Defense Budget: Opportunities Exist to Improve DOD’s Management of Defense Spending

What GAO Found

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

Improving budgeting execution of funds. DOD does not fully obligate the funds appropriated to it and can improve both its budgeting for and its use of the resources that are provided to it. For example, GAO found that DOD has left billions of dollars in appropriated amounts unspent over the past 10 fiscal years. Better estimating annual budget requirements and obligating appropriations provided by Congress within the period of availability established by Congress would help DOD minimize these cases of under-execution.

More clearly determining future resource requirements related to overseas contingency operations. DOD and Congress need a clearer determination of DOD’s future resource requirements, in particular how and whether to incorporate enduring Overseas Contingency Operations (OCO) costs—costs that will endure beyond ongoing contingency operations—into DOD’s base budget. These costs could total tens of billions of dollars a year. However, few details exist as to what makes up these enduring costs or how they were derived, raising questions about how much should be included as future requirements.

Reducing improper payments. Addressing improper payments—payments that should not have been made or were made in an incorrect amount—is an area where better financial management could save DOD billions of dollars. In its fiscal year 2020 agency financial report, DOD estimated that it paid about $11.4 billion in improper payments, or about 1.7 percent of all payments it made 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 more remains to be done.

Sustaining and refining department-wide business reform efforts. DOD must transform its overall business operations so that it can more efficiently and effectively use its resources. In recent years, DOD reported notable achievements from its most recent department-wide business reform efforts, including $37 billion in savings from fiscal years 2017 to 2021 as a result of these efforts. However, GAO previously found that while DOD’s reported savings were largely reflected in its budget materials, the analyses underlying these estimates were not always well documented and the savings were not always the result of business reform.

Moreover, uncertainty about the leadership structure at DOD for overseeing and reforming business operations, including the recent elimination of the Chief Management Officer position, calls into question whether efforts to fundamentally transform how the department does business can be realized and sustained. GAO has previously highlighted the importance of DOD providing clear department-wide guidance on roles, responsibilities, authorities, and resources for business reform efforts will be necessary for DOD to make progress in these efforts.

Why GAO Did This Study

Decisions by DOD and Congress regarding long-term defense needs will have a meaningful impact on the nation’s fiscal future. As the single largest category of discretionary spending, defense spending is likely to play a large role in any discussion of future federal spending. GAO and others have found that DOD faces challenges that are likely to put pressure on its budget moving forward. DOD is the only major federal agency that has been unable to receive a clean audit opinion on its financial statements.

This testimony provides information on how DOD can better manage defense spending, specifically related to its ability to (1) accurately estimate its budgetary requirements and execute its appropriated funds, (2) determine resource requirements related to overseas contingency operations, (3) reduce improper payments, and (4) sustain and refine department-wide reform efforts. For this testimony, GAO reviewed and summarized its recent work on DOD budget and financial management issues and departmental reform efforts.

What GAO Recommends

In prior work on which this testimony is based, GAO made recommendations that DOD take steps to better estimate its annual budget requirements and future fiscal needs for OCO, reduce improper payments, and refine and formalize its departmental reform efforts. DOD generally concurred with these recommendations and is working toward implementing them.

For more information, contact Elizabeth A. Field at (202) 512-2775 or fielde1@gao.gov.

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  • State Department Terrorist Designation Reviews and Amendments
    In Crime Control and Security News
    Office of the [Read More…]
  • Kenyan National Indicted for Conspiring to Hijack Aircraft on Behalf of the Al Qaeda-Affiliated Terrorist Organization Al Shabaab
    In Crime News
    The Department of Justice announced the unsealing of an indictment charging Cholo Abdi Abdullah with six counts of terrorism-related offenses arising from his activities as an operative of the foreign terrorist organization al Shabaab, including conspiring to hijack aircraft in order to conduct a 9/11-style attack in the United States.  Abdullah was arrested in July 2019 in the Philippines on local charges, and was subsequently transferred on Dec. 15, 2020 in connection with his deportation from the Philippines to the custody of U.S. law enforcement for prosecution on the charges in the indictment.  Abdullah was transported from the Phillippines to the United States yesterday, and is expected to be presented today before Magistrate Judge Robert W. Lehrburger in Manhattan federal court.  The case is assigned to United States District Judge Analisa Torres.
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  • Anti-Money Laundering: FinCEN Should Enhance Procedures for Implementing and Evaluating Geographic Targeting Orders
    In U.S GAO News
    To combat money laundering, the Financial Crimes Enforcement Network (FinCEN) issued a geographic targeting order (GTO) in 2016 that required title insurers to report information on certain all-cash purchases of residential real estate by legal entities in specified areas. According to FinCEN analysis, the use of legal entities to purchase high-value real estate, particularly in certain U.S. cities, was prone to abuse. FinCEN determined that imposing the real estate GTO reporting requirements on title insurers would cover a large number of transactions without unnecessary complexity. FinCEN renewed the real estate GTO multiple times—finding it has yielded information useful to law enforcement investigations—and periodically expanded the types of monetary instruments and geographic areas included and decreased the price reporting threshold (see fig.). Issuance and Renewals of the Real Estate Geographic Targeting Order (GTO) Unlike prior GTOs, which FinCEN officials said they issued at the request of and with the involvement of law enforcement agencies, FinCEN issued the real estate GTO on its own initiative. Thus, FinCEN had to take the lead in implementing and evaluating the GTO but lacked detailed documented procedures to help direct the GTO's implementation and evaluation—contributing to oversight, outreach, and evaluation weaknesses. For example, FinCEN did not begin examining its first title insurer for compliance until more than 3 years after issuing the GTO and did not assess whether insurers were filing all required reports. Similarly, while FinCEN initially coordinated with some law enforcement agencies, it did not implement a systematic approach for outreach to all potentially relevant law enforcement agencies until more than 2 years after issuing the GTO. FinCEN also has not yet completed an evaluation of the GTO to determine whether it should address money laundering risks in residential real estate through a regulatory tool more permanent than the GTO, such as a rulemaking. Strengthening its procedures for self-initiated GTOs should help FinCEN more effectively and efficiently implement and manage them as an anti-money laundering tool. Bad actors seeking to launder money can use legal entities, such as shell companies, to buy real estate without a loan. Doing so potentially can conceal the identities of bad actors and avoid banks' anti-money laundering programs. To better understand this risk and help law enforcement investigate money laundering, FinCEN issued its real estate GTO. Although GTOs are limited to 180 days, they may be renewed if FinCEN finds reasonable grounds for doing so. Because of concerns about the potential for bad actors to exploit regulatory gaps to launder money through the U.S. real estate market, GAO was asked to review FinCEN's real estate GTO. This report examines, among other things, the GTO's issuance and renewal, oversight, outreach, and evaluation. GAO reviewed FinCEN's records, orders, and policies and procedures; laws and regulations; and studies and other related materials. GAO also interviewed FinCEN, federal law enforcement agencies, and other stakeholders. GAO recommends that FinCEN provide additional direction for self-initiated GTOs, including how to plan for oversight, outreach, and evaluation. FinCEN concurred with GAO's recommendation. For more information, contact Michael E. Clements, (202) 512-8678, ClementsM@gao.gov.
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  • Secretary Antony J. Blinken at the Virtual U.S.-Nigeria Health Partnership Event
    In Crime Control and Security News
    Antony J. Blinken, [Read More…]
  • Antitrust Division Announces Updates To Civil Investigative Demand Forms And Deposition Process
    In Crime News
    Assistant Attorney General Makan Delrahim of the Justice Department's Antitrust Division announced today that the Antitrust Division has implemented two uniform updates to its Civil Investigative Demand (CID) forms and deposition process: 
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