Transportation Working Capital Fund

The TWCF is dedicated to TRANSCOM’s mission to provide air, land,  and sea transportation for DOD in times of peace and war, with a primary  focus on wartime readiness. These amounts varied annually,  in some cases, by hundreds of millions of dollars. Our analysis of Air  Force and TRANSCOM budget and financial information showed that for  fiscal years 2007 through 2017, the Air Force requested $2.8 billion from  Congress for ARA requirements, as part of its annual Operations and  Maintenance appropriation. The Air Force allotted $2.8 billion (i.e.,  directed the use of the appropriated funds) and expended $2.4 billion of  the ARA appropriated funds). Since Fiscal Year 2010, Air Force Budget Requests Have Omitted Complete Airlift Readiness Account Information and Have Not Been Informed by Estimates

		Air Force Budget Requests Include Some Information on the Airlift Readiness Account but Omit Details Provided In Budget Requests Prior to Fiscal Year 2010

Air Force budget requests include some information on the ARA but omit  details provided in budget requests prior to fiscal year 2010. Air Force  budget officials stated the ARA budget information that was included for  fiscal years 2007 through 2009 was changed for the fiscal year 2010  budget request as part of a DOD initiative to reduce the overall number of  budget line items. TRANSCOM Has a Rate-Setting Process for Airlift Services, but Producing Accurate Workload Forecasts Is Challenging

TRANSCOM has a rate-setting process for airlift services, but producing  accurate workload forecasts is challenging. Producing accurate forecasts is  challenging because TRANSCOM has not fully implemented: (1) an  effective process to gather workload projections from customers, (2)  forecasting goals and metrics and the review of its performance, and (3)  an action plan to improve workload forecasts. U.S. Transportation Command Has a Rate- Setting Process for Airlift Services

TRANSCOM has a rate-setting process for airlift services that is generally  established to be competitive with commercial airlift services, according to  DOD guidance. Specifically, we found that  forecast inaccuracy (i.e., the variance between the forecast and the actual  workload amounts aggregated across all five workload categories)  averaged about 25 percent and was trending upward in absolute value for  fiscal years 2007 through 2017, as shown in figure 4. TRANSCOM no longer uses forecast accuracy metrics and has  not established forecast accuracy goals: In 2012, TRANSCOM  developed a forecasting process, and according to officials started  providing forecast performance metric briefings to TRANSCOM senior  leadership on a quarterly basis in fiscal year 2014. Inaccurate forecasts can lead to unreliable budget requests and hinder  effective and efficient operational planning necessary to provide  customers with the service they need. Conclusions

Each year DOD spends billions of dollars on airlift services flying  personnel and cargo worldwide. Accordingly, Congress would benefit  from detailed ARA information in its budget requests, and this information  would be improved by TRANSCOM providing timely information on the  annual ARA estimate to the Air Force. To determine the extent to which the Air Force provided ARA information  in its budget request to Congress and informed its request with  information from TRANSCOM, we analyzed Air Force Operations and  Maintenance budget justification documents to determine the type of ARA  information (i.e., total budget request amount, changes from year to year,  and other information) provided in the fiscal years 2007 through 2017  President budget submissions. To determine the extent to which TRANSCOM has implemented a  process to set rates for airlift services and use workload forecasts to  estimate the annual ARA funding request, we analyzed the processes  TRANSCOM used to set rates it charges customers in various airlift  workload categories for fiscal years 2007 through 2017. We assessed the reliability of  the data by (1) interviewing Air Force and TRANSCOM officials to gain an  understanding of the processes used to produce the cash, revenue, cost,  workload and ARA data; (2) reviewing prior work to determine if there  were reported concerns with TRANSCOM’s data; (3) comparing cash  balances, revenue, costs and workload data provided by TRANSCOM to  the same data presented in the Air Force Working Capital Fund budgets  for fiscal years 2007 through 2017; and (4) comparing ARA data to Air  Force and TRANSCOM supporting documentation, or to Air Force  Operations and Maintenance budget execution reports to support ARA  reported amounts for fiscal years 2007 through 2017. Due to mobilization requirements, the resulting revenue does not  always cover the full costs of airlift operations provided through the  TWCF.
Why GAO Did This Study

TRANSCOM reported spending about $81 billion flying personnel and cargo worldwide in fiscal years 2007-2017. TRANSCOM manages the Transportation Working Capital Fund (TWCF) to provide air, land, and sea transportation for the Department of Defense (DOD). TRANSCOM sets some rates it charges below costs to be competitive with commercial air service providers. The Air Force generally pays for expenses not covered by TWCF rates through the ARA.
A House Report accompanying the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to review the ARA and the TWCF. GAO's report discusses the extent to which (1) ARA funds were requested, allotted, and expended for airlift activities; (2) the Air Force provided ARA information in its budget requests and informed its requests with information from TRANSCOM; and (3) TRANSCOM has implemented a rate-setting process for airlift services and uses workload forecasts to estimate the annual ARA funding request. GAO analyzed ARA funds and costs and revenues for airlift services for fiscal years 2007-2017; interviewed officials about the ARA budget preparation process; and analyzed TRANSCOM rate-setting and forecasting guidance and results.

What GAO Found

For fiscal years 2007 through 2017, the Air Force requested $2.8 billion from Congress for Airlift Readiness Account (ARA) requirements, as part of its annual Operations and Maintenance appropriation. The Air Force allotted $2.8 billion (i.e., directed the use of the appropriated funds) and expended $2.4 billion of these funds for the ARA. U.S. Transportation Command (TRANSCOM) uses ARA funds to support airlift operations. Specifically, the Air Force requests ARA funds in its annual Operations and Maintenance budget request and subsequently provides these funds to TRANSCOM to assist in paying for airlift services (see figure). Amounts requested, allotted, and expended varied from year-to-year, in some cases by hundreds of millions of dollars, in part due to changes in the amount of airlift services provided by TRANSCOM.
The Air Force has not been including specific ARA information in its budget requests since fiscal year 2010. For fiscal years 2007 through 2009, Air Force budget requests explicitly stated ARA amounts. Air Force officials stated their budget presentation was changed to reduce the overall number of budget line items. In addition, TRANSCOM has not been providing cost estimates in time to support Air Force budget preparations. Specifically, TRANSCOM has been providing this information 2 months later than the Air Force needs it to support budget deliberations. The Air Force and TRANSCOM have taken some initial steps to address this issue, but these efforts lack substantive details regarding formalizing the necessary processes to ensure timely information. Until the Air Force and TRANSCOM resolve this issue, Congress will not have sufficient and complete information to inform its decisions on appropriating funds for ARA.
TRANSCOM has a rate-setting process, but faces challenges producing accurate workload forecasts. To provide information to its customers during the annual budget development process, TRANSCOM sets airlift rates in advance of the fiscal year of expenditure. Workload forecasts influence the rate-setting process. Inaccurate forecasts can lead to unreliable budget requests and hinder effective and efficient operational planning. GAO found that forecast inaccuracy (i.e., the variance between the forecast and the actual workload) averaged 25 percent and was becoming increasingly inaccurate since fiscal year 2007. GAO found that TRANSCOM has several workload forecasting challenges. Specifically, TRANSCOM lacks an effective process to gather workload projections from customers. It also no longer uses forecasting accuracy metrics and has not established forecast accuracy goals to monitor its performance. Furthermore, TRANSCOM does not have an action plan to improve its increasingly inaccurate workload forecasts. Taking steps to address these issues would enable TRANSCOM to improve the accuracy of workload forecasts.

What GAO Recommends

GAO is making five recommendations to DOD, including improving the clarity and completeness of budget estimates, and taking steps to improve the accuracy of airlift workload forecasts. DOD concurs with GAO's recommendations.