Ultimately, these resources were reduced by about 7 percent, or $37.2 billion, as a result of sequestration (see fig. Sequestration Reduced DOD’s Nonexempt Discretionary Resources, Including Unobligated Balances, and the Military Services’ Accounts Absorbed Most of the Reductions

In response to the President’s sequestration order and OMB’s  implementing report, DOD’s nonexempt discretionary resources were  reduced, including those within the operation and maintenance,  procurement, RDT&E, and military construction appropriation accounts.DOD’s use of prior year unobligated balances to meet sequestration  reductions varied by appropriation. In contrast, within their operation and maintenance accounts, the  military services had the flexibility to allocate sequestration reductions to  specific functions and activities. DOD Took Near-Term Actions While Implementing Sequestration Reductions to Preserve Key Programs and Functions

DOD and the military services provided guidance to their subordinate  commands and components identifying near-term actions to help plan for  and implement sequestration, and the components took a variety of  actions in response to this guidance. Similarly, the Air Force  cancelled or reduced participation in 32 of 48 of its large-scale  planned exercises, including two of its key multinational training  events. The  following are examples of sequestration-related effects identified by DOD  officials across our case studies:
The Navy cancelled or delayed some planned ship deployments in  fiscal year 2013, which resulted in a 10 percent decrease in its  deployed forces worldwide. DOD Used Available Means to Mitigate the Effects of Sequestration, but Has Not Consistently Documented and Shared Best Practices or Lessons Learned

DOD and the military services generally relied on previously existing  processes and funding flexibilities, such as the ability to reprogram and  transfer funds, to mitigate the effects of the fiscal year 2013  sequestration. Our review identified some limited efforts to document  decisions or lessons learned from implementing the fiscal year 2013  sequestration, but DOD and the military services did not comprehensively  document, assess, or share best practices or lessons learned from their  experiences. Without documenting, assessing, and  sharing DOD’s and the services’ best practices and lessons learned from  implementing sequestration, including, for example, strategies for  evaluating the interdependence of various funding sources subject to  budgetary reductions, DOD is missing an opportunity to gain valuable  institutional knowledge that would help facilitate future decision making  about budgetary reductions should sequestration occur again. However, without documenting, assessing, and sharing  information on lessons learned and best practices in implementing the  2013 sequestration reductions across the department and leveraging  existing mechanisms to share this information, decision makers at the  program, DOD component, and department-wide levels may not benefit  from such insights. If you or your staff have any questions about this report, please contact  Johana R. Ayers at (202) 512-5741 or ayersj@gao.gov, or Michael J.  Sullivan at (202) 512-4841 or sullivanm@gao.gov. As a result  of actions taken to reduce spending for lower priority areas in fiscal year  2013, service component officials identified negative effects, which based  on our analysis are related to increased costs in fiscal year 2013 or a  subsequent fiscal year; cancelled or reduced training activities and  delayed time frames to restore readiness; and a decreased availability of  forces or equipment to support operations and training. Some of the  effects identified were interrelated, while others were difficult to quantify. The use of transfers and reprogrammings gave the services some  flexibility to manage reductions, but did not allow them to restore some  actions taken in response to the fiscal year 2013 sequestration. Reductions Resulted in Effects Related to Costs and Spending, Delayed Time Frames, and Reduced Equipment Availability

Based on our review of DOD’s budget execution data, internal  maintenance records, service guidance, and interviews with maintenance  officials, we found that the service components took steps during the  fiscal year 2013 sequestration to preserve funding for maintenance  activities most directly associated with equipment readiness for those  units deploying or next-to-deploy in support of ongoing operations, and  reduced spending on equipment maintenance for later-deploying units, in  response to a DOD memorandum. Appendix II: Objectives, Scope, and Methodology

The joint explanatory statement accompanying the National Defense  Authorization Act for Fiscal Year 2014 included a provision that we review  the effects of the fiscal year 2013 sequestration. This report  examines (1) how DOD, including the military services, allocated fiscal  year 2013 sequestration reductions, (2) what effects, if any, DOD has  identified from the fiscal year 2013 sequestration on selected DOD  programs, services, and military readiness, and (3) the extent to which  DOD took actions to mitigate the effects of the fiscal year 2013  sequestration. Case Study Selection

We selected a non-probability sample of five case studies of expenses or  investments within DOD to review in detail. To further our understanding of DOD’s allocation of fiscal year 2013  sequestration reductions and the extent to which those reductions  affected selected case study areas or were mitigated by DOD efforts, we  interviewed officials, or where appropriate, obtained documentation at the  organizations listed below:  Office of the Secretary of Defense
Office of the Under Secretary of Defense (Comptroller)
Office of Cost Assessment and Program Evaluation
Office of the Deputy Chief Management Officer
Manpower and Personnel Directorate
Force Structure, Resources, and Assessment Directorate
F-35 Joint Strike Fighter program  Department of the Air Force
Office of the Assistant Secretary of the Air Force, Financial
Office of the Assistant Secretary of the Air Force, Installations,
Air Force Civil Engineer Center
Headquarters Air Force, Office of the Deputy Chief of Staff, Strategic  Plans and Programs (A8)
Headquarters Air Force, Studies and Analyses, Assessment, and  Lessons Learned (A9)
Headquarters Air Force, Office of the Deputy Chief of Staff,  Operations, Plans and Requirements, Operations (A3O)
Headquarters Air Force, Office of the Deputy Chief of Staff, Logistics,  Installations and Mission Support, Security Forces (A47S)
Headquarters Air Force, Office of the Deputy Chief of Staff, Logistics,  Installations and Mission Support, Logistics (A4L)
Air Combat Command
Air Education and Training Command
Air Force Materiel Command
Air Force Materiel Command, Air Force Life Cycle Management
Air Force Space Command, Space and Missile Systems Center
Air Force Reserve Command
Office of the Assistant Secretary of the Army for Financial  Management and Comptroller, Army Budget
Headquarters, Department of the Army, G-3/5/7 Operations and Plans
Headquarters, Department of the Army, G-4 Office of the Deputy  Chief of Staff for Logistics
Office of the Assistant Chief of Staff for Installation Management
U.S. Army Corps of Engineers
U.S. Army Installation Management Command
U.S. Army Forces Command
U.S. Army Materiel Command
U.S. Army Training and Doctrine Command, U.S. Army Combined  Arms Center, Center for Army Lessons Learned
U.S. Army Aviation and Missile Life Cycle Management Command
U.S. Army Tank-Automotive and Armaments Command Life Cycle
U.S. Army Communications-Electronics Command
Assistant Secretary of the Navy, Financial Management and
Office of the Deputy Chief of Naval Operations (Fleet Readiness and  Logistics), Fleet Readiness Division (N43)
Office of the Deputy Chief of Naval Operations Warfare Systems (N9)
U.S. Fleet Forces Command
Naval Air Systems Command
Naval Sea Systems Command
Naval Supply Systems Command
Space and Naval Warfare Systems Command
Naval Facilities Engineering Command
Commander, Navy Installations Command
Navy Warfare Development Command
Office of the Chief of Navy Reserve
Navy Reserve Forces Command
Headquarters Marine Corps, Programs and Resources
Headquarters Marine Corps, Plans, Policies, and Operations
Headquarters Marine Corps, Installations and Logistics, Logistics
U.S. Marine Corps Forces Command
U.S. Marine Corps Logistics Command
U.S. Marine Corps Installations Command
U.S. Marine Corps Training and Education Command, Marine Corps
U.S. Marine Corps Forces Reserve  We conducted this performance audit from April 2014 to May 2015 in  accordance with generally accepted government auditing standards.
Why GAO Did This Study

In March 2013, the President ordered across-the-board spending reductions, known as sequestration, for all federal agencies and departments. As a result, DOD's discretionary resources were reduced by about $37.2 billion over the remainder of FY 2013. The joint explanatory statement accompanying the National Defense Authorization Act for Fiscal Year 2014 included a provision for GAO to review DOD's implementation and effects of the FY 2013 sequestration. This report examines, for the FY 2013 sequestration, (1) how DOD allocated reductions, (2) what effects DOD has identified on selected DOD programs, services, and military readiness, and (3) the extent to which DOD took actions to mitigate the effects of sequestration.
GAO analyzed DOD's FY 2013 budget and execution data and reviewed a nongeneralizeable sample of five types of expenses or investments—such as maintenance, and a selection of weapon systems and military construction projects—based on the magnitude of reductions and possible relation to readiness. For each area, GAO reviewed data on planned versus actual spending and reports on actions taken and interviewed DOD and service officials.

What GAO Found

To implement sequestration in fiscal year (FY) 2013, the Department of Defense's (DOD) discretionary resources were reduced in approximate proportion to the size of its appropriation accounts, with the largest reductions to DOD's largest accounts, operation and maintenance. The military services' accounts absorbed about 76 percent of DOD's reduction relative to other defense accounts. In contrast to other accounts, such as procurement, DOD and the services had some flexibility to allocate varying reductions to functions and activities funded by the operation and maintenance accounts.
To implement sequestration reductions, DOD took near-term actions to preserve key programs and functions and reduced spending on lower priorities. Many effects that DOD officials attributed to the reductions were interdependent, with some difficult to quantify and assess. Effects DOD identified generally related to:
Costs and spending : Some actions increased costs or deferred spending to subsequent years (e.g., procurement delays to the Navy's P-8A aircraft program resulted in an estimated $56.7 million life-cycle cost increase).
Time frames or cancellations : Delayed or cancelled activities affected some plans to improve military readiness (e.g., the Air Force cancelled or reduced participation in most of its planned large-scale FY 2013 training events, and expects delayed achievement of longer-term readiness goals).
Availability of forces and equipment : Some actions decreased the forces and equipment ready for contingencies (e.g., the Navy cancelled or delayed some planned ship deployments, which resulted in a 10 percent decrease in its deployed forces worldwide).
DOD and the services relied on existing processes and flexibilities to mitigate the effect of sequestration in FY 2013, but did not comprehensively document or assess best practices or lessons learned from their experiences. For example, the services used authorities to reprogram and transfer funds, which allowed them to reverse some initial actions taken to reduce spending. GAO identified some DOD efforts to document lessons learned or best practices related to the implementation of the FY 2013 sequestration, but found them to be limited in scope and not widely shared. Without documenting and assessing lessons learned and best practices, such as strategies for evaluating interdependence of funding sources and programs, and leveraging existing mechanisms to share this information, DOD is missing an opportunity to gain institutional knowledge that would facilitate future decision making about budgetary reductions.

What GAO Recommends

GAO recommends that DOD document and assess lessons learned and best practices from implementing sequestration, as well as leverage existing mechanisms to share these lessons within the services and across the department. DOD concurred with GAO's recommendations.
; or Michael J. Sullivan at (202) 512-4841 or sullivanm@gao.gov .