. One Air Force project included in the 1995 figure was not
canceled but rather reduced by over $33 million. In addition, 14
projects totaling over $136 million are still in dispute. This
includes 3 1995 projects totaling over $16 million and 11 1996
projects totaling almost $120 million.
The IG's review planned for the fiscal year 1997 BRAC military
construction budget includes 113 projects valued at $778 million.
Based on the results of the 1995 and 1996 IG reviews, it is likely
that the IG will identify invalid BRAC construction projects in the
fiscal year 1997 budget.
If the IG audit identifies the same amount of unneeded construction
in the fiscal year 1997 budget as in past years, the amount would be
about $60 million. The scope of the 1997 audit in terms of
construction expenditures is about the same as the average scope of
the 1995 and 1996 audits.
MATTERS FOR CONGRESSIONAL
CONSIDERATION
------------------------------------------------------------ Letter :6
The Congress may wish to consider appropriating up to $148 million
less than DOD is requesting in its fiscal year 1997 BRAC budget
because funds are available from prior years. Because BRAC
construction projects may be canceled as a result of ongoing IG
audits, additional reductions in the BRAC budget are possible.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :7
DOD did not concur with the draft report, nor did it agree with the
report's conclusion that the fiscal year 1997 BRAC budget request
could be reduced by $300 million to $400 million. Specifically, DOD
stated that (1) very little of the $148 million in unobligated funds
will remain unobligated at the end of the fiscal year, (2) the
approximately $144 million in O&M funds that we identified as
unsupported by valid requirements will be used for environmental
requirements, and (3) the IG audit data we used was not accurate and
IG findings from the past cannot be projected to the 1997 budget.
We continue to believe the Congress can reduce the fiscal year 1997
BRAC budget, but we have reduced our estimate to $148 million to
reflect information DOD provided. Accounting data that we were
provided after our draft report was sent to DOD for comment indicate
that unobligated balances are increasing from 1995. We continue to
believe that reducing the BRAC 1997 budget would better align
available funds with closure actions and reduce unobligated balances
in the BRAC account. We also reduced the amount of the reduction
because of the steps DOD took to reprogram unneeded O&M funds to the
environmental subaccount for what it describes as unfunded
requirements. Because these steps were taken after our draft report
was provided to DOD for comment, we did not have the opportunity to
validate the environmental requirements.
DOD was correct in stating the data we used in summarizing the
results of the IG audit were not accurate and technically correct in
stating that past IG results could not be projected to the fiscal
year 1997 budget. Subsequent to providing our draft report to DOD
for comment, the services gave us updated information regarding the
number of BRAC military construction projects canceled as a result of
the IG audit and we adjusted the figures in our report. While we
agree it is not possible to project past IG audit results to the
fiscal year 1997 budget, and are not including such projections in
this report, it makes good fiscal sense to plan that some projects in
the 1997 budget will be canceled and to adjust the budget
accordingly. We believe that the practice of requesting full funding
for all construction projects in the budget, when historically the IG
audits have found some are not needed, contributes to the BRAC
account having more funds than are needed to meet current
requirements. However, we reduced our estimate and revised the
report to reflect that there is a potential for reduction based on
past trends. See appendix I for DOD's comments and our response to
them.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8
Our review of the validity of the fiscal year 1997 BRAC budget
focused on identifying prior year funds available to offset fiscal
year 1997 budget requests. We also reviewed the quality of past BRAC
budget estimates, particularly for environmental costs. In addition,
we reviewed DOD IG work to determine the extent that it could
identify potential BRAC cost reductions.
We reviewed DOD reports and documents and analyzed DOD accounting
reports for the BRAC accounts. We obtained data on requirements
supporting budget requests for selected bases and subaccounts. We
also reviewed IG reports and audit plans as part of this review. In
conducting our review, we used the same accounting systems, reports,
and statistics the services use to monitor their programs. We did
not independently determine the reliability of this information.
We conducted our work from October 1995 to May 1996. We conducted
our review in accordance with generally accepted government auditing
standards.
---------------------------------------------------------- Letter :8.1
We are sending copies of this report to the Chairmen and Ranking
Minority Members, Senate Committees on Armed Services, on
Governmental Affairs, and on Appropriations, Subcommittee on Defense;
the Chairmen and Ranking Minority Members, House Committee on
National Security and on Government Reform and Oversight, and
Subcommittees on Military Construction and on National Security,
House Committee on Appropriations; the Secretaries of Defense, the
Army, the Navy, and the Air Force; the Director, Office of Management
and Budget; and other interested parties. We will also make copies
available to others upon request.
Should you or your staffs have any questions about this report,
please contact me at (202) 512-8412. The major contributors to this
report were John Klotz, Tom Monahan, Stephen DeSart, and Randy Jones.
David R. Warren
Director, Defense Management Issues
(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
============================================================== Letter
(See figure in printed edition.)
(See figure in printed edition.)
The following are GAO's comments on the Department of Defense's (DOD)
letter dated June 5, 1996.
GAO COMMENTS
------------------------------------------------------------ Letter :9
1. Recognizing DOD's past successes in reducing unobligated balances
and pointing out that reductions in future budgets are needed is not
contradictory. DOD has made significant progress in reducing
unobligated balances but, more reductions can be made.
2. We did not find that Commission changes caused the project
cancellations discussed in the report. The projects were, for the
most part, canceled because of Inspector General (IG) findings. The
degree to which the $507 million congressional rescission was
disproportionately taken from the operations and maintenance (O&M)
and military construction subaccounts supports our conclusion that
the subaccounts were overfunded.
3. We agree that DOD considered unobligated balances in developing
its fiscal year 1997 budget submission. However, in the past, DOD
actions, along with congressional budget reductions and rescissions,
were needed subsequent to the appropriation of Base Realignment and
Closure (BRAC) funds to control unobligated balances. Given the
slower rate of obligations in fiscal year 1996 (see comment 4), the
continuing levels of unobligated funds in the BRAC account, and the
potential reductions in fiscal year 1997 construction that could be
expected to result from IG audits, we continue to believe
congressional reductions to the fiscal year 1997 BRAC budget would
more closely align funds in the BRAC account with expected
expenditures from now to the end of fiscal year 1997.
4. We believe the fact that an average of $148 million had remained
unobligated for 3 years demonstrates that the BRAC account has more
funds than needed to meet current BRAC requirements and that the
account can be reduced. Recently released DOD BRAC accounting data
indicate that older unobligated balances are being reduced. Overall,
however, unobligated balances in the BRAC account are increasing
because fiscal year 1996 obligation rates have slowed. As of March
1995, unobligated balances were $1.98 billion. As of March 31, 1996,
unobligated balances were $2.7 billion. As of October 1, 1995, the
unobligated balance from prior years was $374 million, or about 9.5
percent of the fiscal year 1996 budget. If DOD obligates funds at
the same rate in the last half of fiscal year 1996 as it did during
the first half, it will end the year with a prior year unobligated
balance of $1.2 billion, or 46.6 percent of the fiscal year 1997
budget.
5. We revised the amount the fiscal year 1997 budget should be
reduced because of DOD's plans to use the money for environmental
cleanup. Because DOD notified the Congress of its plans subsequent
to the release of our draft report for comment, we did not have the
opportunity to validate the environmental requirements.
The data we gathered during this review do not support DOD's
statement that valid O&M requirements existed at the time DOD made
its 1996 budget request. We found that at the time of the fiscal
year 1996 budget submission, $44 million in O&M funds requested for
one base, Sacramento Army Depot, were not based on valid
requirements. Moreover, the fiscal year 1997 budget submission
continued to indicate that $144 million would be used for O&M costs,
including the $44 million for this depot.
According to DOD, services should only request funding for actions
they can execute in the fiscal year of the budget submission. We
believe that the $144 million allocated for O&M costs is an example
of funds being requested in excess of what could be executed in the
fiscal year of the budget submission. In May, 7 months after
appropriation, DOD reprogrammed the funds to the environmental
subaccount. In informing the Congress of the reprogramming, DOD
indicated the funds would not be completely obligated for 18 months.
Thus, it will take over 2 years to execute the funds. Clearly,
during fiscal year 1996, there was not a need for all of these funds.
6. DOD was correct in stating the data we obtained from the IG were
not accurate. Subsequent to providing our draft report to DOD for
comment, the services gave us updated information regarding the
number of BRAC military construction projects canceled as a result of
the DOD IG audit. The new data have been incorporated in this
report. The new data show that
29 projects valued at over $124 million were canceled as of May 31,
1996. In addition, the services identified 14 projects valued at
over $136 million that are in dispute and eventually could be
canceled.
We agree it is not possible to project the above results to the 1997
budget. However, based on past results, it makes fiscal sense to
plan that some projects in the 1997 budget will be canceled and to
adjust the budget accordingly. We believe that the practice of
requesting full funding for all construction projects in the budget
when historically the IG audits have found some are not needed
contributes to the BRAC account having more funds than are needed to
meet current requirements. We recognize that the Army and the Navy
will audit the 1997 construction projects before they are included in
the budget submissions. However, audits were conducted on the fiscal
years 1995-96 construction projects before they were included in
budget submissions for those years.
DOD's comments suggest that we are proposing that reductions be made
to the fiscal year 1997 budget for construction requirements that are
valid. This is not the case. What we are saying is that some of the
projects in the 1997 budget will be canceled or in dispute at the end
of the fiscal year. If funds are appropriated to cover the costs of
all construction projects, there will be excess funding in the BRAC
account.
7. We recognize that the Congress gave DOD flexibility in its use of
BRAC funds. However, appropriation committee reports and the 1994
congressional rescission indicates the Congress also was concerned
about sound financial management. We are not recommending that DOD's
flexibility in its use of BRAC funds be reduced, rather that it be
better managed to facilitate DOD and congressional oversight.
*** End of document. ***
|
NEWSLETTER
|
|
Join the GlobalSecurity.org mailing list
|
|
|
