Army Working Capital Fund: Actions Needed to Improve Budgeting for Carryover at Army Ordnance
Highlights
From fiscal years 2004 through 2008, new orders received by the eight Army ordnance activities increased from $788 million to $1.5 billion. To the extent that the ordnance activities do not complete work at year end, the ordered and funded work is carried over into the next fiscal year. While past congressional defense committees recognized the need for carryover, the committees have on occasion raised concerns that carryover may be more than needed. GAO was asked to determine (1) whether the reported actual total carryover increased or decreased from fiscal years 2004 through 2008 and, if the carryover increased, the actions the Army is taking to reduce it; (2) the primary reasons for carryover at the eight ordnance activities; and (3) whether carryover amounts exceeded ceilings for fiscal years 2006, 2007, and 2008, and whether the methodology used to calculate the ceiling for the ordnance activities was reasonable. GAO analyzed reported carryover and related data at the eight activities.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | To improve the management of budgeting for carryover and update the DOD Financial Management Regulation that contains guidance on carryover, the Secretary of Defense should direct the Secretary of the Army to establish procedures requiring Army headquarters and Army Materiel Command to develop more accurate estimates of new order data by comparing budgeted orders to actual orders and consider these trends in developing the following year's budget estimates for new orders. |
DOD concurred with the recommendation and, on May 18, 2009, directed the Army to establish procedures that outline the methods the Army is taking to more accurately estimate future orders. Further, DOD directed the Army to consider prior year experience when estimating future workload. In June 2009, the Army established procedures for more accurately forecasting budgeted new orders using a seven year trend analysis comparing historical new orders to new orders reported in the current budget submission. The Army noted that the trend analysis tool would be very useful going forward to identify any large deviations from recent years. By implementing this tool, the Army should have more accurate budget estimates that allow it to put in place the necessary resources (materiel and personnel) to perform work to better address carryover and expected orders.
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| Department of Defense | To improve the management of budgeting for carryover and update the DOD Financial Management Regulation that contains guidance on carryover, the Secretary of Defense should direct the Secretary of the Army to report the allowable and actual amounts of carryover for the Army ordnance activities as a separate item in the Army Working Capital Fund annual budget to Congress. |
DOD concurred with the recommendation and directed the Army to report separately the allowable and actual amount of carryover for the Army ordnance activities. The Army complied with the guidance and has separately reported the amounts in the fiscal years 2010 and 2011 President's Budget Request Justification Books provided to Congress. With the additional information, Congress should have better visibility over the Army Working Capital Fund's carryover.
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| Department of Defense | To improve the management of budgeting for carryover and update the DOD Financial Management Regulation that contains guidance on carryover, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to update methodology in the DOD Financial Management Regulation for calculating the allowable amount of carryover for ordnance activities in order to formally establish this new requirement, which was contained in the December 31, 2008, memorandum. |
The Undersecretary of Defense (Comptroller) concurred with the recommendation and included the new requirement in the November 2009 update to the DOD Financial Management Regulation.
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