The budget justification for the fiscal year  2010 budget request includes details on construction projects and  investigations projects—studies to determine whether the Corps should  initiate construction projects—included in the budget request, including a  narrative description and such details as the total estimated federal cost  and amount allocated in prior years. The Corps’ Budget Formulation Process Favors Projects with the Highest Anticipated Outcomes and Emphasizes Agencywide Priorities

		The Corps’ Use of Performance-Based Budgeting Emphasizes Anticipated Returns and Takes a Centralized Approach to Decision Making

Prior to fiscal year 2006, the Corps’ budget formulation process was  relatively decentralized, with divisions playing a significant role. Corps officials told us  that they sought to provide continued funding to all ongoing projects that  fit within administration guidelines. Under its current budget formulation process, the Corps uses performance  metrics to evaluate projects’ estimated future outcomes, and gives priority  to those with the highest expected returns for the national economy and  the environment, as well as those that reduce risk to human life. For example, the Corps calculates the economic  benefits of most construction and investigations projects using a BCR. Additionally, the Corps’ use of performance metrics makes projects in  certain geographic areas more likely to be included in the budget request,  since they produce higher returns on investment. According to Corps and OMB staff, another effect of the performance  criteria used as part of the current budget process is that fewer  construction and investigation projects have been included in the budget  request in recent years. Although review  boards collect a variety of performance information, the Corps does not  have written guidance establishing a process for incorporating their  findings into budget formulation decisions. The Corps collects  numerous data and has detailed processes for evaluating projects during  the budget formulation process; however, in the absence of a documented  process for considering information on demonstrated performance—such  as the performance information discussed during review board meetings  on whether projects are on time and on budget—the Corps may miss  opportunities to make the best use of this information. Finally, the budget presentation for the Corps does not include  information on how much carryover of unobligated appropriations is  available to potentially offset new requests for projects that were  previously funded, which congressional users of the budget presentation  stated would be useful. Second, the budget  presentation lacks information on the amount of unobligated  appropriations that remain available for each project. To improve the transparency and usefulness of the Corps’ budget  presentation to Congress, building on the information the appropriators  have requested the Corps provide, we recommend that the Secretary of  Defense direct the Chief of Engineers and Commanding General of the  U.S. Army Corps of Engineers to work with OMB and Congress to take the  following four actions:  Include in the annual budget presentation for the Corps summary-level  information on how the budget request reflects decisions made across  project categories, business lines, and accounts. Provide project-level information on all projects with continuing resource  needs, either as part of the budget presentation or as supplementary  information. Appendix I: Objectives, Scope, and Methodology

To analyze the U.S. Army Corps of Engineers’ (Corps) budget formulation  process, we examined (1) the information the Corps uses in its budget  formulation process and the implications of the process and (2) whether  the President’s budget request for the Corps is presented so that agency  priorities are clear and the proposed use of funds transparent. The Operation and Maintenance Account

For the Operation and Maintenance (O&M) account, the divisions have a  greater role in selecting projects in certain funding increments.
Why GAO Did This Study

The U.S. Army Corps of Engineers (Corps) is the world's largest public engineering, design, and construction management agency. In fiscal year 2006 it began incorporating performance information into its budget process, but Congress raised concerns that the criteria used by the Corps to prioritize projects are not transparent and the budget formulation process could achieve a higher return on investment. GAO was asked to (1) describe the information the Corps uses in its budget formulation process and the implications of the process, and (2) evaluate whether the President's recent budget requests for the Corps are presented so that agency priorities are clear and proposed use of funds transparent. GAO reviewed the Corps' internal budget guidance, documentation of its project rankings and budget formulation process, performance review materials, and budget presentation materials. GAO also interviewed Corps and Office of Management and Budget officials.

What GAO Found

With the introduction of performance-based budgeting in fiscal year 2006, the Corps began emphasizing projects with the highest anticipated returns on investment. Previously, Corps division officials sought to provide continued funding to all ongoing projects that fit within administration guidelines. Now, under the current process, Corps headquarters plays an increased role in selecting projects, and evaluates projects using certain performance metrics. The Corps gives priority to those projects with the highest anticipated returns for the economy and the environment, as well as those that reduce risk to human life. The Corps' use of performance metrics makes projects in certain geographic areas more likely to be included in the budget request. For example, the benefit-cost ratio, a measure of economic benefit that is used to rank certain projects, tends to favor areas with high property values. Another effect of the Corps' use of performance-based budgeting is that fewer construction and investigation projects--studies to determine whether the Corps should initiate construction projects--have been included in the budget request in recent years. In contrast, the number of projects in the Operation and Maintenance account has been relatively stable, which Corps officials attributed partially to its emphasis on routine activities. While the metrics used by the Corps in its budget formulation process focus on anticipated benefits, the Corps monitors the progress of ongoing projects through review boards at the headquarters, division, and district levels. However, the Corps does not have written guidance establishing a process for incorporating information on demonstrated performance, such as review board findings, into budget formulation decisions. In the absence of such a process, the Corps may miss opportunities to make the best use of this performance information. The budget presentation for the Corps lacks transparency on key elements of the budget request. It focuses on requested construction and investigations projects, but does not describe how the decisions made during the budget formulation process affected the budget request. For example, the budget presentation does not include an explanation of the relative priority given to project categories or how they are evaluated against each other. Also, while the number of construction and investigations projects receiving appropriations is typically much greater than the number requested, the budget presentation does not include detailed information on all projects with continuing resource needs. The budget presentation also lacks detail on the amount of the balance of unobligated appropriations (carryover) that remain available for each project. Users of the budget presentation told GAO that these two types of project information would be useful.