	Background

In addition to the 50-50 requirement in 10 U.S.C. Management Control Weaknesses Prevent Determination of Military Departments’ Compliance with 50-50 Requirement for Fiscal Year 2004

As in previous years, management control weaknesses in DOD’s financial  systems and persistent deficiencies in 50-50 data reporting processes  continue to prevent us 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. As a result, the data reported for the prior year cannot be relied  on to provide an accurate measure of the balance of funding between the  public and private sectors or to determine if the military departments  complied with the statutory limitation set by Congress for private-sector  depot-level maintenance funding allocations. Persistent Deficiencies Continue to Limit Accuracy of Reported Data

Systemic weakness in DOD’s financial systems and persistent deficiencies,  such as inadequate management attention and review to ensure accurate  and complete reporting, limited independent review and validation of 50-50  data by audit agencies or other third parties, and inadequate training for  those responsible for data collection and reporting continue to limit the  accuracy of the 50-50 data provided to Congress. Fiscal Year 2005 and 2006 Projections Do Not Represent Reasonable Estimates of Public- and Private- Sector Funding

DOD’s reported projections for fiscal years 2005 through 2006 do not  represent reasonable estimates of public- and private-sector depot  maintenance funding allocations. The usefulness of the reported  projections to congressional and DOD decision makers is limited because  errors, omissions, and inconsistencies in DOD’s reported prior-year data  are carried into future years and because of the difficulty in projecting out- year data due to factors such as changing depot maintenance requirements,  consolidating maintenance facilities, and the trend toward more contractor  logistics support for new and existing weapon systems. DOD’s Current 50-50 Report Satisfies the Annual Mandate but Could Provide More Useful Data and Analysis

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. Furthermore, the reported data are aggregated at  the service level. The report also does not identify funding allocation  variances from year to year, nor explain the reasons behind them. Finally, DOD’s 50-50 report to Congress does not contain information about  the methodologies used to prepare the current and future year projections  or the reasons for projected funding variances and changes in workload  distribution. Explanation of the methodologies used to estimate workload allocation  projections for the current and ensuing fiscal years. Neither DOD nor the  military services have consistently implemented corrective actions  sufficient to resolve the deficiencies. 2466. Defense Depot Maintenance: Privatization and the Debate over the  Public-Private Mix.
Why GAO Did This Study

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.

What GAO Found

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.