Defense Budget: There are opportunities to improve the management of the DOD’s defense spending

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What GAO found

GAO’s previous work has shown that the Department of Defense (DOD) has a number of ways to strengthen the management of defense spending, which would help the department address the challenges it faces, particularly in a constrained budgetary environment. These options include:

Improve budget implementation of funds. DOD does not fully commit the funds allocated to it and can improve both its budgeting and its use of the resources it has been given. For example, GAO found that DOD had not spent billions of dollars in earmarked amounts for the past 10 fiscal years. A better estimate of the annual budget needs and the commitment of the funds provided by Congress within the availability period set by Congress would help the DOD to minimize these cases of under-execution.

Clearer determination of future resource requirements in connection with emergency operations abroad. The DOD and Congress need a clearer definition of the DOD’s future resource requirements, particularly how and whether ongoing Overseas Contingency Operations (OCO) costs – costs that go beyond ongoing emergency operations – should be included in the DOD’s base budget. These costs could run into tens of billions of dollars annually. However, there are few details about what makes up these persistent costs or how they were derived, which begs the question of how much should be considered as future requirements.

Reduce improper payments. Dealing with improper payments – payments that shouldn’t have been made or were made in the wrong amount – is an area where better financial management could save the DOD billions of dollars. In its agency’s 2020 financial report, the DOD estimates it made about $ 11.4 billion in improper payments, or about 1.7 percent of all payments that year. DOD has taken steps to reduce improper payments in some areas, but DOD’s estimates of its improper payments in other areas indicate that more needs to be done.

Support and further development of department-wide corporate reform efforts. DOD needs to transform its entire business operations so that it can use its resources more efficiently and effectively. In recent years, the DOD has reported notable achievements from its recent department-wide corporate reform efforts, including $ 37 billion in savings in fiscal years 2017-2021 as a result of those efforts. However, GAO previously noted that while the savings reported by DOD were largely reflected in its household materials, the analyzes underlying these estimates were not always well documented and the savings were not always the result of corporate reform.

In addition, uncertainty about DOD’s governance structure for overseeing and reforming its operations, including the recent elimination of the position of Chief Management Officer, questions whether efforts to fundamentally transform the department’s operations can be implemented and sustained. GAO previously highlighted the importance of DOD, which provides clear departmental guidelines on roles, responsibilities, authorities, and resources for corporate reform efforts so that DOD can move forward in those efforts.

Why GAO conducted this study

DOD and Congress decisions on long-term defense needs will have a significant impact on the country’s fiscal future. As the largest single category of discretionary spending, defense spending is likely to play a major role in any discussion of future federal spending. GAO and others have noted that the DOD is facing challenges that are likely to put pressure on its budget. DOD is the only major federal agency that has not been able to get a clean audit opinion on its financial statements.

This statement provides information on how the DOD can better manage defense spending, particularly in terms of its ability to (1) accurately estimate its budgetary needs and execute its allocated funds, (2) determine resource needs related to foreign emergency operations, ( 3) inappropriate payments; and (4) maintaining and refining department-wide reform efforts. For this testimony, GAO reviewed and summarized its recent work on DOD budget and financial management issues and department reform efforts.

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