Second, BOP projects inmate population changes for the budget year and  for several years into the future. BOP’s Methods for Estimating Costs Largely Reflect Best Practices

BOP’s methods for estimating costs in its annual budget requests to DOJ  largely reflect the best practices outlined in GAO’s Cost Estimating and  Assessment Guide. Specifically, BOP followed a well-defined process for  developing a mostly comprehensive, well documented, accurate, and  credible cost estimate for fiscal year 2008. For example, we found BOP’s projections were accurate,  on average, to within 1 percent of the actual inmate population growth  from fiscal year 1999 through August 20, 2009. While not required by OMB or DOJ in annual budget  development guidance, conducting an uncertainty analysis of this kind is a  best practice. BOP has not conducted an uncertainty analysis, and  therefore has not quantified the level of confidence associated with its  cost estimate. By providing the results of such analysis to DOJ, BOP  officials could share advance information on the probability and  associated risks of operating expenses exceeding enacted funding levels— a situation BOP faced in fiscal year 2008. By documenting all steps for  developing its budget cost estimate, BOP would be better positioned to  recreate its estimates in the event of attrition within its budget office  among those who developed initial budget cost estimates. Costs for Key Operations Have Exceeded the Funding Levels Requested in the President’s Budget in Recent Years

BOP’s costs for key operations to maintain basic services, such as those  for inmate medical care and utilities, exceeded the funding levels  requested in the President’s budget from fiscal years 2004 through 2008,  limiting BOP’s ability to manage its growing inmate population. During this  period, BOP’s annual non-salary inmate medical care and utilities costs  exceeded funding levels in the President’s budget request by a total of  about $131 million and $55 million, respectively, largely due to inflation  and inmate population growth. Recommendations for Executive Action

To improve transparency in BOP’s cost estimation process, as well as  DOJ’s annual budget formulation and justification process, and to provide  DOJ with more detailed information to consider when deliberating its  budget proposal for BOP, we recommend that the Attorney General take  the following two actions:  instruct the BOP Director to require the BOP budget staff to conduct  an uncertainty analysis quantifying the extent to which operations  costs could vary due to changes in key cost assumptions and submit  the results along with budget documentation to DOJ so that DOJ could  be aware of the range of likely costs and BOP’s associated confidence  levels; and  instruct the BOP Director to require the BOP budget staff to improve  documentation of calculations used to estimate its costs. BOP identifies and estimates costs for new initiatives/program increases, such  as activation of a new BOP prison facility, by reviewing the proposals submitted  by its divisions and regional offices, and historical data. Consistent with best practices, BOP used relevant historical cost data and considered adjustments for general inflation when estimating costs for its fiscal year 2008 budget request to DOJ, and its methods for projecting inmate population have been largely accurate. In some cases, however, we required the guidance of BOP budget analysts to  identify backup support because the documentation was insufficient to allow  someone unfamiliar with the budget to locate detailed corroborating data. As a result, BOP has faced funding gaps in its operations account that has  left it with limited flexibility to manage its continually growing inmate  population.
Why GAO Did This Study

The Department of Justice's (DOJ) Federal Bureau of Prisons (BOP) is responsible for the custody and care of about 209,000 federal inmates--a population which has grown by 44 percent over the last decade. In fiscal years 2008 and 2009, the President requested additional funding for BOP because costs for key operations were at risk of exceeding appropriated funding levels. Government Accountability Office (GAO) was congressionally directed to examine (1) how BOP estimates costs when developing its annual budget request to DOJ; (2) the extent to which BOP's methods for estimating costs follow established best practices; and (3) the extent to which BOP's costs for key operations exceeded requested funding levels identified in the President's budget in recent years, and how this has affected BOP's ability to manage its growing inmate population. In conducting our work, GAO analyzed BOP budget documents, interviewed BOP and DOJ officials, and compared BOP's cost estimation documentation to criteria in GAO's Cost Estimating and Assessment Guide.

What GAO Found

BOP uses three general steps to estimate costs for its annual budget submission: (1) estimating cost increases to maintain service levels, such as inmate medical care and utilities; (2) projecting inmate population changes for the budget year and for several years into the future using a modeling program that incorporates data on the current inmate population and estimated incoming population and associated sentences; and (3) estimating costs to both provide additional capacity to house projected inmate population growth and implement new programs, such as activating new prisons. BOP's methods for cost estimation largely reflect best practices outlined in GAO's Cost Estimating and Assessment Guide. BOP followed a well-defined process for developing a mostly comprehensive, well documented, accurate, and credible cost estimate for fiscal year 2008. For example, BOP used relevant historical cost data and considered adjustments for general inflation when estimating costs for its budget request to DOJ. Moreover, BOP's methods for projecting inmate population changes were accurate, on average, to within 1 percent of the actual inmate population growth from fiscal year 1999 to August 2009. Still, BOP could strengthen its methods in two ways. First, BOP has not quantified the level of confidence associated with its cost estimate. While not required by the Office of Management and Budget or DOJ, conducting an uncertainty analysis of this kind is a best practice. By providing the results of such analysis to DOJ, BOP officials could share advance information on the probability and associated risks of operating expenses exceeding enacted funding levels. Second, during our review of documentation for BOP's fiscal year 2008 cost estimate, in some cases we required the guidance of BOP budget analysts to identify backup support because the documentation was insufficient to allow someone unfamiliar with the budget to locate detailed corroborating data. By documenting all steps, BOP would be better positioned to recreate its budget cost estimates in the event of attrition among those who initially developed them. According to BOP, from fiscal years 2004 through 2008, costs for non-salary inmate medical care and utilities exceeded funding levels in the President's budget request by about $131 million and $55 million, respectively. As a result, BOP has faced funding gaps in its operations account that has left it with limited flexibility to manage its continually growing inmate population.