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This report discusses financial management and logistics management issues relating to the effectiveness and efficiency of the Department of Defense's (DOD) operations. Specifically, it will focus on the operations of DOD'S working capital funds, which collect and disburse over $65 billion annually, and on DOD'S management of the $13 billion depot maintenance program. It is important to note that these areas fall within defense financial management and infrastructure activities, 2 of the 24 areas we identified as high-risk areas within the federal government. These issues have significant impact on the efficiency and effectiveness of how DOD spends its operations and maintenance funds. DOD has consistently experienced losses in the operations of various working capital funds, including the depot maintenance activity group, and has had to request additional funding to support their operations. This issue has been an area of concern to this subcommittee and other congressional committees.
This report discusses financial management and logistics management issues relating to the effectiveness and efficiency of the Department of Defense's (DOD) operations. Specifically, it will focus on the operations of DOD'S working capital funds, which collect and disburse over $65 billion annually, and on DOD'S management of the $13 billion depot maintenance program. It is important to note that these areas fall within defense financial management and infrastructure activities, 2 of the 24 areas we identified as high-risk areas within the federal government. These issues have significant impact on the efficiency and effectiveness of how DOD spends its operations and maintenance funds. DOD has consistently experienced losses in the operations of various working capital funds, including the depot maintenance activity group, and has had to request additional funding to support their operations. This issue has been an area of concern to this subcommittee and other congressional committees.
According to the Department of Defense's (DOD) fiscal year 2006 budget estimates, working capital fund activity groups (depot maintenance, ordnance, and research and development) will have about $6.3 billion of funded work that will be carried over from fiscal year 2006 into fiscal year 2007. The congressional defense committees recognize that these activity groups need some carryover to ensure smooth work flow from one fiscal year to the next. However, the committees have previously raised concern that the amount of carryover may be more than is needed. GAO was asked to determine (1) if the military services' carryover calculations were in compliance with DOD's new carryover policy and (2) if customers were submitting orders to working capital fund activities late in the fiscal year and, if so, the effect this practice has had on carryover.
The report discusses the Department of Defense's (DOD) (1) plans for eliminating costly depot maintenance excess capacity, (2) progress in finalizing a new depot workload allocation policy, (3) current approach for allocating maintenance workloads for new and existing systems, and (4) estimates that billions can be saved by outsourcing depot maintenance.
About 40,000 civilians at Marine Corps, Navy, and Air Force depots maintain weapon systems and equipment. During FY 2020, COVID-19 exacerbated challenges the depots already faced, such as having too few people or materials to finish work. The depots responded to COVID-19 by protecting personnel, shifting schedules, or pausing operations. DOD also acted to keep the funds used to operate depots solvent, despite reduced depot revenue. Our 9 recommendations include that DOD provide guidance to depot personnel before a crisis, update depot contingency plans based on COVID-19 lessons learned, and publish its Working Capital Fund cash management policy.