prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: The inventories of the selected Air Force and Navy fixed-wing aircraft in our review totaled 2,823 aircraft and required approximately $20 billion to operate and support in fiscal year 2016  The inventory, aircraft status, initial operational capability, and service life forecast for each of the 12 selected fixed-wing aircraft are shown in figure 1  Sustainment of fixed-wing aircraft and other weapon systems comprises the logistics and personnel services required to maintain and prolong operations, and DOD policy provides direction to service components on sustainment planning across the life cycle of the weapon system  Specifically, DOD policy requires the services to develop and implement a sustainment strategy, such as a Life-cycle Sustainment Plan, for sustaining its weapon systems  According to DOD’s policy, this strategy should be the basis for all sustainment efforts, including sustainment metrics mapped to key performance parameters and key system attributes, such as aircraft availability, to manage sustainment performance  The policy states that, after initial operating capability, programs should update the sustainment plan whenever there are major changes to its strategy for sustaining the weapon system, or every 5 years, whichever occurs first  The Air Force and the Navy also have guidance that implements the requirements of the DOD guidance  These services’ guidance include sustainment-planning requirements for life-cycle sustainment and assurance of affordability  There are a variety of DOD offices that have roles and responsibilities related to sustaining fixed-wing aircraft  For instance, the Under Secretary of Defense for Acquisition and Sustainment (USD ), is the principal staff assistant and advisor to the Secretary of Defense for all matters concerning acquisition and sustainment  Specifically, USD (A&S) is responsible for establishing policies for logistics, maintenance, and sustainment support for all elements of DOD, including fixed-wing aircraft  The Assistant Secretary of Defense for Logistics and Materiel Readiness (ASD ) serves as the principal staff assistant and advisor to the USD (A&S) on logistics and materiel readiness within DOD  Specifically, the ASD (L&MR) is responsible for (1) establishing DOD policies and procedures for logistics, maintenance, materiel readiness, strategic mobility, and sustainment support; (2) providing related guidance to the Secretaries of the military departments, including developing the Life- cycle Sustainment Plan outline; and (3) monitoring and reviewing programs associated with these areas, among other duties and responsibilities  For the Air Force, the Air Force Materiel Command develops, acquires, and sustains weapon systems through research, development, testing, evaluation, acquisition, maintenance, and program management of the systems and their components  This command provides acquisition and life-cycle management services and logistics support, among other things  The Air Force Life Cycle Management Center within the Air Force Materiel Command is responsible for the life-cycle management of weapon systems from inception to retirement  A Program Executive Officer—responsible for managing a specific portfolio of weapon systems—is responsible for each of the selected fixed-wing aircraft  The Program Executive Officer oversees the program office that manages each weapon system  For the Navy and Marine Corps, the Naval Air Systems Command is responsible for providing the full life-cycle support of naval aviation aircraft, weapons, and systems  This support includes research, design, development and systems engineering; acquisition; test and evaluation; training facilities and equipment; repair and modification; and in-service engineering and logistics support  As with the Air Force, Program Executive Officers oversee their assigned program managers  DOD relies on program managers to lead the development, delivery, and sustainment of individual weapon systems through their life cycles  The program managers are the designated individuals with responsibility for and authority to accomplish the program’s sustainment objectives to meet the users’ operational needs  Product support managers, who work within the program offices, are responsible for developing and implementing support strategies for weapon systems that maintain readiness and control life-cycle costs  Weapon systems are sustained under various arrangements that may include contractors, DOD organic facilities, or some combination of the two  For example, the Air Force Sustainment Center provides depot maintenance through its Air Logistics Complexes for weapon systems  Naval Air Systems Command is responsible for the Navy Fleet Readiness Centers, which provide depot-level maintenance for Navy and Marine Corps fixed-wing aircraft  Additionally, the Air Force Sustainment Center and the Navy Supply Systems Command, as well as the Defense Logistics Agency, manage inventories of repair parts, and individual weapon systems programs are typically supported by a complex supplier network that includes a prime contractor, subcontractors, and various tiers of parts suppliers  On the other hand, sustainment responsibilities—in their entirety or particular elements—may be contracted out as part of a public-private partnership or a performance-based logistics agreement, such as with the F-22 Raptor  The Air Force and Navy monitor the readiness status of selected fixed- wing aircraft through numerous performance metrics  Specifically, the Air Force measures how well a fleet is performing by calculating the availability of the fleets’ aircraft, which is the number of aircraft that are available for flight operations  The Navy measures its aircraft availability through two metrics: (1) Ready-Basic-Aircraft (RBA)—the number of aircraft that are able to safely fly—and (2) Ready-for-Tasking (RFT)—the number of aircraft that are able to conduct specific missions  Both the Air Force and Navy have established goals associated with aircraft availability  In addition to measuring the availability of the aircraft against the associated goals, the Air Force and Navy track the reasons for aircraft not being available or able to conduct missions  Specifically, the Air Force and Navy track the following: Aircraft in depot: Aircraft unavailable to conduct missions because of scheduled or unscheduled depot maintenance or modification  Not mission capable maintenance: Aircraft that are not in depot and not capable of performing any of their assigned missions because of maintenance  Not mission capable supply: Aircraft that are not in depot and not capable of performing any of their assigned missions because of the lack of a repair part  In addition to these three metrics, the Air Force also tracks the following: Not mission capable for both supply and maintenance: Aircraft that are not in depot and not capable of performing any of their assigned missions because of both maintenance and the lack of a repair part  Units possessed not reported: Aircraft that are not available for use for reasons other than depot and not mission capable status, but possessed by the squadron  There are various costs associated with operating and supporting weapon systems  DOD’s Operating and Support Cost-Estimating Guide provides direction to the service components on developing estimates to support various analyses and reviews throughout the program life cycle  According to the guide, as a program matures, it remains necessary to continue to track and assess O&S costs and trends to ensure that the program remains sustainable, affordable, and properly funded  Each military department maintains a database that collects historical data on the O&S costs for major fielded weapon systems  DOD’s Office of Cost Assessment and Program Evaluation provides policy guidance on this requirement, known as the Visibility and Management of Operating and Support Costs program; specifies the common format in which the data are to be reported; and monitors its implementation by each of the military departments  O&S costs are categorized using the following six overarching elements: unit level manpower—cost of operators, maintainers, and other support manpower assigned to operating units; unit operations—cost of unit operating materiel such as fuel, and training material, unit support services, and unit travel; maintenance—cost of system maintenance including depot- and sustaining support—cost of system support activities that are provided by organizations other than the system’s operating units; continuing system improvements—cost of system hardware and software modifications; and indirect support—cost of activities that provide general services that lack the visibility of actual support to specific force units or systems  For the selected Air Force and Navy fixed-wing aircraft in our review, aircraft availability and O&S cost trends varied over the 6-year period between fiscal years 2011 and 2016, and the aircraft generally did not meet availability goals  We found that 6 of 12 fixed-wing aircraft—3 from each service—experienced decreased aircraft availability between fiscal years 2011 and 2016  One aircraft met availability goals each year between fiscal year 2011 and 2016  Conversely, six aircraft met the goals in some years but not others, and five aircraft did not meet the goals in any year  In the latest year included in our review—fiscal year 2016—9 of 12 of the fixed-wing aircraft did not meet their associated availability goals  With respect to O&S costs, the overall O&S total for all 12 aircraft was about $20 billion annually over the 6-year period; some aircraft experienced increases while the costs to operate and support others decreased  The reasons for changes in costs included increases in maintenance costs for 8 of 12 fixed-wing aircraft  Below we summarize these trends, and the “Sustainment Quick Looks” in appendices II–XIII provide detailed information on the trends associated with each of the 12 fixed-wing aircraft and appendix XV provides additional information on operating and support cost per aircraft  Our analysis found that: between fiscal years 2011 and 2016, aircraft availability for two of five selected Air Force fixed-wing aircraft fluctuated and for three decreased; between fiscal 2011 and 2016, two aircraft met availability goals in some years, and three aircraft did not meet availability goals in any of the years; and in fiscal year 2016, four of the five aircraft did not meet availability goals  Specific details regarding aircraft availability and not mission capable status for maintenance, supply, and both maintenance and supply were omitted because DOD deemed this information as sensitive (i e , For Official Use Only)  According to officials, when aircraft availability goals are not met, training and operational missions may not be fulfilled as timely as needed  For example, F-22 squadron officials explained that the lack of available aircraft creates a shortage of trained pilots  F-22 pilots need extensive training to fulfill their air-superiority role  Further, command officials explained that when aircraft availability goals are not met, there may not be enough aircraft to respond to contingency requirements  Officials expressed concern that, given the capability and expectation of the F-22 to be available to create air superiority in any operation, missions may not be met  Additionally, E-8C program office officials stated that missions are often limited to top priority, which means supported combatant commands may not obtain all needed capabilities, such as the E-8C not being able to provide surveillance capability to particular combatant commands  From fiscal years 2011 through 2016, O&S costs for the Air Force aircraft in our review totaled about $13 billion annually  These costs decreased for the C-17, F-16, and the F-22, but increased for the B-52 and E-8C, as shown in figure 2  For example, the F-16’s total annual O&S costs decreased by about $943 million (or about 19 percent) because of decreases in all cost elements—the largest decrease being unit operations—except sustaining support  According to officials, the decrease in unit operations can be attributed to the retiring of aircraft and the consolidation of squadrons  The C-17’s and F-22’s O&S costs decreased mainly because of decreases in two cost elements: continuing system improvements and unit operations  In contrast, the B-52’s and the E-8C’s O&S costs increased, by $76 million (or about 6 percent) and $41 million (or about 6 percent), respectively  The increases occurred because two of the cost elements—continuing system improvements and maintenance costs—increased more than the other costs elements decreased  Based on our analysis of the O&S cost elements, maintenance cost generally is one of the largest portions—on average about 36 percent—of total O&S costs for each aircraft  As shown in figure 3, maintenance costs for four of the five aircraft generally have increased from fiscal years 2011 through 2016  Specifically, maintenance costs for the C-17, E-8C, and F- 22 increased because of additional depot maintenance needs  B-52 maintenance costs fluctuated year to year, but increased overall during this period  The overall maintenance costs for the F-16 decreased by approximately $140 million  According to our analysis, even though there was an increase in some of the F-16 maintenance cost elements, the fleet’s executed flying hours decreased  Therefore, the flying hour depot- level reparable costs decreased by approximately $123 million and engine repair decreased by $115 million, causing the overall maintenance cost to decrease  Our analysis found that: between fiscal years 2011 and 2016, aircraft availability increased for three of the seven Navy fixed-wing aircraft, fluctuated for one, and decreased for the remaining three aircraft; between fiscal 2011 and 2016, one aircraft met aircraft availability goals in each year, and four aircraft met goals in some years, while two aircraft did not meet goals in any of the years; and in fiscal year 2016, the Navy did not meet aircraft availability goals for five of the seven aircraft  Specific details regarding aircraft availability and not mission capable status for maintenance and supply were omitted because DOD deemed this information as sensitive (i e , For Official Use Only)  To address decreases in aircraft availability, the Navy has moved available aircraft between squadrons to help ensure deploying squadrons are fully equipped for their assigned missions  In November 2017, the Commander of Naval Air Forces testified before the House Armed Services Committee that to equip the air wings with the required number of mission capable aircraft for the deployment of three aircraft carriers in 2017, the Navy had to transfer 94 strike fighters to and from the maintenance depots or between squadrons  This transfer included pulling aircraft from fleet replacement squadrons, where the focus should be on training new aviators  The Commander of Naval Air Forces, in his November 2017 testimony, summarized the issue: “That strike fighter inventory management, or shell game, leaves non-deployed squadrons well below the number of jets required to keep aviators proficient and progressing toward their career qualifications and milestones, with detrimental impacts to both retention and future experience levels ” Furthermore, based on our analysis, F/A- 18A-D squadrons have underexecuted their flight hours by an average of 4 percent from fiscal years 2011 through 2016  According to officials, this is largely due to low aircraft availability  Additionally, placing further strain on aircraft availability, the F/A-18A-D inventory has decreased from 581 aircraft in fiscal year 2011 to 537 aircraft in fiscal year 2016  From fiscal years 2011 through 2016, O&S costs for the Navy’s seven selected fixed-wing aircraft totaled about $7 billion annually  Also, the Navy has experienced varying O&S and maintenance costs since fiscal year 2011 for these aircraft  Specifically, annual O&S costs decreased for the AV-8B, C-2A, E-2C, and F/A-18A-D, and increased for the E-2D, EA- 18G, and F/A-18E-F, as shown in figure 4  We found that O&S costs for the F/A-18A-D decreased by about 22 percent from about $3 1 billion in fiscal year 2011 to about $2 4 billion in fiscal year 2016  According to officials, this decrease can be attributed to the decrease in inventory as aircraft are retired and squadrons transition to the F-35 Joint Strike Fighter  In another example, O&S costs for the E- 2D increased from about $1 6 million in fiscal year 2012 to about $125 million in fiscal year 2016  The size of the fleet has increased by 17 aircraft—from 3 to 20 since fiscal year 2011  According to officials, this aircraft remains in production with a projected fleet size of 75; as inventory increases, so will O&S costs  Based on our analysis of the O&S cost elements, maintenance cost generally is one of the largest portions—about 42 percent—of total O&S costs for the seven aircraft in our review  Annual maintenance costs have increased for the C-2A, E-2D, EA-18G, and F/A-18E-F, and decreased for the AV-8B, E-2C, and F/A-18A-D, as shown in figure 5  We found that maintenance cost for the C-2A increased by about 7 percent from about $89 million in fiscal year 2011 to about $95 million in fiscal year 2016  According to officials, the increase in maintenance cost can be attributed to increased demand for outer wing panels, which resulted in a $16 million increase in depot-level repair costs and a more than 10 percent increase in executed flight hours, among other things  In another example, maintenance cost for the AV-8B decreased by about 9 percent from about $375 million in fiscal year 2011 to about $341 million in fiscal year 2016  According to officials, these decreases can be attributed to the AV-8B no longer being used in Operation Enduring Freedom in 2012, the loss of six aircraft, and the transition of AV-8B squadrons to the F-35 Joint Strike Fighter  The Air Force and Navy face similar sustainment challenges that relate to aging, maintenance, and supply support that affect aircraft availability and O&S costs for the 12 aircraft selected in our review, as shown in figure 6  Specifically, 10 of 12 aircraft are experiencing sustainment challenges related to aging; all 12 are experiencing challenges related to maintenance; and all 12 are also experiencing challenges related to supply support  Below is a brief overview of these challenges: Aging: A number of these aircraft are aging and operating beyond their planned service life, partly because of delays in replacement aircraft  Specifically, the Air Force and Navy plan to replace the F-16, AV-8B, and F/A-18A-D with the F-35 Joint Strike Fighter  The Navy is expected to transition the F/A-18A-D through 2030 and the Marine Corps is planning to use the F/A-18A-D beyond 2030 (although these time frames have been extended several times already)  The Navy plans to retire the AV-8B in 2026  On the other hand, the Air Force is not expected to retire the F-16 until at least 2040  Because of aging, according to officials, there are parts on some aircraft that need to be repaired and replaced that were not accounted for during initial sustainment analysis  To mitigate some challenges associated with the age of the fixed-wing aircraft, the Air Force and Navy program officials have decided to extend the service life of some aircraft by repairing and overhauling airframes and components, as well as developing the engineering specifications for parts that were never planned to be repaired or replaced  Maintenance: Delays in getting aircraft into and through depot maintenance, as well as shortages of skilled maintainers, are contributing to some aircraft missing their availability goals  Both services reported losing experienced maintainers, either to retirement or to other programs such as the F-35 Joint Strike Fighter  To address maintenance challenges, program offices for the selected aircraft have improved the efficiency and speed of depot maintenance, as well as are working to ensure there are sufficient numbers of trained maintainers  Supply Support: Some aircraft are encountering supply shortages as a result of parts not being available, in some cases due to obsolescence issues or diminishing manufacturer sources  Overcoming part shortages through either searching for replacement parts or reengineering parts takes time, which can contribute to aircraft being unavailable for longer periods  To mitigate supply challenges, officials have proactively upgraded aircraft before obsolescence occurs or located available parts and reengineered parts that are no longer in production, as well as identified suitable manufacturers in advance, among other things  For more specific information on sustainment challenges related to aging aircraft, maintenance, and supply support for each of the fixed-wing aircraft, see the “Sustainment Quick Looks” in appendixes II–XIII  The Air Force has documented sustainment strategies for its five selected aircraft in our review, but the Navy has not documented sustainment strategies or updated the strategies for four of seven of its aircraft in our review  The Air Force and Navy also regularly reviewed sustainment metrics and have implemented plans to improve aircraft availability  The Air Force has documented sustainment strategies for the five selected fixed-wing aircraft and updated them in accordance with Air Force guidance  However, the Navy has not documented a sustainment strategy or updated the strategies for four of the seven aircraft in our review since 2012  See figure 7 for the year of the most recent update to the sustainment strategy for the aircraft in our review  While sustainment strategies do not guarantee successful outcomes, they serve as a tool to guide operations as well as support planning and implementation of activities through the life-cycle of the aircraft  Specifically, at a high-level the strategy is aimed at integrating requirements, product support elements, funding, and risk management to provide oversight of the aircraft  For example, these sustainment strategies can be documented in a life-cycle sustainment plan, postproduction support plan, or an in-service support plan, among other types of documented strategies  Additionally, program officials stated that an aircraft’s sustainment strategy is an important management tool for the sustainment of the aircraft by documenting requirements that are known by all stakeholders, including good practices identified in sustaining each aircraft  For example: The strategy for the Air Force B-52 has been updated several times in recent years because of several major modifications  For example, in 2014 the Air Force issued an updated sustainment plan within the life- cycle management plan to update the combat network communications technology program because the B-52’s communications system is still the original from the 1950s and has limitations related to making mission or target changes in flight  The plan addresses the testing, resource management, and numerous program performance indicators and requirements of the system  The strategy for the Air Force F-16 outlines plans for the aircraft’s service life extension and includes proactive measures and data forecasting to bundle depot modifications in order to minimize fleet- wide effects on aircraft availability  The service life extension for the F- 16 is designed to extend the service life of 300 F-16 aircraft from 8,000 to 13,856 flight hours at an estimated cost of $740 million (as of June 2016)  The strategy for the Navy E-2D provides a systematic approach to ensure that a comprehensive support package is in place to support the sustainment of the aircraft  Also, it describes the overall plan for the management and execution of the product support package by communicating the sustainment strategy to stakeholders in the acquisition, engineering, and logistics communities  However, the Navy had not documented a sustainment strategy for the C- 2A because a strategy was not required when the aircraft, now a legacy system, was going through the acquisition process prior to 1965  According to Navy officials, while they have not documented a strategy for the C-2A, they are undertaking efforts, such as updating technical publications, performing maintenance analysis on the landing gear, and evaluating depot tasks to decrease turnaround time, among other efforts, to sustain the aircraft  However, a documented sustainment strategy for the C-2A would help guide the planning and implementation of these efforts, as well as serve as a management tool by documenting these requirements that are known by all stakeholders  In addition, the Navy’s sustainment strategies for the E-2C (2011), EA- 18G (2006), and F/A-18A-D (2001) were developed prior to 2012 and thus have not been updated in over 5 years  With respect to the EA-18G, Navy officials told us that the sustainment strategy should be updated in accordance with DOD’s acquisition policy—DOD Instruction 5000 02— since the EA-18G is still in the acquisition process, as it continues to be produced  For the E-2C and F/A-18A-D, Naval Air Systems Command officials and program office officials told us that they were not required to document sustainment strategies because these aircraft were legacy systems at the time the requirement to develop and maintain a sustainment strategy was implemented  Therefore, according to these officials, the DOD requirements to document and update sustainment strategies every 5 years in DOD Instruction 5000 02 were not applicable  DOD Instruction 5000 02 requires weapon systems to have some form of a sustainment strategy that is not older than 5 years; however, it is unclear whether this policy is applicable to legacy weapon systems  Specifically, the policy states that program managers for all programs are responsible for developing and maintaining a sustainment strategy, such as a Life-cycle Sustainment Plan, beginning at the risk-reduction decision point (i e , Milestone A of the acquisition process)  However, based on our discussions with Navy program officials for our selected aircraft and our review of the policy, it is unclear whether the policy—as currently written—is applicable to legacy systems that were no longer in production and thus had completed the risk-reduction decision point (or Milestone A) prior to the requirement to update a sustainment strategy every 5 years  According to DOD officials, the intent of the policy is for all programs, including legacy weapon systems, to develop and maintain a sustainment strategy; however, the policy does not explicitly state that legacy systems are expected to fulfill this requirement  In May 2017, the Air Force updated its sustainment guidance to require sustainment strategies for legacy systems and for those strategies to be updated every 5 years  Air Force officials told us that they did this because the DOD policy was unclear whether it was applicable to legacy systems and it was a good practice to ensure the guidance was explicit for all weapon systems to document and update a sustainment strategy  This instruction explicitly states that the requirement to document a sustainment strategy and update it every 5 years is applicable to all weapon systems, including legacy systems that are in the O&S phase of their life cycles  Additionally, the Air Force Instruction states that these legacy systems are not required to retroactively meet requirements identified for previous phases of the acquisition life-cycle, but should meet the requirements needed for continued operations of the system  However, the Navy has not made the requirement explicit for legacy systems in its guidance  Specifically, Navy guidance does not explicitly state that documenting a sustainment strategy and updating that strategy every 5 years is a requirement for legacy systems  While Navy guidance requires the development and use of sustainment metrics for legacy systems and requires the Naval Air Systems Command be responsible for aviation weapon systems in sustainment, the Navy does not address any requirement for sustainment strategies for legacy systems  The lack of clarity in DOD Instruction 5000 02 and the Navy guidance regarding whether legacy systems are required to document a sustainment strategy and update that strategy every 5 years has resulted in confusion regarding sustainment planning requirements among Navy program offices and could cause confusion with other weapon system program offices across DOD  Standards for Internal Control in the Federal Government state that management should define objectives in specific terms so they are understood at all levels of the entity  The standards also state that guidance should clearly define what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement  As indicated by the Air Force’s 2017 update to its sustainment guidance, clarifying DOD and Navy guidance and the applicability of sustainment strategy requirements to legacy systems could be done through very small additions and clarifications to the applicable guidance documents  Until DOD and the Navy update or issue new guidance clarifying the requirements for documenting sustainment strategies for legacy systems, weapon system program offices, such as those for fixed-wing aircraft, as well as Naval Air Systems Command and DOD may not have full visibility of necessary requirements to achieve program objectives or any related risks associated with the sustainment of these weapon systems  While the DOD policy and Navy guidance is unclear, Naval Air Systems Command and Navy program offices for the four aircraft—C-2A, E-2C, EA-18G, and F/A-18A-D—that either do not have a sustainment strategy or have not updated the strategy within the last 5 years are taking actions to document or update the sustainment strategies for these aircraft  According to Naval Air Systems Command officials, once it was brought to their attention that the intent of DOD Instruction 5000 02 was for legacy systems to have an updated documented sustainment strategy, they began to take action to develop or update the respective sustainment strategies  Specifically, according to C-2A, E-2C, and E-2D program officials, they are currently updating the E-2D strategy for its 5-year update, which is due in fiscal year 2018, and it will include updates for the C-2A and E-2C since the airframe for all three aircraft are very similar  Also, program officials for the EA-18G and F/A-18A-D told us that they are currently updating the strategies for these aircraft and are expected to complete the process in fiscal year 2018  Given that the Navy is already taking action to update its sustainment strategies and has established timelines for these updates, we are not making any recommendations to the Navy regarding updating the respective sustainment strategies  The Air Force and the Navy have (1) regularly reviewed sustainment metrics for fixed-wing aircraft and (2) implemented improvement plans to address aircraft availability  The Air Force and Navy have regularly monitored the condition of their fixed-wing aircraft, which includes measuring aircraft availability against planned goals as well as monitoring other sustainment metrics  Specifically, the Air Force Materiel Command monitors aircraft availability and other sustainment metrics through quarterly Weapon System Enterprise Review (WSER) briefings  The program office in conjunction with the Air Force Life Cycle Management Center generates the WSER, which is briefed through Air Force Materiel Command and the Program Executive Offices to the Air Force Chief of Staff  The WSER delivers insight into the comprehensive health of a system by flagging gaps in performance and identifying mitigating actions, which is used to conduct crosscutting enterprise analysis and provide input into readiness reviews  In addition to the WSER, the program offices manage their performance through their Health of the Fleet briefs  These briefs—conducted monthly or quarterly depending upon the aircraft—include readiness assessments that provide insight on maintenance and management practices  The assessment is delivered by the program’s maintenance group, and includes aircraft performance metrics, issues, actions, and schedules to inform program leadership on fleet status and to help prioritize and make decisions concerning the issues  The Navy monitors aircraft availability through its aircraft status dashboard for each aircraft, which provides specific information, such as goals, actual availability, and gaps between the two  More specifically, the Navy tracks the status of each of its aircraft through the dashboard, including those aircraft that are available (i e , Ready-Basic-Aircraft ), are in depot maintenance, or are not mission capable due to maintenance or supply, among other metrics  The dashboard is updated monthly, and there are weekly meetings with key stakeholders, including Naval Air Systems Command officials, industry partners, and depot officials, to monitor the performance of each aircraft and make adjustments to improve aircraft availability  Additionally, all program offices have processes in place to manage the fleet within their portfolios, including semiannual or annual program reviews such as Program Management Reviews and Executive Steering Reviews  These reviews focus on readiness, cost drivers, and initiatives to address program risk and ways to resolve issues affecting each aircraft  Further, the Marine Corps Commandant for Aviation leads biannual Executive Steering Summits to assess readiness issues affecting Marine Corps aircraft  The Air Force and Navy have implemented improvement plans to address aircraft availability for each of the selected fixed-wing aircraft  Air Force program offices for the fixed-wing aircraft in our review have plans for improving availability  Since 2005, the Air Force Materiel Command has had an annual process to improve aircraft availability, which is known as the Aircraft Availability Improvement Program  The process enables the program offices to assess and limit risk, incorporate available support funding, and specifically address where there are effects on availability, such as aircraft in depot  This process also incorporates projecting historical and goal rates in order to leverage scheduled and modernization maintenance  Program offices create plans, known as aircraft availability improvement plans, based on these projections to forecast improvements that can facilitate increased availability and reduction of costs, among other things  The Air Force provides guidance in the form of a template to ensure consistency amongst the plans, which typically must include improvement initiatives with milestone goals  This information includes projected aircraft availability rates for mission capable, units possessed not reported, not mission capable for supply, not mission capable for maintenance, and depot possession  Officials noted that the program office creates an improvement plan each year, regardless of whether it is short of its availability goal, since the plan serves as a forecasting measure  The program is designed to ensure the program offices have plans in place to meet target goals, and the information and milestones laid out in the plans feed into the WSER briefings to senior management  For example: The B-52 plan for fiscal year 2017 discusses the process and milestones for replacing actuator seals for the fleet, the costs of the repair, and the expected benefit to B-52 availability—1 05 percent improvement to the not mission capable supply metric  The C-17 plan for fiscal year 2017 identifies the current and future modifications, timelines for beginning and completion, and the effect on availability  For example, the future replacement of a legacy computer system with a modernized system and display is set to begin in fiscal year 2019 with an estimated completion date of 2026  This replacement is planned to be done concurrently with other maintenance, and to prevent future declines in the C-17’s availability  The F-22 plan for fiscal year 2017 identifies several projects taking place between 2016 and 2021 that are expected to improve availability by almost 2 percent  Further, officials said they are currently working with the Assistant Secretary of the Air Force (Acquisition) to develop an Air Force manual that would make developing an Aircraft Availability Improvement Plan a requirement  This manual will become a supplement to Air Force Instruction 63-101/20-101, according to the officials  Navy program offices for all seven fixed-wing aircraft in our review also have plans for improving availability  According to Navy officials, they started preparing “summary playbooks,” which is the Navy’s term for improvement plans, in late 2015 and started implementing these plans in early 2016 to increase aircraft availability  Officials told us that there was a limitation in funding because of sequestration prior to fiscal year 2017, which hampered their ability to fully implement the playbooks  At a broad level, the Navy’s playbooks include efforts such as maintenance planning, supply support, aircraft material condition and management, and technical data, among other things  These efforts are linked to specific initiatives such as working with the manufacturer and contractors to provide maintenance support, identifying obsolete parts, conducting aircraft fatigue analysis, and updating technical publications, among other things, which have been identified by the program office as ways to improve aircraft availability  Additionally, these playbooks include the extent to which these initiatives are funded, underfunded, or partially funded and the appropriation account that would fund each initiative  The playbooks include the status of each initiative, and some of the playbooks also provide an approximate time frame for implementing each initiative  For example: The playbook for the C-2A has a fatigue analysis initiative focused on analyzing the landing gear to update its design, provide a depot repair manual, and increase its service life, among other things  This initiative is considered funded, is expected to improve aircraft availability, and has an estimated time frame for implementation between fiscal years 2017 and 2021  The playbook for the E-2D contains a maintenance initiative focused on improving the maintenance planning process of the C-2A, E-2C, and E-2D aircraft by completing elements of the product support package, such as training, publications, support equipment, and tools, among others  This initiative is considered partially funded, is expected to improve aircraft availability by decreasing the not mission- capable rates related to maintenance and supply and decreasing maintenance down time, and has an estimated time frame for implementation between fiscal years 2017 through 2019  The playbook for the F/A-18A-D includes a product improvement initiative to conduct a case study to assess the condition of the wiring of the aircraft in the fleet  This initiative is considered funded and is expected to help to sustain aircraft availability  However, there is no time frame for implementing this initiative  The playbook for the F/A-18E-F contains a service life modification initiative focused on extending the service life of the aircraft through modifications  According to officials, this initiative is considered partially funded, is expected to help to sustain aircraft availability, and is expected to help the fleet realize an 80 percent cost avoidance because the Navy will not have to pay the cost to replace these aircraft  Also, this initiative has an estimated time frame for implementation between fiscal years 2018 through 2040  The Departments of the Air Force and Navy spend tens of billions of dollars each year to sustain their fixed-wing aircraft, which need expensive logistics support, including maintenance and repair, to meet goals for availability  The departments spent at least $20 billion annually since 2011 to sustain the 12 aircraft that we examined  The Air Force and Navy share a variety of sustainment challenges, including the age of their aircraft as well as maintenance and supply support issues  These challenges have led to half (6 of 12) of the aircraft in our review experiencing decreasing availability and to the aircraft in general not being able to meet aircraft availability goals  For example, 9 of 12 aircraft did not meet availability goals in fiscal year 2016  These trends are occurring even though the Air Force and Navy regularly review sustainment metrics for the aircraft and are implementing plans for improving aircraft availability  However, DOD’s policy and the Navy’s guidance are not clear on whether the services should have a current sustainment strategy for legacy weapon systems, including fixed-wing aircraft, and on whether the strategies are required to be updated every 5 years  Without clarity about whether the DOD instruction and the Navy guidance apply to legacy systems, program officials will not know whether they are required to have a sustainment strategy or are required to update the plan for their respective fixed-wing aircraft  Furthermore, the program offices, the services, and DOD may not have full visibility of necessary requirements to document program objectives, related risks, and the effectiveness of the program, ultimately jeopardizing the sustainability and affordability of each of the programs  We are making the following two recommendations to DOD: The Secretary of Defense should ensure that the Under Secretary of Defense for Acquisition and Sustainment updates or issues new policy clarifying the requirements for documenting sustainment strategies for legacy weapon systems, including fixed-wing aircraft  (Recommendation 1) The Secretary of the Navy should update or issue new guidance clarifying the requirements for documenting sustainment strategies for legacy weapon systems, including fixed-wing aircraft  (Recommendation 2) We provided a draft of the sensitive report to DOD for review and comment  In written comments that are reproduced in appendix XVI, DOD concurred with our recommendations and noted planned actions to address each recommendation  The Air Force and Navy also provided technical comments, which we incorporated as appropriate  We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretaries of the Navy and Air Force; the Commandant of the Marine Corps; the Under Secretary of Defense for Acquisition and Sustainment; and the Director, Defense Logistics Agency  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have questions about this report, please contact me at merrittz@gao gov or (202) 512-5257  GAO staff who made key contributions to this report are listed in appendix XVII  Over the past several years, we have conducted work on a number of issues that affect the ability of the Department of Defense (DOD) to sustain its weapon systems  In September 2017, we found that several factors were important to the success of Product Support Managers  These factors included teamwork and collaboration, early implementation of the Product Support Manager position, and organizational support and emphasis on sustainment  We also found that in response to our 2014 recommendations regarding the implementation of the Product Support Manager position, DOD had developed a comprehensive career path and associated guidance to develop, train, and support future Product Support Managers  Additionally, DOD revised guidance to define roles, responsibilities, and reporting relationships between support staff and Product Support Managers  However, DOD was still in the process of implementing our other three recommendations, such as issuing clear, comprehensive, centralized guidance regarding the roles and responsibilities of PSMs and collecting and evaluating information on the effects, if any, that Product Support Managers are having on life-cycle sustainment decisions for their assigned weapon systems  In September 2017, we also found that DOD does not have complete information to identify and manage single-source-of-supply risks  Specifically, some parts are provided by a single source of supply (e g , one manufacturing facility), and if that single source were no longer able to provide the part, DOD could face challenges in maintaining weapon systems  DOD concurred with our six recommendations focused on improving the completeness of information for single-source-of-supply risks, including issuing department-wide policy that clearly defines requirements of Diminishing Manufacturing Sources and Material Shortages management, and details responsibilities and procedures to be followed to implement the policy  DOD is in the process of taking action to implement these recommendations  In June 2016, we found that the Defense Logistics Agency and the military services have not adopted metrics to measure the accuracy of planning factors, such as the accuracy of part lists, or the costs created by backorders  As a result, depot maintenance may not be efficient or cost-effective, resulting in unnecessary delays in the repair of weapon systems  DOD concurred with our six recommendations to develop metrics to monitor the accuracy of demand planning factors and disruption costs created by the lack of parts at depot maintenance sites and is in the process of taking action to implement these recommendations  For a listing of relevant past GAO work, see the Related GAO Products list at the end of this report  Sustainment: Depot maintenance conducted organically at the designated air logistics complex and contractually for some depot- level repairs at contractor facilities  The B-52 is a long-range, heavy bomber that can perform a variety of missions, including strategic attack, close air support, air interdiction, maritime operations, and offensive counter-air missions  It can carry nuclear or precision-guided conventional ordnance with worldwide precision navigation capability  However, the B-52s are some of the oldest aircraft in the Air Force’s fleet, and will continue to operate until at least 2040 (see fig  8)  Operating and support (O&S) costs for the B-52s have remained relatively steady, generally fluctuating around $1 2 billion–$1 3 billion per year  As a predominantly military-maintained system, most of that O&S cost is related to maintenance and manpower, with depot maintenance and depot-level reparables—direct labor and materials for item repairs, transportation, and storage, among other things—accounting for most of the maintenance cost  Technology Program (2014) is focused on upgrading outdated communications technology  The communications modification requires 7,000 hours of work and is estimated to be complete by 2020  The fleet has active sustainment plans for other components of the aircraft, such as the B-52 Anti-skid Replacement Life Cycle Sustainment Plan (2015), which is estimated to cost over $40 million and be completed by 2019  The B-52 faces sustainment challenges related to its age and, according to officials, replacement parts are difficult to obtain  Several modernization efforts are under way (communications, engines, etc ), and is working with vendors and its own service engineers to identify problem areas and plan ahead so that replacement parts will be available  Depot maintenance on the B-52 is managed by the program office and conducted at Oklahoma City Air Logistics Complex depot  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  The C-17 is a long-range, heavy logistic transport aircraft powered by four F-117 turbofan engines with air-refueling capability that was first manufactured in 1987 (see fig  10)  It is capable of rapid strategic delivery of troops and all types of cargo to main operating bases or to bases in any forward deployment area  The C-17 can perform tactical airlift and airdrop missions and can transport ambulatory patients during aeromedical evacuations, when required  The C-17 can carry virtually all air-transportable equipment  Total operating and support (O&S) costs for the C-17 have decreased from about $5 3 billion in fiscal 2011 to about $4 0 billion in fiscal year 2016  Specifically, unit operations decreased, while maintenance costs have generally increased during this period due to contractor logistics support because the C-17 is a predominantly contractor-managed aircraft  The C-17 Enterprise Life Cycle Management Plan and Life Cycle Sustainment Plan (2014) documents current and future acquisition, sustainment, and integration efforts of the aircraft  It also addresses contractual arrangements and partnership support agreements between Air Force, Boeing, and other service providers for aircraft sustainment  Boeing provides continued sole-source life-cycle support for the C-17 under the terms of the Globemaster Integrated Sustainment Program (2013)  Under this program, Boeing is responsible for sustainment, to include material management and depot maintenance support  The C-17 participates in a virtual fleet arrangement, a global network of 43 additional C-17 aircraft, which allows participants total aircraft parts access from any fleet participant worldwide  The C-17 is an aircraft being modified to meet its requirements as well as to address maintenance and supply issues  The Air Force’s actions to mitigate these challenges include processes to increase the service life of the aircraft, allowing managers to quickly hire skilled workers for critical positions, and locating other vendor source for parts  Logistics Complex, and at its facility in San Antonio; landing gear overhaul occurs at Ogden Air Logistics Complex, and engine overhaul occurs at Oklahoma City Air Logistics Complex in partnership with Pratt & Whitney, the original equipment manufacturer on the F-117 turbofan engine  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  Sustainment: Depot maintenance conducted by Northrop Grumman, and field maintenance conducted organically, by the National Guard  The E-8C Joint Surveillance Target Attack Radar System (E-8C) was first manufactured in 1967 (see fig  12)  Its primary mission is to provide theater ground and air commanders with ground surveillance to support attack operations and targeting that contributes to the delay, disruption, and destruction of enemy forces  Total operating and support (O&S) costs for the E-8C have generally increased from about $686 million in fiscal year 2011 to about $734 million in fiscal year 2016  Specifically, maintenance cost has increased partly because of increases in contractor logistics support since the E-8C is maintained by Northrop Grumman  E-8C aircraft were formerly used as commercial airliners and purchased by the Air Force  Therefore, the exact usage of the aircraft was unknown with any degree of specificity  The program office has utilized new analysis conducted by Boeing to develop an improved method of determining and tracking service life for the E-8C aircraft  The new method uses a quantitative analysis capability to identify safety of flight structural concerns, allowing for planning and execution of risk mitigation  The E-8C is an aircraft with significant maintenance and supply issues according to Air Force officials  The Air Force’s actions to mitigate these challenges include updating the Maintenance Plan and the Corrosion Plan for the E-8C (formerly a commercial airframe) to bring them in line with military standards  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  Sustainment: Depot maintenance conducted organically at the designated air logistics complex, and field maintenance conducted organically and by contractors  The F-16 Fighting Falcon is a compact, single-engine, multirole fighter aircraft first manufactured in 1978 (see figure 14)  It is highly maneuverable and participates in air-to-air combat and air-to-surface attack  There are four versions of the F-16: A, single-seat model; B, two-seat model with tandem cockpits; C and D, single- and two-seat models, respectively, incorporating newer capabilities  Total operating and support (O&S) cost for the F-16 decreased from about $5 billion in fiscal year 2011 to about $4 billion in fiscal year 2016 because of a 6 percent reduction of inventory  Specifically, maintenance cost has generally decreased during this same period as a result of a decrease in cost of depot maintenance  Sustainment: Performance-based logistics contract with depot maintenance subcontracted to Ogden Air Logistics Complex, Utah, and field maintenance performed organically  and is designed to project air dominance, rapidly and at great distances, and defeat threats  Overall operating and support costs (O&S) for the F-22 have decreased about $248 million overall since fiscal year 2011  Maintenance issues continue to be an area of concern for the aircraft, and these costs increased approximately $255 million from fiscal years 2011 to 2016, due to increases in contractor logistics costs  maintaining a comprehensive diminishing manufacturing sources program and proactively supporting the continued sustainment of component parts of the aircraft through various replacement programs, such as the F-22 Reliability and Maintainability Maturation  This initiative is an ongoing effort to drive continuous improvement in availability  The F-22 faces issues with its low- observable coating and supply funding  Actions to mitigate these challenges include contracting a repair facility to conduct coating reversion repair and securing additional spares funding  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  The AV-8B Harrier (AV-8B) is a Vertical/Short Take-off and Landing attack aircraft first manufactured in 1984 (see fig  18)  The AV-8B has the capability of conducting close air support using conventional weapons for intermediate range intercept and attack missions  The AV-8B is capable of deploying and operating on aircraft carriers and other suitable seagoing platforms, advanced bases, expeditionary airfields, and remote tactical landing sites  Total operating and support (O&S) costs for the AV-8B have decreased from about $815 million in fiscal year 2011 to about $646 million in fiscal year 2016  Specifically, unit-level manpower and operations as well as maintenance costs have decreased partly because the inventory is decreasing as AV-8B squadrons transition to the F-35 Joint Strike Fighter  Average number of flying hours: 4,711 hours per aircraft Operating and support cost: $646 million Depot maintenance activity and squadron locations: AV-8B Program Strategic Sustainment and Warfighting Relevance Plan (2013) addresses strategic sustainment and warfighting requirements to ensure relevance, reliability, safety, and sustainability through five pillars: recruit and retain high-quality people, develop a comprehensive readiness and sustainment plan, meet combatant commander requirements, retain and sustain government and industry agencies to support engineering and logistics requirements, and integrate capabilities to remain tactically relevant and operationally effective  AV-8B is maintained organically at Navy Fleet Readiness Centers under planned maintenance intervals occurring every 1,500 flight hours; supply support is provided organically by Naval Supply Systems Command and Defense Logistics Agency; contractor support services are provided by Boeing  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  Manufacturer: Grumman Corporation (acquired by Northrop Grumman) The C-2A Greyhound Logistics Aircraft (C-2A) is a high-wing, twin-engine monoplane cargo aircraft first manufactured in 1965 (see fig  20)  It is designed to land on aircraft carriers, with a primary mission of providing critical logistics support to Carrier Strike Groups by transporting high-priority cargo, mail, and passengers between carriers and shore bases  The original C-2A aircraft were overhauled to extend their operational life in 1973 and again from 2004 through 2011  Total operating and support (O&S) costs for the C-2A have generally decreased from about $233 million in fiscal year 2011 to about $207 million in fiscal year 2016  Specifically, unit-level manpower, unit operations, and continuing system improvements have decreased, while maintenance costs have increased  landing gear, and avionics system, among others  The Navy will include an appendix for the C-2A when it updates the sustainment strategy for the E 2D for its 5-year update  C-2A completed a service life extension program from 2004 through 2011 to increase flight hours from 10,000 to 15,000 and landings from 16,020 to 36,000, among other things  Aircraft are maintained organically by field maintainers and at Navy Fleet Readiness Centers under a planned maintenance interval cycle with three planned maintenance interval events occurring consecutively every 24 months, and supply support is provided organically by the Naval Supply Systems Command and Defense Logistics Agency  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  The E-2 Hawkeye (E-2C) is the Navy’s all-weather, carrier-based tactical battle management, surface surveillance coordination and airborne early warning, command and control aircraft, with a planned sunset in 2026 when the last E-2D is delivered (see fig  22)  The E-2 is a twin-engine, five- crewmember, high-wing turboprop aircraft with a 24-foot diameter radar rotodome attached to the upper fuselage  Total operating and support (O&S) costs for the E-2 have decreased from about $536 million in fiscal year 2011 to about $345 million in fiscal year 2016  Specifically, unit manpower and maintenance costs have decreased, partly because E-2C inventory is decreasing as E-2C squadrons transition to the E-2D fleet  comprehensive sustainment logistics, engineering programs, and financial resources necessary to ensure continued platform sustainment and attainment of readiness and safety operations  The Navy will include an appendix for the E-2C when it updates the sustainment strategy for the E-2D for its 5-year update  E-2C is maintained organically by field maintainers and at Navy Fleet Readiness Centers under a planned maintenance interval cycle: initial planned maintenance interval is performed by field maintainers at 42 months and the second cycle is performed at a Fleet Readiness Center 46 months after the initial planned maintenance interval  Supply support is provided organically by the Naval Supply Systems Command and Defense Logistics Agency; contractor support services are provided by General Dynamics and Wyle Labs  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  The E-2 Advanced Hawkeye (E-2D) is the newest variant of the E-2 aircraft platform, expecting to reach full operational capability by 2027 (see fig  24)  Using the same configuration as the E-2C, the E-2D aircraft is used for surface-surveillance coordination and airborne early warning, and command control  Its mission is to provide advanced warning of approaching enemy surface units, and cruise missiles and aircraft, among other things  Total operating and support (O&S) costs for the E-2D have increased consistently since fiscal year 2011 to about $125 million in fiscal year 2016  This increase is driven by the addition of aircraft to the inventory as the Navy continues to produce E-2D aircraft through 2026  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  The EA-18G Growler is the fourth major variant of the F/A-18 family of aircraft manufactured in 2007 to replace the EA-6B Prowler (see fig  26)  The EA-18G is the first newly designed electronic warfare aircraft produced in more than 35 years and combines the proven F/A-18 Super Hornet platform with a sophisticated electronic warfare suite  Total O&S costs for the EA-18G have consistently increased from about $334 million in fiscal year 2011 to about $868 million in fiscal year 2016  Specifically, unit manpower and maintenance costs have increased partly because the inventory is increasing, as EA-18Gs are still in production  design, development, and fielding of the aircraft  Some of the key support program elements include developing support equipment and technical data, testing requirements for avionics, and facilities requirements, among others  The Navy is updating this plan and expects to finalize it in 2018  The aircraft are maintained organically at Navy Fleet Readiness Centers under planned maintenance intervals, which typically occur every 72 months  Also, the Navy partners with Boeing to provide wholesale supply and depot repair support for major components, such as the engine  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  The F/A-18A-D Hornet Strike Fighter is a twin-engine, mid-wing, multimission tactical aircraft initially fielded in the 1980s (see fig  28)  In its fighter mode, it is used primarily as a fighter escort and for air defense; in its attack mode, it is used for force projection, interdiction, and air support  Total operating and support (O&S) costs for the F/A-18A-D have decreased consistently from about $3 1 billion in fiscal year 2011 to about $2 4 billion in fiscal year 2016  Specifically, unit manpower, operations, and maintenance costs have decreased, partly because the F/A-18A-Ds are being permanently transitioned out of service to be replaced by the F-35 Joint Strike Fighter   and financial resources necessary to ensure continued readiness and supportability for the remainder of the aircraft’s service life  The Navy is currently updating this plan and expects to finalize it in 2018  The aircraft are maintained organically at Navy Fleet Readiness Centers under planned maintenance intervals, which typically occur every 48 months for carrier-deploying aircraft, and every 72 months for land-based aircraft  The Navy implemented the High-Flight-Hour program in 2006 to extend the service life from 8,000 to 10,000 flight hours by inspecting and repairing airframes, and replacing major components and parts  The High-Flight-Hour program, along with other factors, has led to maintenance carryover (i e , into the next fiscal year) due to maintenance events taking longer than planned  In 1999, the Navy entered into a contract with Boeing for engineering support to leverage resources within the technology and industrial base to improve efficiency of the maintenance process and address the maintenance backlog  The F/A-18A-D is operating beyond its planned service life with maintenance and supply issues  The Navy’s actions to mitigate these challenges include extending the service life of the aircraft, allowing maintainers to work overtime to reduce backlog, and cannibalizing parts—moving parts from one aircraft to another  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  The F/A-18E-F Super Hornet was first manufactured in 1998 (see fig  30)  The F/A-18E-F is highly capable across the full mission spectrum: air superiority, fighter escort, reconnaissance, aerial refueling, close air support, air defense suppression, and day/night precision strike  The F/A-18E-F provides aircrew the capability and performance necessary to face 21st century threats  Total operating and support (O&S) costs for the F/A-18E-4 have increased from about $2 2 billion in fiscal year 2011 to about $3 1 billion in fiscal year 2016  Specifically, unit manpower, maintenance, and continuing system support have increased, partly because the inventory is increasing, as the F/A-18E-F is still in production  the Navy is conducting an assessment to determine the number of flight hours the aircraft can safely continue to fly, and then extend the service life of the program through inspections, repairs, and modifications, among other things  The Navy contracted with Boeing to potentially begin these efforts by fiscal year 2018  The F/A-18E-F is a high operational tempo aircraft supporting contingency operations with maintenance and supply issues  The Navy’s actions to mitigate these challenges include plans to extend the service life of the aircraft, training maintainers to transition to vacated positions, and cannibalizing parts—removing parts from one aircraft to another  This report is a public version of a sensitive report that we issued on April 25, 2018  DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i e , For Official Use Only)  This public report omits the information that DOD deemed to be sensitive  To examine the trends in aircraft availability and operating and support (O&S) costs for selected Air Force and Navy fixed-wing aircraft, including whether the aircraft met availability goals, we selected a nongeneralizable sample of 12 fixed-wing aircraft managed by the Departments of the Air Force and the Navy  These included two Marine Corps aircraft that are managed by the Department of the Navy  This nongeneralizable sample was selected to ensure a mix of aircraft, including type of aircraft (fighter, bomber, cargo, etc ), age of the aircraft, and size of inventory, and whether the aircraft were sustained organically by the Department of Defense (DOD) or through contract arrangements, such as public-private partnerships or performance-based logistics, among other factors  For the Air Force, we selected five fixed-wing aircraft—the B-52 Stratofortress, C-17 Globemaster III, E-8C Joint Surveillance and Target Attack Radar System (JSTARS), F-16 Fighting Falcon, and F-22 Raptor  For the Navy, including the Marine Corps, we selected seven fixed-wing aircraft—the AV-8B Harrier, C-2A Greyhound Logistics Aircraft, E-2 Hawkeye Early Warning and Control Aircraft, E-2 Advanced Hawkeye Early Warning and Control Aircraft, EA-18G Growler, F/A-18 Hornet Strike Fighter A-D, and F/A-18 Super Hornet E-F  The Marine Corps uses the AV-8B Harrier and also uses a variant of the F/A-18A-D  For the selected aircraft, we obtained and reviewed the aircraft availability, sustainment, and O&S data for accuracy and completeness, interviewed officials regarding their data-collection processes, and reviewed available related policies and procedures associated with the collection of the data  As a result, we found the information to be sufficiently reliable for the purposes of presenting sustainment metrics, such as aircraft availability and O&S costs  status due to maintenance, supply, and both  With respect to O&S costs, we collected and analyzed data from fiscal years 2011 through 2016  We conducted data-reliability assessments for the data provided by the Air Force and the Navy  To do this, we sent data-reliability questionnaires to both departments requesting information on the sources that generated the data  For the Air Force, we conducted data-reliability assessments on the Air Force Total Ownership Cost system and the Logistics Installation and Mission Support system  For the Navy, we conducted data-reliability assessments on the Aviation Management Supply and Readiness Reporting—Type Model Series Integrated Database, the Decision Knowledge Programming for Logistics Analysis and Technical Evaluation system, the Flying Hour Projection System / Cost Adjustment and Visibility Tracking System, and the Visibility and Management of Operating and Support Costs system  We reviewed responses from both departments on these sources as well as documentation—such as guidance, user manuals, and data dictionaries—provided to corroborate questionnaire responses, and interviewed knowledgeable officials to discuss the data  We concluded that the data provided by the Air Force and the Navy were sufficiently reliable for the purposes of reporting condition metrics such as aircraft availability; not mission capable status due to maintenance, supply, and both; depot inductions; budgeted and executed flight hours; and O&S costs for the selected fixed-wing aircraft in our review  To identify the sustainment challenges and mitigation actions for the selected aircraft, we reviewed sustainment metrics data, performance briefings, and other relevant documentation to identify specific challenges for each of the 12 aircraft in our review  We also reviewed ongoing and planned actions to address those challenges  Additionally, we interviewed program officials, depot officials, field maintainers, and squadron personnel to obtain their views on the challenges they face in sustaining the aircraft and the actions they take to mitigate those challenges  In some instances, we visited depots and squadrons to observe aircraft undergoing maintenance, discuss the respective maintenance processes, and discuss challenges and mitigation actions with officials  We then grouped the identified challenges into categories and represented them in a table to demonstrate which aircraft are experiencing specific challenges  To assess the extent to which the Air Force and the Navy have sustainment strategies, regularly review sustainment metrics, and have plans to improve aircraft availability for the selected fixed-wing aircraft, we obtained and analyzed sustainment strategies, performance management frameworks (i e , sustainment metrics collected and monitored as well as the levels of management review), and improvement plans for each of the selected 12 fixed-wing aircraft  We also identified and reviewed DOD, Air Force, and Navy guidance to analyze the departments’ efforts in sustaining these aircraft and to determine whether these were consistent with federal standards for internal control that deal with management defining objectives in specific terms  Specifically, we reviewed DOD Instruction 5000 02, Operation of the Defense Acquisition System, which provides management principles and mandatory policies for defense acquisition systems such as fixed- wing aircraft  These policies incorporate decision processes and assessing of readiness, which includes the creation of and requirements for a Life-cycle Sustainment Plan  We also reviewed Air Force Instruction 63-101/20-101, Integrated Life Cycle Management, which implements various Air Force and DOD policy directives, including DOD Instruction 5000 02  It establishes the integrated life-cycle management guidelines and procedures for Air Force personnel who develop, review, approve, or manage the systems, subsystems, end-items, services, and activities procured by the Air Force  For the Navy, we reviewed Secretary of the Navy M-5000 2, Department of the Navy Acquisition and Capabilities Guidebook, which provides guidance for the operation of the defense acquisition system and the joint capabilities integration and development system  It also implements DOD Instruction 5000 02 for the Navy and Marine Corps, including guidance on the management and execution of a sustainment strategy  and service guidance  We also reviewed the Air Force’s and the Navy’s performance metric briefings and improvement plans to determine whether the departments regularly reviewed sustainment metrics and had plans aimed at improving aircraft availability  We interviewed DOD, Air Force, and Navy officials knowledgeable about sustainment of these selected fixed-wing aircraft to discuss DOD’s and the departments’ efforts in sustaining these aircraft, including historical information on each aircraft, applicability of policy and guidance for legacy aircraft, and overviews of performance management frameworks identified by the departments to monitor and improve aircraft availability  To develop the fixed-wing aircraft sustainment summary documents (i e , “Sustainment Quick Looks”) in appendixes II–XIII we obtained historical and current information including background on aircraft capabilities, manufacturer, sustainment strategy, depot maintenance and squadron locations, and key dates in the life cycle of each aircraft (i e , first manufactured, initial and full operational capability, last production, and planned sunset year)  We collected and analyzed the following metrics: aircraft availability, not mission capable maintenance, not mission capable supply, and not mission capable aircraft from fiscal year 2011 through March 2017; the number of aircraft in depots for fiscal years 2011 through 2016; budgeted and executed flight hours from fiscal years 2011 through overall O&S and maintenance costs for fiscal years 2011 through 2016  We compared availability actuals to goals, aircraft in depots to availability trends, and budgeted and executed flight hours to availability trends  We analyzed O&S cost by reviewing its six elements and compared them to availability trends  We also analyzed the subcategories of the maintenance costs element  Through interviews with knowledgeable officials and reviewing documentation, we identified sustainment challenges (i e , aging, maintenance and supply support) and mitigation actions to address these challenges for each selected fixed-wing aircraft  DOD deemed some of the information, such as aircraft availability, not mission capable status, number of aircraft in depots, and budgeted and executed flight hours, to be sensitive (i e , For Official Use Only), which must be protected from public disclosure  This public report omits the information that DOD deemed to be sensitive  Additionally, to support our work for each objective we conducted site visits and interviewed officials to discuss data trends and identify specific sustainment challenges such as aging, maintenance, and supply support, among other challenges affecting aircraft availability, and mitigation actions to address these challenges  For the Air Force, we met with the following entities: Headquarters—Secretary of the Air Force, Logistics and Product Support and Deputy Assistant Secretary for Cost and Economics, Air Force Cost Analysis Agency; Materiel Commands—Air Force Materiel Command and Air Force Life Cycle Management Center; Program Offices—B-52 Program Office, C-17 Program Office, E-8C Program Office, F-16 Program Office, and F-22 Program Office; Depots—Tinker Air Force Base at Oklahoma City, Oklahoma (B-52); Robins Air Force Base at Warner Robbins, Georgia (C-17); Northrop Grumman facility at Lake Charles, Louisiana (E-8C); Ogden Air Logistics Center / Hill Air Force Base at Ogden, Utah (F-16 and F-22); and Squadrons—437th Maintenance Group, Joint Base Charleston, South Carolina (C-17); 461st Air Control Wing, Robins Air Force Base Georgia (E-8C); 20th Fighter Wing, Shaw Air Force Base, South Carolina (F-16); and 325th Maintenance Group, Tyndall Air Force Base, Florida (F-22)  For the Navy, we met with the following entities: Headquarters—Deputy Assistant Secretary of the Navy— Expeditionary Programs and Logistics Management, Marine Corps Aviation Plans and Policy Branch, and Air Warfare Division; Materiel Commands—Commander, Fleet Readiness Center; Naval Air Systems Command; and Naval Supply Systems Command; Program Offices—Program Manager–Air (PMA)-231 (C-2A, E-2C, and E-2D); PMA- 257 (AV-8B); and PMA-265 (F/A-18A-F, and EA- 18G); Depots—Fleet Readiness Center–East at Cherry Point, North Carolina; Fleet Readiness Center–Mid Atlantic at Naval Air Station Norfolk, Virginia, and Naval Air Station Oceana, Virginia; Squadrons—Marine Corps Air Station Cherry Point, North Carolina; Marine Corps Air Station Miramar, California; Naval Air Station Norfolk, Virginia; and Naval Air Station Oceana, Virginia; and Other—Naval Center for Cost Analysis  The performance audit upon which this report is based was conducted from September 2016 to April 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate, evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  We subsequently worked with DOD from April 2018 to September 2018 to prepare this unclassified version of the original sensitive report for public release  This public version was also prepared in accordance with these standards  For fiscal year 2016, total operating and support (O&S) costs for the five Air Force fixed-wing aircraft selected in our review were about $12 billion, and the average O&S cost per aircraft across all five fleets was about $96 million, as shown in figure 32  Each of the C-17 and F-16 fleets accounted for about 33 percent of the total O&S cost, and the E-8C’s average cost per aircraft accounted for about 48 percent of the total average cost per aircraft  For fiscal year 2016, total O&S costs for the seven Navy fixed-wing aircraft selected in our review were about $7 7 billion, and the average O&S cost per aircraft across all seven fleets was about $44 million, as shown in figure 33  The F/A-18E-F fleet accounted for about 40 percent of the total O&S cost, and the E-2C’s average cost per aircraft accounted for about 19 percent of the total average cost per aircraft  In addition to the contact named above, John Bumgarner (Assistant Director), Clarine Allen, Ron Aribo, Vincent Buquicchio, Amie Lesser, Richard Powelson, Steven Putansu, Matt Spiers, and Natasha Wilder made key contributions to this report  Defense Supply Chain: DOD Needs Complete Information on Single Sources of Supply to Proactively Manage the Risks  GAO-17-768  Washington, D C : September 27, 2017  Weapon Systems Management: Product Support Managers’ Perspectives on Factors Critical to Influencing Sustainment-Related Decisions  GAO-17-744R  Washington, D C : September 12, 2017  Defense Acquisitions: Assessments of Selected Weapon Programs  GAO-17-333SP  Washington, D C : March 30, 2017  Depot Maintenance: Executed Workload and Maintenance Operations at DOD Depots  GAO-17-82R  Washington, D C : February 3, 2017  Defense Inventory: Further Analysis and Enhanced Metrics Could Improve Service Supply and Depot Operations  GAO-16-450  Washington, D C : June 9, 2016  Weapon Systems Management: DOD Has Taken Steps to Implement Product Support Managers but Needs to Evaluate Their Effects  GAO-14-326  Washington, D C : April 29, 2014 


Report 2: CSPF is a defined benefit multiemployer pension plan  Multiemployer plans are often created and maintained through collective bargaining agreements between labor unions and two or more employers, so that workers who move from job to job and employer to employer within an industry can continue to accrue pension benefits within the same plan over the course of their careers  Multiemployer plans are typically found in industries with many small employers such as trucking, building and construction, and retail food sales  In 2017, there were about 1,400 defined benefit multiemployer plans nationwide covering more than 10 million participants  Most multiemployer plans are jointly administered and governed by a board of trustees selected by labor and management  The labor union typically determines how the trustees representing labor are chosen and the contributing employers or an employer association typically determines how the trustees representing management are chosen  The trustees set the overall plan policy, direct plan activities, and set benefit levels (see fig  1)  Multiemployer plans are “prefunded,” or funded in advance, primarily by employer contributions  The employer contribution is generally negotiated through a collective bargaining agreement, and is often based on a dollar amount per hour worked by each employee covered by the agreement  Employer contributions are pooled in a trust fund for investment purposes, to pay benefits to retirees and their beneficiaries, and for administrative expenses  Multiemployer plan trustees typically decide how the trust fund should be invested to meet the plan’s objectives, but the trustees can use investment managers to determine how the trust fund should be invested  Multiemployer plan trust funds can be allocated among many different types of assets, any of which can generally be passively- or actively-managed, domestically or internationally based, or publicly or nonpublicly traded (see table 1)  A plan’s funded percentage is its ratio of plan assets to plan liabilities  Because the amount needed to pay pension benefits for many years into the future cannot be known with certainty due to a variety of economic and demographic factors, including the potential volatility of asset values, estimates of a plan’s funded percentage may vary from year to year  Defined benefit pension plans use a “discount rate” to convert projected future benefits into their “present value ” The discount rate is the interest rate used to determine the current value of estimated future benefit payments and is an integral part of estimating a plan’s liabilities  The higher the discount rate, the lower the plan’s estimate of its liability  Multiemployer plans use an “assumed-return approach” that bases the discount rate on a long-term assumed average rate of return on the pension plan’s assets  Under this approach, the discount rate depends on the allocation of plan assets  For example, a reallocation of plan assets into more stocks and fewer bonds typically increases the discount rate, which reduces the estimated value of plan liabilities, and therefore, reduces the minimum amount of funding required  Looking at the entire “multiemployer system”—the aggregation of multiemployer plans governed by ERISA and insured by PBGC—shows that while the system was significantly underfunded around 2001 and 2009, its funded position has improved since 2009  Specifically, analyses published by the Center for Retirement Research at Boston College and the Society of Actuaries used plan regulatory filings to calculate the funded status for the system and determined that it was approaching 80 percent funded by 2014 after falling during the 2008 market downturn  However, some observers have noted that while many plans are making progress toward their minimum targets, a subset of plans face serious financial difficulties  Multiemployer retirement benefits are generally determined by the board of trustees  The bargaining parties negotiate a contribution rate and the trustees adopt or amend the plan’s benefit formulas and provisions  Decisions to increase benefits or change the plan are also typically made by the board of trustees  Benefit amounts are generally based on a worker’s years of service and either a flat dollar amount or the worker’s wage or salary history, subject to further adjustment based on the age of retirement  CSPF was established in 1955 to provide pension benefits to International Brotherhood of Teamsters union members (Teamsters) in the trucking industry, and it is one of the largest multiemployer plans  In the late 1970s, CSPF was the subject of investigations by the IRS within the U S  Department of the Treasury (Treasury), and by DOL and the U S  Department of Justice (DOJ)  The DOL investigation ultimately resulted in the establishment of a federal court-enforceable consent decree in 1982 that remains in force today  CSPF held more than $4 3 billion in Net Assets at the end of 1982 after the consent decree was established  The plan’s Net Assets peaked at nearly $26 8 billion at the end of 2007 and declined to about $15 3 billion at the end of 2016 (see fig  2)  As of 2016, CSPF reported that it had about 1,400 contributing employers and almost 385,000 participants  The number of active CSPF participants has declined over time  In 2016, 16 percent of about 385,000 participants were active, i e , still working in covered employment that resulted in employer contributions to the plan  In comparison, CSPF reported in 1982 that 69 percent of more than 466,000 participants were active participants  Since the 1980s, CSPF’s ratio of active to nonworking participants has declined more dramatically than the average for multiemployer plans  By 2015, only three of the plan’s 50 largest employers from 1980 still paid into the plan, and for each full-time active employee there were over five nonworking participants, mainly retirees  As a result, benefit payments to CSPF retirees have exceeded employer contributions in every year since 1984  Thus, CSPF has generally drawn down its investment assets  In 2016, CSPF withdrew over $2 billion from investment assets (see fig  3 )  CSPF has historically had fewer plan assets than were needed to fully fund the accrued liability—the difference referred to as unfunded liability  In 1982, we reported that CSPF was “thinly funded”—as the January 1, 1980, actuarial valuation report showed the plan’s unfunded liability was about $6 billion—and suggested that IRS should closely monitor CSPF’s financial status  In 2015, the plan’s actuary certified that the plan was in “critical and declining” status  The plan has been operating under an ERISA-required rehabilitation plan since March 25, 2008, which is expected to last indefinitely  As of January 1, 2017, the plan was funded to about 38 percent of its accrued liability  In September 2015, CSPF filed an application with Treasury seeking approval to reduce benefits pursuant to provisions in the Multiemployer Pension Reform Act of 2014 (MPRA), which is fully discussed later in this section  The application was denied in May 2016 based, in part, on Treasury’s determination that the plan’s proposed benefit suspensions were not reasonably estimated to allow the plan to remain solvent  In 2017, CSPF announced it would no longer be able to avoid the projected insolvency  (See app  II for a timeline of key events affecting CSPF ) As previously mentioned, CSPF was the subject of investigations in the 1970s by IRS, DOL, and DOJ  DOL’s investigation focused on numerous loan and investment practices alleged to constitute fiduciary breaches under ERISA, such as loans made to companies on the verge of bankruptcy, additional loans made to borrowers who had histories of delinquency, loans to borrowers to pay interest on outstanding loans that the fund recorded as interest income, and lack of controls over rental income  As a result of its investigation, DOL filed suit against the former trustees of CSPF and, in September 1982, the parties entered into a consent decree, which remains in force today  The consent decree provides measures intended to ensure that the plan complies with the requirements of ERISA, including providing for oversight by the court and DOL, and prescribes roles for multiple parties in its administration  For example, certain plan activities must be submitted to DOL for comment and to the court for approval, including new trustee approvals and some investment manager appointments  According to DOL, to prevent criminal influence from regaining a foothold of control over plan assets, the consent decree generally requires court-approved independent asset managers—called “named fiduciaries”—to manage CSPF’s investments  CSPF’s trustees are generally prohibited from managing assets; however, they remain responsible for selecting, subject to court approval, and overseeing named fiduciaries and monitoring plan performance  To focus attention on compliance with ERISA fiduciary responsibility provisions, the consent decree provides for a court-appointed independent special counsel with authority to observe plan activities and oversee and report on the plan  (See app  III for additional detail on the key provisions of the consent decree ) In 1974, Congress passed ERISA to protect the interests of participants and beneficiaries of private sector employee benefit plans  Among other things, ERISA requires plans to meet certain requirements and minimum standards  DOL, IRS, and PBGC are generally responsible for administering ERISA and related regulations  DOL has primary responsibility for administering and enforcing the fiduciary responsibility provisions under Part 4 of Title I of ERISA, which include the requirement that plan fiduciaries act prudently and in the sole interest of participants and beneficiaries  Treasury, specifically the IRS, is charged with determining whether a private sector pension plan qualifies for preferential tax treatment under the Internal Revenue Code  Additionally, the IRS is generally responsible for enforcing ERISA’s minimum funding requirements, among other things  ERISA generally requires that multiemployer plans meet minimum funding standards, which specify a funding target that must be met over a specified period of time  The funding target for such plans is measured based on assumptions as to future investment returns, rates of mortality, retirement ages, and other economic and demographic assumptions  Under the standards, a plan must collect a minimum level of contributions each year to show progress toward meeting its target, or the plan employers may be assessed excise taxes and owe the plan for missed contributions plus interest  Minimum contribution levels may vary from year to year due to a variety of economic and demographic factors, such as addressing differences between assumed investment returns and the plan’s actual investment returns  To protect retirees’ pension benefits in the event that plan sponsors are unable to pay plan benefits, PBGC was created by ERISA  PBGC is financed through mandatory insurance premiums paid by plans and plan sponsors, with premium rates set by law  PBGC operates two distinct insurance programs: one for multiemployer plans and another for single- employer plans  Each program has separate insurance funds and different benefit guarantee rules  The events that trigger PBGC intervention differ between multiemployer and single-employer plans  For multiemployer plans, the triggering event is plan insolvency, the point at which a plan begins to run out of money while not having sufficient assets to pay the full benefits that were originally promised when due  PBGC does not take over operations of an insolvent multiemployer plan; rather, it provides loan assistance to pay administrative expenses and benefits up to the PBGC-guaranteed level  According to PBGC, only once in its history has a financial assistance loan from the multiemployer pension insurance program been repaid  In 2017, PBGC provided financial assistance to 72 insolvent multiemployer plans for an aggregate amount of $141 million  For single-employer plans the triggering event is termination of an underfunded plan—generally, when the employer goes out of business or enters bankruptcy  When this happens, PBGC takes over the plan’s assets, administration, and payment of plan benefits (up to the statutory limit)  The PBGC-guaranteed benefit amounts for multiemployer plans and the premiums assessed by PBGC to cover those benefit guarantees are significantly lower than those for single-employer plans  Each insured multiemployer plan pays flat-rate insurance premiums to PBGC based on the number of participants covered  The annual premium rate for plan years beginning in January 2017 was $28 per participant and it is adjusted annually based on the national average wage index  (See app  II for the PBGC premium rates that have been in effect since the consent decree was established in 1982 ) When plans receive financial assistance, participants face a reduction in benefits  For example, using 2013 data, PBGC estimated 21 percent of more than 59,000 selected participants in insolvent multiemployer plans then receiving financial assistance from PBGC faced a benefit reduction  The proportion of participants facing reductions due to the statutory guarantee limits is expected to increase  About 51 percent of almost 20,000 selected participants in plans that PBGC believed would require future assistance were projected to face a benefit reduction  Since 2013, the deficit in PBGC’s multiemployer program has increased by nearly 700 percent, from a deficit of $8 3 billion at the end of fiscal year 2013 to $65 1 billion at the end of fiscal year 2017  PBGC estimated that at of the end of 2016, the present value of net new claims by multiemployer plans over the next 10 years would be about $24 billion, or approximately 20 percent higher than its 2015 projections  The program is projected to become insolvent within approximately 8 years  If that happens, participants who rely on PBGC guarantees will receive only a very small fraction of current statutory guarantees  According to PBGC, most participants would receive less than $2,000 a year and in many cases, much less  We have identified PBGC’s insurance programs as high-risk  This designation was made in part because multiemployer plans that are currently insolvent, or likely to become insolvent in the near future, represent a significant financial threat to the agency’s insurance program  We designated the single-employer program as high-risk in July 2003, and added the multiemployer program in January 2009  Both insurance programs remain on our high-risk list  Multiemployer Pension Plan Amendments Act of 1980 Among other things, the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) made employers liable for a share of unfunded plan benefits when they withdraw from a plan, unless otherwise relieved of their liability, and strengthened certain funding requirements  An employer that chooses to withdraw from a multiemployer plan may be required to continue to contribute if the plan does not have sufficient assets to cover the plan’s current and known future liabilities at the time the employer withdraws; however, these payments may not fully cover the withdrawing employer’s portion of the plan’s liabilities  In such cases, the employers remaining in the plan may effectively assume the remaining liability  The Pension Protection Act of 2006 The Pension Protection Act of 2006 (PPA) was intended to improve the funding of seriously underfunded multiemployer plans, among other things  It included provisions that require plans in poor financial health to take action to improve their financial condition over the long term and established two categories of troubled plans: (1) “endangered status” or “yellow zone” plans (this category also includes a sub-category of “seriously endangered”), and (2) more seriously troubled “critical status” or “red zone” plans  PPA further required plans in the endangered and critical zones to develop written plans to improve their financial condition, such as by revising benefit structures, increasing contributions, or both, within a prescribed time frame  Multiemployer plans in yellow or red zone status must document their remediation strategies in a written plan, notify plan participants, and report annually on whether scheduled progress has been made  Since the 2008 market decline, the number of participants in endangered and critical plans has generally been decreasing (see fig  4)  The Multiemployer Pension Reform Act of 2014 In response to the funding crisis facing PBGC and multiemployer pension plans, the Multiemployer Pension Reform Act of 2014 (MPRA) made changes to the multiemployer system that were intended to improve its financial condition  Key changes included: Creation of critical and declining status  MPRA created a new category, “critical and declining,” for plans in critical status projected to become insolvent during the current plan year or within any of the 14 succeeding plan years, or in certain circumstances, within any of the 19 succeeding plan years  In 2017, PBGC reported that more than 100 multiemployer plans (more than 7 percent of plans) representing approximately 1 million participants (about 10 percent of participants) have been determined to be “critical and declining ” Permitted reduction of accrued benefits  MPRA permits plans to reduce participants’ and beneficiaries’ accrued retirement benefits if the plan can demonstrate such action is necessary to remain solvent  Plans apply to Treasury for the authority to reduce benefits  Treasury, in consultation with PBGC and DOL, reviews the applications and determines whether the proposed changes would enable the plan to remain solvent  Increased PBGC premiums  MPRA also increased the PBGC premiums for multiemployer plans from $12 to $26 (per participant per plan year) in 2015 and from $26 to $28 in plan year 2017  The annual premium in subsequent years is indexed to changes in the national average wage index  Creation of new framework of rules for partition  Partition allows a multiemployer plan to split into two plans—the original and a successor  Partitions are intended to relieve stress on the original plan by transferring the benefits of some participants to a successor plan funded by PBGC and to help retain participant benefits in the plans at levels higher than the PBGC-guaranteed levels  At the time the consent decree was established in 1982, CSPF had less than half the estimated funds needed to cover plan liabilities (and to pay associated benefits over the lifetime of participants) and it has not attained 100 percent of its estimated funding need since then, according to regulatory filings  CSPF’s 1982 Form 5500 we reviewed shows that the plan was less than 40 percent funded prior to the consent decree becoming effective  Over the next two decades, the plan generally made progress toward achieving its targeted level of funding but was never more than 75 percent funded, and funding has generally deteriorated since its 2002 filing (see fig  5)  Overall, the plan’s unfunded liability increased by approximately $11 2 billion (in inflation-adjusted dollars) between January 1983 and January 2016  As a consequence, participant benefits were never fully secured by plan assets over this period, as measured by ERISA’s minimum funding standards, and the plan consistently needed to collect contributions in excess of those needed to fund new benefit accruals to try to make up for its underfunded status  CSPF officials and other stakeholders identified several factors that contributed to CSPF’s critical financial condition and reflect the challenges faced by many multiemployer plans  For example, like CSPF, many multiemployer plans have experienced financial difficulties due to a combination of investment losses and insufficient employer contributions  In addition to being underfunded prior to the consent decree going into effect, stakeholders identified other specific factors that contributed to CSPF’s critical financial condition, such as trends within the national trucking industry and its workforce, funding challenges and common investment practices of multiemployer plans, and the impact of market downturns on long-term investment performance  Stakeholders also described the effects of the 2007 withdrawal of a key employer, United Parcel Service (UPS), on CSPF’s critical financial condition  Stakeholders we interviewed said changes to the workforce, such as declining union membership rates and changes resulting from industry deregulation, affected CSPF and some other multiemployer plans by reducing the number of workers able to participate in their plans  While the multiemployer structure distributes bankruptcy risk across many employers, for any particular multiemployer plan employers are often concentrated in the same industry, making the plans vulnerable to industry- specific trends and risks  For example, stakeholders noted the impact that the Motor Carrier Act of 1980 had on the trucking industry  Specifically, deregulation of the trucking industry reduced government oversight and regulation over interstate trucking shipping rates  The trucking industry became increasingly dominated by nonunion trucking companies resulting in the bankruptcy of many unionized trucking companies, according to stakeholders  New trucking companies typically did not join multiemployer plans because their labor force was not unionized and this, coupled with the bankruptcy of many contributing employers, contributed to a decrease in active participant populations for many plans serving the industry  As the total number of active participants in a plan declines, the resources from which to collect employer contributions declines proportionally  Stakeholders also said these changes were unforeseeable  Limitations on a plan’s ability to increase contributions mean that a plan has less capacity to recover from an underfunded position or to make up for investment returns that fall short of expectations  A decline in the number of active workers can also accelerate plan “maturity,” as measured by the ratio of nonworking to working participants  Plan maturity has implications for a plan’s investment practices and the time frame over which the plan must be funded  According to PBGC’s data for the multiemployer plans it insures, there were approximately three active participants for every nonworking participant in 1980 (3:1); by 2014, the ratio was approximately one active worker for every two nonworking participants (1:2)  Figure 6 shows the change in the percentages of active and nonworking participants for the multiemployer plans that PBGC insures  CSPF saw an even more dramatic change in its active to nonworking participant ratio from 1982 through 2015  In 1982, there were more than two active workers for every nonworking participant (2:1) and by 2016 that ratio had fallen to approximately one active worker for every five nonworking participants (1:5) (see fig  7)  Because CSPF’s contributing employers were largely trucking companies, stakeholders said this made the fund especially vulnerable to industry-wide shocks  Like the industry as a whole, CSPF was unable to attract new employers to replace exiting employers, in part because of the lack of new unionized employers  CSPF officials said that changes to the trucking industry and its workforce also led to other challenges for the plan  For example, contributions to the plan declined with the shrinking number of active workers  CSPF officials told us they could not significantly increase the contribution rate paid by remaining employers because of the financial hardship it would cause, and as a result, the plan’s ability to recover from its underfunded position was limited  CSPF officials said that this increased the plan’s reliance on investment returns to try to close the gap between its assets and liabilities  Stakeholders we interviewed cited challenges inherent in multiemployer plans’ funding and investment practices, and described how the challenges may have contributed to the critical financial condition of some plans, including CSPF  Stakeholders said that CSPF and many other multiemployer plans have been challenged by employer withdrawals  An employer withdrawal reduces the plan’s number of active worker participants, thereby reducing its contribution base and accelerating plan maturity  A withdrawing employer generally must pay a share of any unfunded benefits  Stakeholders identified several ways in which the withdrawal liability framework could result in a withdrawing employer underpaying its share of an unfunded liability  We have previously reported on the challenges associated with withdrawal liability, including: withdrawal liability assessments are often paid over time, and payment amounts are based on prior contribution rates rather than the employer’s actual withdrawal liability assessment  withdrawal liability payments are subject to a 20-year cap, regardless of whether an employer’s share of unfunded benefits has been fully paid within this 20-year timeframe; plans often did not collect some or all of the scheduled withdrawal liability payments because employers went bankrupt before completing their scheduled payments; and fears of withdrawal liability exposure increasing over time could be an incentive for participating employers to leave a plan and a disincentive for new employers to join a plan; Stakeholders we interviewed also added that the calculation used to determine withdrawal liability may use an investment return assumption that inherently transfers risk to the plan  When exiting employers do not pay their share of unfunded benefits, any remaining and future employers participating in the plan may effectively assume the unpaid share as a part of their own potential withdrawal liability as well as responsibility for the exiting employer’s “orphaned” participants  Participating employers may negotiate a withdrawal if they perceive a risk that the value of their potential withdrawal liability might grow significantly over time  In its MPRA application, CSPF cited employer withdrawals and bankruptcies as a significant challenge for the plan  CSPF reported that after deregulation, the number of contributing employers dropped by over 70 percent  While some of the drop could be due to the consolidation of trucking companies after deregulation, CSPF officials cited several cases in which employers went bankrupt or withdrew from the plan, which reduced the plan’s contribution base and accelerated its maturity  Additionally, when employers went bankrupt, they often did not pay their full withdrawal liability  For example, CSPF said two of its major contributing employers left the plan between 2001 and 2003, and left $290 million of more than $403 million in withdrawal liability unpaid after they went bankrupt  Stakeholders identified funding timeframes as a factor that contributed to the challenges facing many multiemployer plans, including CSPF  ERISA’s minimum funding standards have historically allowed multiemployer plans to amortize, or spread out the period of time for funding certain events, such as investment shortfalls and benefit improvements  For example, CSPF began a 40-year amortization of approximately $6 1 billion in underfunding on January 1, 1981, giving the plan until the end of 2021 to fully fund that amount  Longer amortization periods increase the risk of plan underfunding due to the number and magnitude of changes in the plan’s environment that may occur, such as a general decline in participants or deregulation of an industry  The Pension Protection Act of 2006 shortened amortization periods for single- employer plans to 7 years and the amortization periods for multiemployer plans to 15 years  Shorter amortization periods provide greater benefit security to plan participants by reducing an unfunded liability more rapidly  In addition, shorter amortization periods can be better aligned with the projected timing of benefit payments for a mature plan  However, shorter periods can be a source of hardship for plans with financially troubled contributing employers because they may require higher contributions  According to CSPF officials, CSPF requested and received an additional 10-year amortization extension from the IRS in 2005 after relating that contribution requirements could force participating employers into bankruptcy  One CSPF representative said an amortization extension can also help avoid subjecting the plan’s employers to IRS excise taxes for failing to make required minimum contributions  Stakeholders we interviewed said that certain common investment practices may have played a role in the critical financial condition of CSPF and other mature and declining plans  In general, multiemployer plans invest in portfolios that are expected, on average, to produce higher returns than a low-risk portfolio, such as one composed entirely of U S  Treasury securities  Stakeholders also stated that these investment practices may have been too risky because returns can be more volatile, and the higher expected returns might not be achieved  In addition, the Congressional Budget Office has reported that if “plans had been required to fund their benefit liabilities—at the time those liabilities were accrued—with safer investments, such as bonds, the underfunding of multiemployer plans would have been far less significant and would pose less risk to PBGC and beneficiaries ” Stakeholders also told us that for mature plans like CSPF, these investment practices can pose further challenges  Mature plans, with fewer active employees, have less ability to recoup losses through increased contributions and have less time to recoup losses through investment returns before benefits must be paid  Market corrections, such as those that occurred in 2001 through 2002 and in 2008, can be particularly challenging to mature plans and their participants, especially if a mature plan is also significantly underfunded  Mature plans could mitigate these risks by investing more conservatively, however, the resulting lower expected returns from more conservative investing necessitates higher funding targets and contribution rates, which could be a hardship for employers in an industry with struggling employers  Alternatively, a plan that invests more conservatively may provide lower promised benefits to accommodate the level of contributions it can collect  Lower investment returns from a more conservative investment policy would cost employers more in contributions and could potentially result in employers leaving the plan  Further, investing in a conservative portfolio would be relatively unique among multiemployer plans, and stakeholders said plan managers may feel they are acting in a prudent fashion by investing similarly to their peers  Underfunded plans like CSPF may not see conservative investment as an option if they cannot raise the contributions necessary to fully fund their vested benefits  Officials from CSPF told us that, because they lacked the ability to significantly increase revenue or decrease accrued benefits, the named fiduciaries sought incrementally higher investment returns to meet funding thresholds required by the amortization extension they received in 2005  On the other hand, there are challenges associated with risk bearing investments  In our prior work, we reported that multiemployer plans generally develop an assumed average rate of investment return and use that assumption to determine funding targets, required contributions, and the potential cost of benefit improvements  Experts we interviewed for that report told us that using a portfolio’s expected return to value the cost of benefits increases the risk that insufficient assets could be on hand when needed  They also told us that using the portfolio’s expected return to calculate liabilities could incentivize plans to invest in riskier assets and to negotiate higher benefit levels because the higher returns expected from riskier portfolios can result in lower reported liabilities  Plan Terms Set through Collective Bargaining Stakeholders we interviewed said that plan terms, such as contribution rates, which are set through the collective bargaining process, can create an additional challenge for multiemployer plans  Employers in multiemployer plans generally are not required to contribute beyond what they have agreed to in collective bargaining, and these required employer contributions generally do not change during the term of a collective bargaining agreement  CSPF officials said that up until the early 2000s, plan officials did not request modifications to collective bargaining agreements, such as reallocating contribution dollars, to respond to adverse investment returns  Stakeholders highlighted the effects of market downturns on multiemployer plan assets as another contributing factor to CSPF’s critical financial condition and that of other multiemployer plans  Failure to achieve assumed returns has the effect of increasing unfunded liabilities  For the multiemployer system in aggregate, the average annual return on plan assets over the 2002 to 2014 period was about 6 1 percent, well short of typical assumed returns of 7 0 or 7 5 percent in 2002  Many multiemployer plans were especially impacted by the 2008 market downturn  PBGC estimated that from 2007 to 2009, the value of all multiemployer plan assets fell by approximately 24 percent, or $103 billion, after accounting for contributions to and payments from the plans  Although asset values recovered to some extent after 2009, some plans continued to be significantly underfunded, and stakeholders said this could be due to the contribution base not being sufficient to help recover from investment shortfalls  CSPF’s investment performance since 2000 has reflected performance similar to other multiemployer plans and the plan went from 73 percent funded in 2000 to about 38 percent funded in 2017  While the plan used an assumed rate of return of 7 5 to 8 0 percent per year between 2000 and 2014, our analysis of the plan’s regulatory filings shows that the plan’s weighted-average investment return over this period was about 4 9 percent per year  CSPF officials said the 2008 downturn significantly reduced CSPF’s assets and it was unable to sufficiently recoup those losses when the market rebounded in 2009  Plan assets declined from $26 8 billion at the beginning of 2008 to $17 4 billion at the beginning of 2009, with $7 5 billion of the decline attributable to investment losses  Despite reporting a 26 percent return on assets during 2009, CSPF had only $19 5 billion in assets at the end of 2009 because benefits and expenses exceeded the contributions it collected and because it had fewer assets generating returns for the plan  By the end of 2009, CSPF’s funding target was $35 9 billion but the fund had less than $20 billion that could be used to generate investment returns  If CSPF’s portfolio had returned 7 5 percent per year over the 2000-2014 period, instead of the approximately 4 9 percent we calculated, we estimate that the portfolio value would have exceeded $32 0 billion at the end of 2014, or 91 percent of its Actuarial Accrued Liability  In addition to the factors mentioned that affected many multiemployer plans, stakeholders we interviewed also noted the unique effect of the UPS withdrawal on CSPF  In 2007, UPS negotiated with the International Brotherhood of Teamsters for a withdrawal from CSPF and paid a withdrawal liability payment of $6 1 billion  This payment was invested just prior to the 2008 market downturn  Moreover, the loss of UPS, CSPF’s largest contributing employer, reduced the plan’s ability to collect needed contributions if the plan became more underfunded  A UPS official said that, following the market decline of 2001-2002, the company considered whether it should withdraw from all multiemployer plans because it did not want to be the sole contributing employer in any plan  According to this official, UPS considered the large number of UPS employees in CSPF and the plan’s demographics—such as an older population and fewer employers—in its decision to withdraw  CSPF officials said they did not want UPS to withdraw because its annual contributions accounted for about one-third of all contributions to the plan  CSPF officials also told us that, prior to the UPS withdrawal, they had expected the population of active UPS workers in the plan to grow over time  UPS’ withdrawal of 30 percent of CSPF’s active workers, in combination with the significant market downturn just after UPS withdrew, reflected the loss of working members and investment challenges on a large scale  Additionally, stakeholders noted that although each of the factors that contributed to CSPF’s critical financial condition individually is important, their interrelated nature also had a cumulative effect on the plan  Industry deregulation, declines in collective bargaining, and the plan’s significantly underfunded financial condition all impaired CSPF’s ability to maintain a population of active workers sufficient to supply its need for contributions when investment shortfalls developed  Given historical rules for plan funding and industry stresses, CSPF was unable to capture adequate funding from participating employers either before or after they withdrew from the plan  The plan’s financial condition was further impaired when long-term investment performance fell short of expectations  For an underfunded, mature plan such as CSPF, the cumulative effect of these factors was described by some stakeholders as too much for CSPF to overcome  There have been three distinct periods related to CSPF’s investment policy after the original consent decree took effect: the early period, from the consent decree’s effective date in September 1982 through October 1993, during which named fiduciaries set different investment policies and sold many of CSPF’s troubled assets—mostly real estate; a middle period from November 1993 through early 2017, during which CSPF’s investment policies were consistently weighted towards equities and its asset allocation varied, with notable equity allocation increases occurring from year-ends 1993-1995 and 2000-2002; and the current period, starting in January 2017, during which named fiduciaries and CSPF trustees are moving assets into fixed income ahead of insolvency  Appendix I has a detailed timeline that includes changes to CSPF’s investment policies since the consent decree was established in 1982  The original consent decree placed exclusive responsibility for controlling and managing the plan’s assets with an independent asset manager, called a named fiduciary  Additionally, the original consent decree prohibited CSPF trustees from managing assets or making investment decisions and gave a single named fiduciary the authority to set and change the plan’s investment objectives and policies, subject to court approval (see fig  8)  During this period, two successive named fiduciaries—first Equitable Life Assurance Society of the United States (Equitable) and then Morgan Stanley—set and executed the plan’s investment objectives using similar investment philosophies, but differing investment return goals and target asset allocations (see fig  9)  Both named fiduciaries planned to sell the plan’s troubled real estate assets from the pre-consent decree era  They also limited nonpublicly traded investments to 35 percent of the plan’s assets and set broad allocation targets for new real estate, fixed income, and equity assets  In 1984, Morgan Stanley considered a dedicated bond portfolio in its capacity as the plan’s named fiduciary, but after review, Morgan Stanley decided similar results could be obtained through other investment strategies  In executing these policies, the plan’s asset allocation varied from year to year  Starting in 1987 and in subsequent years during the early period, Morgan Stanley invested a majority of the plan’s assets in fixed income assets—more than half of which were passively managed—and all equity assets were allocated to domestic equity through 1992  By 1989, CSPF officials reported that nearly all troubled real estate assets had been sold and Morgan Stanley’s responsibilities and risk of potential fiduciary liability were reduced, permitting a concomitant reduction in fees paid to the named fiduciary (see fig  10)  During the middle period, CSPF’s investment policy was broad and consistently directed that asset allocations be weighted toward equities  In 1993, Morgan Stanley revised its investment policy statement for CSPF to eliminate asset allocation targets for each asset class and instead specified that the plan invest a majority of assets in equity or equity-type securities and no more than 25 percent in nonpublicly traded assets  After 1999, CSPF’s investment policy under other, successive named fiduciaries continued to be broad and generally specified that the plan should invest a majority of assets in equity or equity-type securities  Specifically J P  Morgan’s and Northern Trust’s consecutive investment policies for part of the plan’s assets continued to specify that a majority of the plan’s assets be invested in equity or equity-type securities and no more than 15 percent be invested in nonpublicly traded assets  Goldman Sachs’ investment policy for another part of the plan’s assets did not specify asset allocation details but indicated slightly higher tolerance for risk in conjunction with its equity portfolio  CSPF trustees said that named fiduciaries considered investing in alternative assets, but instead chose to increase the plan’s allocation to equity assets  The named fiduciaries’ investment policies did not vary significantly over this period because CSPF officials said that the plan’s overarching investment objective of achieving full funding did not change, even though there were key changes to the plan’s investment management structure during this time period  Specifically, starting in 1999, the plan temporarily shifted to a dual named fiduciary structure and increased its use of passively-managed accounts—both described in detail below— changing the named fiduciary structure that had been in place since the original consent decree (see fig  11)  More specifically, the two key changes to the plan’s investment management structure were: A temporary shift to a dual named fiduciary structure  Effective in 1999, CSPF proposed and the court approved allocating plan assets between two named fiduciaries instead of one in order to diversify CSPF’s investment approach, among other things  Both named fiduciaries were in charge of setting and executing separate policies for plan assets they managed—called “Group A” and “Group B” assets—irrespective of the other named fiduciary’s allocations  During this time, the two named fiduciaries were J P  Morgan/Northern Trust and Goldman Sachs  Specifically, J P  Morgan was named fiduciary between 2000 and 2005 and Northern Trust between 2005 and 2007 for “Group A” assets  Goldman Sachs was named fiduciary for “Group B” assets between 2000 and 2010  In 2010, an investment consultant found the performance of two named fiduciaries under the dual named fiduciary structure had been similar and more expensive than it would be under a proposed move back to a single named fiduciary  Accordingly, CSPF officials proposed, and the court approved, consolidation of all assets allocated to named fiduciaries in August 2010, with Northern Trust as the plan’s single named fiduciary  An increased use of passively-managed accounts  Between 2003 and 2010, the portion of assets that named fiduciaries managed declined as the plan moved 50 percent of its assets into three passively-managed accounts  Specifically, in 2003, 20 percent of CSPF’s assets were transitioned into a passively-managed domestic fixed income account to lower the plan’s investment management fees  In addition, both of the named fiduciaries reported that they had not outperformed the industry index for the domestic fixed income assets they managed after they were approved as named fiduciaries in 1999 and 2000 through February 2003  Similarly, in 2007 and 2010, CSPF officials said that two more passively-managed accounts were created to further reduce plan fees  Specifically, in 2007, 20 percent of plan assets were moved into a passively-managed domestic equity account  Then, in 2010, an additional 10 percent of the plan’s assets were allocated to passively-managed accounts—5 percent were allocated to a new passively-managed international equity account and 5 percent were added to the passively-managed domestic equity account  CSPF officials and named fiduciary representatives also said that the plan’s investment policies did not change in response to a couple of the events that contributed to CSPF’s critical financial condition  For example, when UPS withdrew from the plan in December 2007, it paid $6 1 billion in a lump sum to fulfill its withdrawal liability  Consistent with the named fiduciaries’ investment policies during this time period, the majority of this withdrawal payment was invested in equity assets  Specifically, the court approved the UPS withdrawal liability payment to be allocated: $1 billion to Northern Trust to be invested primarily in short-term fixed income assets, $0 9 billion to the passively-managed domestic fixed income account, and $4 2 billion to partially fund the newly created passively- managed domestic equity account  As a result of the 2008 market downturn, the balance of each of CSPF’s accounts—Northern Trust’s named fiduciary account, the passively-managed domestic fixed income and domestic equity accounts, and Goldman Sachs’ named fiduciary account—declined because of investment losses or withdrawals from investment assets to pay benefits and expenses  Some of the declines in each account were reversed by investment gains in 2009  Although the changes made to CSPF’s investment management structure did not lead to investment policy changes during the middle period, they altered the process by which the policy was set and executed  In particular, trustee responsibilities in the policy process grew after CSPF trustees became responsible for developing investment policy statements and selecting and overseeing managers of the passively-managed accounts, subject to court approval  In addition, CSPF officials said the addition of passively-managed accounts between 2003 and 2010 had the effect of creating broad bounds within which the named fiduciary could set the plan’s asset allocation  For example, when the plan moved 20 percent of total plan assets into the passively-managed domestic fixed income account in 2003, this placed an upper bound on the plan’s total equity allocation at 80 percent  Similarly, since 2010 the 30 percent of total plan assets in passively-managed equity accounts has placed a lower bound on the plan’s total equity allocation at 30 percent (see fig  12)  Nevertheless, named fiduciaries maintained the largest role in setting and executing CSPF’s investment policy throughout the middle period  From 1993 to 2003, named fiduciaries managed all of the plan’s investment assets, and from 2003 to 2009, when the plan added two of the current passively-managed accounts, named fiduciaries still held the majority of the plan’s assets  It has only been since 2010 that the assets in passively-managed accounts equaled those managed by the named fiduciary  Furthermore, Northern Trust representatives said they considered the plan’s allocations to passively-managed accounts when developing the objectives and target asset allocations for the assets they managed  Northern Trust representatives also said they discussed the plan’s overall asset allocation with trustees, but the trustees, and ultimately the court, were responsible for the decision to move 50 percent of the plan’s assets into passively-managed accounts  After the 1993 policy change that specified the plan would invest a majority of assets in equity or equity-type securities, CSPF’s asset allocation changed significantly  For example, during the middle period the plan’s allocation to equities increased from 37 percent at the end of 1993 to 69 percent at the end of 2002, and its allocation to cash plus fixed income decreased from 63 percent at the end of 1993 to 27 percent at the end of 2002  In particular, Morgan Stanley increased the plan’s allocation to equity assets from 37 percent at the end of 1993 to 63 percent at the end of 1995, with the percentage in equities almost or above 50 percent through the end of 1999  From 1993 through 1999, Morgan Stanley generally decreased the plan’s allocation to fixed income assets and increased its allocation to international equity (reaching a high of about 28 percent of the plan’s assets in 1995), an asset class in which the plan had not previously invested (see fig  13)  After 1999, the plan’s asset allocation continued to be weighted towards equities  After the market downturn in 2001, CSPF trustees told us that J P  Morgan and Goldman Sachs explicitly increased the equity allocation in an attempt to generate higher investment returns and increase the plan’s funded ratio—the plan’s overarching investment objective  Between 2000 and mid-2010, when the plan had two named fiduciaries, equity assets increased from about 58 percent at the end of 2000 to between 66 and 70 percent at the end of 2001 and each year thereafter until the end of 2009, mostly based on the named fiduciaries’ decisions to increase the plan’s allocation to domestic equity assets  When Northern Trust became the sole named fiduciary in 2010, the proportion of equity assets declined from almost 72 percent at the end of 2010 to almost 63 percent at the end of 2016  During this time, Northern Trust generally decreased the plan’s allocation to domestic equity assets, increased the allocation to actively-managed fixed income, and started investing in global infrastructure assets  Northern Trust representatives said CSPF’s recent portfolio had been kept relatively aggressive in an attempt to achieve the returns the plan would need to become fully funded while balancing risk (see fig  14)  CSPF’s deteriorating financial condition precipitated a recent investment policy change that will move plan assets into fixed income and cash equivalent investments ahead of projected insolvency  In early 2017, Northern Trust representatives revised the plan’s investment policy because they, in consultation with the trustees, believed the plan had no additional options to avoid insolvency (see textbox)  This change to the plan’s outlook led to a significant change in the plan’s investment objective, from a goal of fully funding the plan to instead forestalling insolvency as long as possible while reducing the volatility of the plan’s funding  Northern Trust representatives and CSPF officials revised applicable plan investment policy statements and started to gradually transition the plan’s “return seeking assets”—such as equities and high yield and emerging markets debt—to high quality investment grade debt and U S  Treasury securities with intermediate and short-term maturities  Northern Trust’s new investment policy specified the assets under its control would not be invested in nonpublicly traded securities, in order to manage risk and provide liquidity  CSPF Has Limited Options to Achieve Solvency As of March 2018, the Central States, Southeast and Southwest Areas Pension Fund (CSPF) was projected to be insolvent on January 1, 2025  As of July 2017, CSPF officials said that the following measures (in isolation) could help the plan avoid insolvency: 18 percent year-over-year investment returns (infinite horizon), or 250 percent contribution increases (with no employer attrition), or 46 percent across-the-board benefit cut  However, CSPF officials said that investment returns and contribution increases of these magnitudes were untenable, and CSPF’s application to reduce accrued benefits under the Multiemployer Pension Reform Act of 2014 (MPRA) was denied in 2016  CSPF officials and Northern Trust representatives said these asset allocation changes are intended to provide participants greater certainty regarding their benefits and reduce the plan’s exposure to market risk and volatility until it is projected to become insolvent on January 1, 2025 (see fig  15)  Northern Trust is expected to continue to manage 50 percent of the plan’s investment assets until the plan becomes insolvent  While the total amount of assets in the passively-managed accounts will continue to constitute 50 percent of the plan’s assets, the trustees plan to transfer assets from the passively-managed domestic and international equity accounts into the passively-managed domestic fixed income account, which will be gradually transitioned to shorter-term or cash-equivalent fixed-income securities sometime before the end of March 2020 (see fig  16)  CSPF officials said the changes will reduce the amount of fees and transaction costs paid by the plan  Specifically, investment management fees are expected to generally decrease as the plan moves into shorter duration fixed income assets  In addition, Northern Trust’s plan is designed to reduce transaction costs in two ways: (1) in the near term, Northern Trust plans to liquidate “return-seeking assets” so the cash it receives can be used directly to pay benefits, and (2) it plans to synchronize the fund’s benefit payments with the maturity dates of fixed income assets it purchases so cash received can be used directly to pay benefits  Both of these design features are intended to eliminate the need to reinvest assets, which might entail additional transaction costs  Our analysis of available data from several different sources shows the returns on CSPF’s investments and the fees related to investment management and other plan administration activities appear generally in line with similar pension plans or other large institutional investors of similar size  The annual returns on CSPF’s investments in recent decades have generally been in line with the annual returns of a customized peer group provided by the investment consultant Wilshire  The comparison group data is from Wilshire’s Trust Universe Comparison Service (TUCS)—a tool used by CSPF to compare its investment returns to a group of peers  Over the 22 years covered by our analysis, CSPF’s returns were above the median in 12 years and below the median the other 10  Figure 17 illustrates how CSPF’s annual investment returns compare to CSPF’s customized peer group of master trusts with over $3 billion in assets  CSPF’s annual investment returns tended to fluctuate relative to the annual median of the TUCS peer group over the 1995 through 2016 period  For example, in 14 of the 22 years analyzed, its annual return was in the highest or lowest 25 percent of returns (7 years each)  Further, in 3 years, its investment returns fell either within the top 5 percent of returns (1996, 2009) or bottom 5 percent (1998)  In 8 of the 22 years, CSPF’s annual return was within the middle 50 percent of its TUCS peer group  The TUCS data we analyzed also included median portfolio allocations for the group of CSPF’s peers  Table 2 compares CSPF’s asset allocations for selected asset categories to the median allocations of its TUCS comparator group  In 1996, compared to the TUCS medians, CSPF had relatively lower proportions of its assets in both equities and fixed income and a relatively higher proportion in real estate  Twenty years later (2016), CSPF had relatively higher proportions of its assets in both equities and fixed income (about 15 and 7 percentage points, respectively) than the respective medians for its peer group  However, the relatively large difference between CSPF’s 2016 equity allocation and the median allocation of its peer group may be a result of the peers moving into different asset classes  For example, there is a relatively large difference, in the other direction, in the allocation to alternative investments (see table 2)  We did not identify an alternative asset category in CSPF’s asset reports for 2016, but the TUCS comparator group median asset allocation in that year is 11 8 percent of assets  Similar to our findings when comparing the returns on CSPF’s investments to a customized peer group of other large institutional funds, the annual returns on CSPF’s investments in recent decades have also generally been in line with the annual returns for a group of similar multiemployer pension plans  To create a group of comparable plans, we selected plans that had a similar degree of “maturity” to CSPF in 2000, as such plans may face similar cash flow challenges to those facing CSPF  This comparator group ultimately consisted of 15 plans in addition to CSPF  Relative to less mature plans, mature plans generally have a greater proportion of liabilities attributable to retired participants receiving benefit payments and a lower proportion attributable to active participants (i e , workers) earning benefits  Mature plans may have limited capacity to make up for insufficient investment returns through employer contributions  Similar to the comparison against other large institutional fund returns based on TUCS data, our comparison against other mature multiemployer plan returns based on Form 5500 data shows that CSPF’s annual returns fluctuate relative to the median annual return for the mature plan comparator group (see fig  18)  For example, in 12 of the 15 years, CSPF’s annual return was in the highest or lowest 25 percent of returns (7 times high and 5 times low)  In 3 of the 15 years analyzed, CSPF’s annual return fell within the middle 50 percent of the peer group  Overall, from 2000 to 2014, CSPF’s annual return was above the group median return in 9 of the 15 years—and lower than the median return in the other 6 years  Relative to its peers, CSPF’s annual returns performed worst during economic downturns and best in years coming out of such downturns  CSPF’s annual investment return was in the bottom 10 percent of returns in 2001, 2002, and 2008  Alternatively, its annual return was in the top 10 percent of returns from 2003 to 2006, in 2009, and in 2012  Additionally, the dollar-weighted average annual return for CSPF over the 2000 through 2014 period was roughly the same as the median for the mature plan comparison group  Specifically, the dollar-weighted average annual return over this period for CSPF was roughly 4 9 percent, while the median dollar-weighted average annual return over this period among the comparison plans with continuous data was 4 8 percent  Our analysis of investment returns for mature plans compares investment returns for a set of peers that includes only multiemployer defined benefit plans  However, as with the comparison against other large institutional funds, the comparisons against other mature plans are not measures of over- or under-performance relative to an index or benchmark  Similarly, as with the earlier comparison, the analysis does not account for variations in the levels of investment risk taken by the plans  Our analysis of Form 5500 data shows CSPF’s investment fees and administrative expenses were in line with other large multiemployer plans  Plan investment fees and administrative expenses are often paid from plan assets so many plans seek to keep these fees and expenses low  Additionally, investment fees are likely to be related to the value of assets under management, and plans with greater asset values tend to be able to negotiate more advantageous fee rates  According to a pension consultant and a DOL publication, investment management fees are typically a large defined benefit plan’s largest category of expense, but a pension plan also incurs a number of lesser expenses related to administering the plan  Administrative expenses (other than investment fees) may include those for: audit and bookkeeping/accounting services; legal services to the plan (opinions, litigation and advice); administrative services provided by contractors; plan staff salaries and expenses; plan overhead and supplies; and other miscellaneous expenses  These administrative expenses relate to plan operations beyond the management of the assets, including the day-to-day expenses for basic administrative services such as participant services and record keeping  Furthermore, some of these expenses can vary based on the number of participants in the plan  To compare CSPF’s fees and expenses against similarly sized plans, we tallied various investment fee-related and other administrative expenses and compared CSPF to a group of multiemployer defined benefit plans that were among the 19 largest plans in terms of assets as of January 1, 2014  According to CSPF’s 2014 Form 5500, CSPF spent about $46 5 million on investment fees (or $47 6 million in 2016 dollars) and had about $17 4 billion in assets (or $17 8 billion in 2016 dollars) as of the end of the year—resulting in an investment fee expense ratio of about 27 basis points, or 0 27 percent  Over the 2000 to 2014 period, CSPF’s average annual investment fee expense ratio was 34 basis points (0 34 percent) while the median of the averages for our large plan comparison group was 37 basis points (0 37 percent)  While CSPF’s average investment fee expense ratio was below the median for its comparison group over the period we examined, the relationship of CSPF’s annual ratio to the annual median changed over time  CSPF’s annual investment-fee expense ratio was consistently at or above the median from 2000 through 2006, but was below the median thereafter  In addition, CSPF’s average investment fee expenses over the period that followed 2006 were 26 percent less than the average over the period before 2007  (They averaged 39 basis points, or 0 39 percent, from 2000 through 2006 and 29 basis points, or 0 29 percent, from 2007 through 2014 ) Two events may have contributed to this change  First, CSPF introduced the passively-managed accounts beginning in 2003—as noted earlier, and CSPF moved certain assets to those accounts in an effort to reduce fees  Second, the change back to a single named fiduciary, which was suggested as an expense saving move, occurred in the middle of the 2007 to 2014 period analyzed  Figure 19 illustrates how CSPF’s investment fee expense ratio compares to other large plans  Our analysis uses investment fee data reported in the Form 5500 that does not include details about the sources of the fees  Investment fees may be sensitive to a plan’s particular investment strategy and the way assets are allocated  For example, with CSPF, a named fiduciary has responsibility for executing the investment strategy and allocations  According to a representative from Northern Trust—the current named fiduciary—CSPF pays a fee of about 5 basis points for named fiduciary services, and this, combined with investment management fees, is in line with investment fees for other clients (though the overall fees depend on the types of asset allocations and investment strategies)  Figure 20 shows how CSPF’s administrative (or non-investment) expenses compare to those of other large plans on a per participant basis  According to CSPF’s 2014 Form 5500, CSPF spent about $38 million on administrative expenses ($39 million in 2016 dollars)—the third most among the 20 peer plans  However, when these expenses are expressed relative to the number of plan participants, CSPF had per participant expenses of $98 in 2014, which is about 16 percent less than the median of the large comparator group, $117  Over the period studied, CSPF’s administrative expenses per participant were at or above the large comparator median in 3 years (2001, 2004, and 2005), but lower than the median in all other years of the 2000 to 2014 period  CSPF’s administrative expenses were also in line with a broader group of comparators  For example, PBGC reported on 2014 administrative expenses of a population of large multiemployer plans (plans with more than 5,000 participants)  By closely replicating the methodology of that study, we found CSPF’s expenses of $98 per participant in 2014 fell below the median expense rate of $124 dollars per participant but above the lowest quartile of this group of large multiemployer plans  In comparing administrative expenses as a percentage of benefits paid, we found CSPF’s administrative expenses were among the lowest 5 percent of this group of large multiemployer plans  We performed a similar comparison against the peer group of large plans  CSPF had the lowest administrative expense rate among the large plan peer group in 2014, paying administrative expenses at a rate of 1 4 percent of benefits paid  In addition, CSPF’s annual administrative expenses as a percentage of benefits were below the median of our peer group of large plans in all years we reviewed  Our analysis of administrative expenses is highly summarized and does not account for possibly unique sources of administrative expenses  Plans may have unique organizational structures and attribute expenses differently  For example, one plan may contract a significant portion of administrative duties with a third-party, while another plan may administer the plan in-house  According to an actuary we interviewed, most multiemployer plans are administered by a third-party, but the plan’s in- house staff will still retain a number of duties  Additionally, the amount of individual administrative expenses could vary significantly by plan depending on the importance of the related administrative function in the plan’s organization  We provided a draft of the report to the U S  Department of Labor, U S  Department of the Treasury, and the Pension Benefit Guaranty Corporation for review and comment  We received technical comments from the U S  Department of Labor and the Pension Benefit Guaranty Corporation, which we incorporated as appropriate  The U S  Department of the Treasury provided no comments  We will send copies to the appropriate congressional committees, the Secretary of Labor, the Secretary of the Treasury, Director of the Pension Benefit Guaranty Corporation, and other interested parties  This report will be available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact Charles Jeszeck at (202) 512-7215 or jeszeckc@gao gov or Frank Todisco at (202) 512-2700 or todiscof@gao gov  Mr  Todisco meets the qualification standards of the American Academy of Actuaries to address the actuarial issues contained in this report  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix IV  Our objectives were to review: (1) what is known about the factors that contributed to the Central States, Southeast and Southwest Areas Pension Fund’s (CSPF) critical financial condition; (2) what has been CSPF’s investment policy, and the process for setting and executing it, since the consent decree was established; and (3) how has CSPF performed over time, particularly compared to similar pension plans  For all objectives, we reviewed relevant federal laws and regulations, literature, and documentation the U S  Department of Labor (DOL) and CSPF officials provided, including reports prepared by the court- appointed independent special counsel  We interviewed knowledgeable industry stakeholders, participant advocates, CSPF officials, International Brotherhood of Teamsters officials and members, and federal officials— including officials from the Pension Benefit Guaranty Corporation (PBGC), DOL, and the U S  Department of the Treasury (Treasury)  To describe the major factors that led to CSPF’s critical financial condition, we conducted semi-structured interviews and reviewed CSPF documentation, relevant scholarly materials, trade and industry articles, government reports, conference papers, research publications, and working papers  We also collected actuarial, financial, and other data on current and historical measures of plan assets, liabilities, investment performance, and other factors, and performed our own analyses of these data  The data and documentation collected were generally from the plan or agencies that oversee pensions  We determined the information to be generally reliable for the purposes of our objectives  To describe CSPF’s investment policy and the process by which it was set and executed we (1) reviewed CSPF’s investment policy statements, court orders and consent decree amendments, and other documentation provided by CSPF officials; (2) interviewed CSPF officials, including pension plan staff, the board of trustees, and the investment advisor, and representatives of the named fiduciary serving the plan at the time of our review; and (3) summarized certain aspects of CSPF’s assets using year- end performance reports prepared by the named fiduciaries  To describe how CSPF has performed over time compared to similar pension plans, we analyzed investment and fee data from DOL’s Form 5500, the government’s primary source of pension information  We also examined CSPF’s investment returns in comparison to a customized Wilshire Associates’ (Wilshire) Trust Universe Comparison Service (TUCS) benchmark of trusts with $3 billion or more in assets  CSPF provided these data and the data are included in the independent special counsel reports  Wilshire provided supplemental data using the same benchmark specifications  We reviewed three types of documentation provided by CSPF for changes in named fiduciaries; changes in investment policy, strategy, and asset allocation; major issues that affected funding; and how these issues affected CSPF’s investment strategy and policy  Select independent special counsel reports  CSPF officials provided 4th quarter reports for each year from 1982 through 2002 and available quarterly reports from 2003 through 2007  We downloaded all available quarterly reports from 2008 through 2017 from CSPF’s website  Select board of trustee meeting minutes  We requested board of trustee meeting minutes from 1983, 1994-95, 1998-2005, 2007-2010, and 2016 so we could review trustee discussions from the first full year the plan was covered by the 1982 consent decree, the most recent full year; periods that included a recession and/or when the plan’s assets performed poorly; and periods that preceded a change or reappointment of the named fiduciary  CSPF officials selected portions of the trustee meeting minutes from those years that pertained to the following topics: named fiduciary reports concerning investment performance; discussions relating to the amortization extension the Internal Revenue Service (IRS) granted to the plan and the contribution rate increases the plan required of participating employers in an effort to comply with funding targets required as condition of the IRS-approved amortization extension; major amendments to the plan; significant reports concerning the plan’s financial condition; amendments to the consent decree; discussions relating to any inquiries or issues DOL raised; discussions of named fiduciary appointments or resignations; discussions of particularly significant contributing employer delinquencies, bankruptcies, and settlements; and discussions relating to the independent special counsel  In addition to the board of trustee meeting minutes, CSPF officials provided select documentation on similar topics a former secretary of the board of trustees retained (1995 through 2008)  Select correspondence between CSPF and DOL  CSPF officials provided select correspondence with DOL from 1987 through 2017 relating to DOL’s oversight of the plan  CSPF officials said they provided all records of those communications that related to significant, substantive, and nonroutine issues  The correspondence excluded other documents, such as periodic reports concerning asset rebalancing and correspondence related to fairly noncontroversial motions to the consent decree  In addition, DOL provided documentation throughout the course of our engagement, including documentation it provided between September and October 2017 that it had not previously identified as being relevant to our review  We completed an on-site file review at DOL in September 2017, and DOL sent us additional electronic documentation in September and October 2017  Overall, we reviewed extensive documentation from DOL—spanning over 10,000 pages of paper-based and electronic files— and spent substantial time cataloging and categorizing it  However, DOL officials reported that certain documentation related to CSPF was no longer available because it had only been retained for the time specified in the records retention policy of the relevant office  We conducted 23 semi-structured interviews with federal agency officials and other stakeholders, including affected parties, and persons knowledgeable about unions, participants and retirees, the trucking industry, collective bargaining agreements, and multiemployer pension plans  We also interviewed three stakeholders with actuarial expertise to specifically understand actuarial standards and procedures  We selected knowledgeable stakeholders based on review of literature and prior GAO work, and recommendations from other stakeholders  We judgmentally selected stakeholders whose expertise coincided with the scope of our objectives and who would be able to provide a broad range of perspectives  In our semi-structured interviews we asked about key factors affecting the plan, the broader regulatory and financial environment in which multiemployer plans operate, and solvency options for plans like CSPF  We reviewed CSPF’s investment policy statements after CSPF entered into a consent decree in 1982, most of which are documented in the consent decree or other court orders  Seven of the investment policy statements were developed by named fiduciaries in consultation with the plan’s board of trustees and four were developed by the trustees  (See fig  21 ) From each investment policy statement, we compiled relevant information on: (1) investment philosophy and plan characteristics considered in developing it, (2) investment return benchmarks, (3) asset allocation, and (4) strategies and assets  See table 3 for select asset allocation information  To describe how CSPF’s investment policy was executed, we compiled information from performance reports prepared by named fiduciaries  We reported CSPF’s asset allocation generally based on the aggregate asset allocation categories CSPF’s named fiduciaries assigned in those reports  CSPF provided these reports for the end of each year 1984 through 2016—except 1992 and 1995, for which it provided reports as of the end of November  Information we compiled included the plan’s: account breakdown (i e , assets in named fiduciary and passively- asset allocation; and investment assets withdrawn to pay benefits and administrative expenses  When possible, we checked the information from year-end performance reports against that in other sources  Specifically, to ensure we captured the vast majority of the plan’s assets in our asset summary we compared the total amount of plan assets named fiduciaries reported with Net Assets reported in CSPF’s Form 5500 filings, available from 1982 through 2016  We generally found these totals to be similar for each year—in most years the difference was about or under 1 percent  Also, named fiduciary performance reports included information on withdrawals from investment assets to meet pension and administrative expense obligations as of the end of each year, except for 1995 and 1999-present  For 1995 through 2016, we compiled this information from independent special counsel reports  For years in which we had overlapping information, 1996 through 1998, we found the reported totals were similar—no more than about 0 6 percent difference in each of those years  Based on our review we believe that the differences were insignificant to our overall analysis and did not impact our findings  To determine investment returns, investment fees, and administrative expenses for CSPF and related comparator group multiemployer defined benefit plans, we analyzed electronic Form 5500 information, the primary, federal source of private pension data  We analyzed information from 2000 through 2014, the most current and complete year at the time we performed our analysis  We began our analysis with 2000 data as data on investment returns and plan fees is primarily found in the Schedule H  Schedule H information was first collected in 1999  But we begin our analysis with 2000 data as electronic data became more reliable the year after the schedule was introduced  We have previously reported on the problems associated with the electronic data of the Form 5500  To mitigate problems associated with the data, we used Form 5500 research data from PBGC  PBGC analysts routinely and systematically correct the raw 5500 data submitted by plans, and PBGC’s Form 5500 research data are thought to be the most accurate electronic versions  Although we did not independently audit the veracity of the PBGC data, we took steps to assess the reliability of the data and determined the data to be sufficiently reliable for our purposes  For example, we performed computer analyses of the data and identified inconsistencies and other indications of error and took steps to correct inconsistencies or errors  A second analyst checked all computer analyses  Funded status is a comparison of plan assets to plan liabilities  One measure of funded status is the funded percentage, which is calculated by dividing plan assets by plan liabilities  Another measure of funded status is the dollar amount of difference between plan assets and plan liabilities; the excess of plan liabilities over plan assets is the unfunded liability (or surplus if assets exceed liabilities)  In this report, we measured funded status using the Actuarial Value of Assets and the Actuarial Accrued Liability, which are the basic measures used to determine the annual required minimum contribution for multiemployer plans under ERISA  We chose these measures because of the consistent availability of data for these measures  There are other ways to measure plan assets and plan liabilities  The Actuarial Value of Assets can be a “smoothed” value that differs from the market value of plan assets  The Actuarial Accrued Liability depends on the choice of actuarial cost method and discount rate, and on whether it is determined on an ongoing plan basis or a plan close-out basis  While different measures of plan assets and liabilities will produce different measures of funded status at any particular point in time, we found that our use of the Actuarial Value of Assets and the Actuarial Accrued Liability was sufficient for our purposes, which included examining the plan’s progress relative to statutory funding standards as well as its trend over time  We developed multiple comparison groups for our analysis  The general rationale behind these comparator groups is to identify plans with similar fundamental characteristics, such as plan size or plan maturity, for purposes of investment return and fee and expense comparisons  We created the following two comparator groups: 1  Large plans (in terms of assets)  We ordered multiemployer defined benefit plans by descending 2014 plan assets (line 2a of the 2014 of the Schedule MB)  Because one of our key analyses of the data involves comparing investment returns across plans, we also limited the comparable plans to those that share a common plan year to CSPF (specifically if they have the same plan year-end of December 31)  We selected the 20 plans that had the largest plan asset values  This includes CSPF, which was the second largest multiemployer plan as of the beginning of 2014  Because these comparator plans are among the largest, they should have similar cost advantages  For example, for investment management services, they should have similar advantages in obtaining lower fees and thus garner greater net returns due to the more favorable fee structures  2  Mature plans (in terms of retiree liability proportions)  We ordered multiemployer defined benefit plans by their similarity to CSPF’s ratio of retiree to total liabilities as of the beginning of calendar year 2000  The ratio of retiree to total liabilities is defined as line 2(b)1(3) of the 2000 Schedule B divided by total liabilities of line 2(b)4(3) of the 2000 Schedule B  To compare retiree to total liability ratios, we created a variable for the absolute value of the difference between CSPF’s ratio and that of a given plan  We ordered the plans by ascending differences in the ratios (excluding any with missing differences)  CSPF was the top plan because its difference is zero by definition  Because one of our key analyses of the data involved comparing investment returns across plans, we also limited the comparable plans to those that shared a common plan year with CSPF (specifically if they have the same plan year-end of December 31)  Of the plans that had the same plan year as CSPF and assets over $300 million, we selected the 20 plans (including CSPF) that had the smallest absolute difference from CSPF in the retiree-to-total liability ratio  Plans with a high ratio of liabilities attributable to retirees will have a relatively large portion of future benefit payments attributable to those that are older and retired  By selecting plans that were similarly mature to CSPF (and had $300 million in assets as of the beginning of 2000), we identified plans that may have had a similar basis for their plan investments, similar cash flow characteristics, or similar potential deviations between time-weighted and dollar-weighted average investment returns over time (see section below entitled “Calculation of Average Investment Return over Multiple Years”)  That is, these plans should have roughly similar cost advantages and similar considerations in their investment objectives such as the balance of cash flows into and out of the fund and the plans’ investment horizons  Similarity in the balance of cash flows is important because it helps to mitigate the influence of plan maturity on the weighted average investment return over multiple years  The year 2000 was used to select the group because the primary purpose of this group is comparison of investment returns for plans that are similarly situated at the beginning of the period being analyzed  Our calculation of investment returns is based on the investment return calculation expressed in the Form 5500 instructions for the Schedule MB  Specifically the instructions of the 2014 Schedule MB state: Enter the estimated rate of return on the current value of plan assets for the 1-year period ending on the valuation date  (The current value is the same as the fair market value—see line 1b(1) instructions ) For this purpose, the rate of return is determined by using the formula 2I/(A + B – I), where I is the dollar amount of the investment return, A is the current value of the assets 1 year ago, and B is the current value of the assets on the current valuation date  Enter rates to the nearest  1 percent  If entering a negative number, enter a minus sign (“ - “) to the left of the number  After preliminary analysis of the variable and consultation with a GAO senior actuary, we determined that Form 5500, Schedule H contains all the information necessary to derive the calculation for years prior to 2008—as far back as 1999 when the Schedule H first came into existence  Additionally, we made adjustments for the timing of cash flows, to the extent indicated by the data  For example, employer and employee contributions that were considered receivable at the end of the prior year and thus included in the Schedule MB calculation were instead included in the year when the plan received the cash for the contribution  Thus, our calculation of annual rate of return is expressed as line items of the 2014 Schedule H to be: 2 * / [[{item1(f)a} – {item 1(b)1(a)} - {item 1(b)2(a)} - {item 1j(a)}] + [{item1(f)b} – {item 1(b)1(b)} - {item 1(b)2(b)} - {item 1j(b)}] – [{item 2d} - {item 2a(3)} – {item 2c}]] Or expressed with expository names as: (2 * (TLINCOME - TOTLCON - OTHERINCOMEW)) / ((TASSTSBY - (ERCONBOY + EECONBOY + OTHER_LIAB_BOY_AMT)) + (TASSTSEY - (ERCONEOY + EECONEOY + OTHER_LIAB_EOY_AMT)) - (TLINCOME - TOTLCON - OTHERINCOMEW)) For purposes of data reliability and validation of our results, we ran permutations of the calculation to see how, if at all, certain items could influence the calculation  In two permutations, we changed the timing of net asset transfers to or from other plans  (This occurs when, for example, there is a plan merger ) A senior actuary determined whether the calculations with/without net asset transfers affected our calculation  If the timing of the net transfer caused the investment return calculation to vary by more than 0 1 percent, we excluded the data for that particular plan in that particular year  We also ran another calculation that did not include “other” income so we could estimate the impact of not adjusting for such information  Historical average investment returns over multiple years can be calculated in at least two different ways  One measure is the “time- weighted” average return, calculated as a geometric average of the annual returns during the period  A time-weighted average measures average investment performance without regard to the order of the annual returns or the impact of different plan circumstances over time  Another measure is the “dollar-weighted” average return–also known as the “internal rate of return” (and also referred to as the “cash flow weighted” return in this report)—which reflects the impact of the plan’s cash flow pattern  The dollar-weighted average return is the rate that, when applied over time to the asset value at the beginning of the period and to each year’s net cash flow into or out of the plan over the period, reproduces the asset value at the end of the period  We calculated dollar-weighted average returns (along with some time- weighted returns for comparison), for both CSPF and for the multiemployer system as a whole, as discussed in the report  We used a market value of plan assets for this purpose  The dollar-weighted average captures the impact of negative cash flow on average investment return  For example, with negative cash flow, investment results in an earlier year can have a bigger impact than investment results in a later year because more money is at stake in the earlier year  Using the same beginning-of-period asset value, and subsequent annual net cash flows into or out of the plan, used in calculating the dollar- weighted average return, we also performed a hypothetical calculation of what CSPF’s end-of-period asset value would have been if the plan had earned 7 5 percent per year instead of its actual return  Conceptually, there are multiple ways to express investment fees, but our analysis used the following two methods for calculating them: Investment fee ratio  Investment fees [line 2i(3) of the 2014 Schedule H] divided by end-of-year net assets [line 1l(b) of the 2014 Schedule H] less receivables [line 1b(1)(b); line 1b(2)(b); and line 1b(3)(b) of the 2014 Schedule H]  Investment fees per participant  Investment fees [line 2i(3) of the 2014 Schedule H] divided by total (end-of-year) participants [line 6f of the 2014 main form]  We define administrative expenses as all other expenses besides investment fees  In part, we used this definition of administrative expenses as it represents the expenses that remain after excluding investment fees  In addition, according to a PBGC analyst, this is the unit of analysis that they also used in their study of administrative expenses  Administrative expense to benefits paid  This is administrative expenses (professional, contract and other) divided by benefits paid  For administrative expenses we derived the value by taking total expenses less investment fees   For benefits paid, we used the 2014 Schedule H, line 2e(1), “Benefit payment and payments to provide benefits directly to participants or beneficiaries, including direct rollovers ” However, if the benefit payment value for such payments is missing or zero, we used the 2014 Schedule H, line 2e(4) “Total Benefit Payments” since the plan may be expressing their benefit payments on another line  Administrative expense per participant  Administrative expenses (professional, contract and other) divided by total (end-of-year) participants   For administrative expenses we derived the value by taking total expenses [line 2i(5) of the 2014 Schedule H] less investment fees [line 2i(3) of the 2014 Schedule H]  PBGC Study on Administrative Expenses PBGC has reported on administrative expenses and included various breakouts of these data in past data book supplements  The calculations of administrative expenses in this report are similar to those used by PBGC  Certain differences may exist because our calculation did not include certain multiemployer plans that reported missing data  Additionally, our population of multiemployer plans included only those plans exclusively associated with defined benefit features  The table below compares our results for plans with 5,000 or more participants, which is a subset of plans analyzed in the PBGC study  Our results used a sample that includes three fewer plans than the PBGC study, but our distributional results were within one-tenth percent for the administrative expense ratio and within $5 of the administrative expenses per participant (see table 4)  Comparing the administrative expenses across reports using other statistics such as the minimum, maximum and standard deviation shows similar results for the PBGC and our analysis (see table 5)  The mean administrative expenses per participant differ by $2 47  This difference is 1 5 percent lower than the PBGC estimate and could be a result of the difference in sample size  We also performed additional analyses as summarized below  We compared CSPF’s annual returns against plans that have the largest assets among multiemployer defined benefit plans (with the same plan year as CSPF) and CSPF’s results against these plans were broadly similar to results for the mature plans (see fig  22)  We compared CSPF’s administrative expenses as a percentage of benefit paid against other large plans  As noted in this report, CSPF has the lowest relative administrative expenses among the comparators in 2014 with administrative expenses at 1 4 percent of benefits (see fig  23)  In addition, CSPF’s administrative expenses as a percentage of benefits were consistently below the median  For our analysis of Wilshire TUCS data, we used two sources of data  Data from 1999 through 2016 was provided by CSPF  CSPF provided reports of their TUCS custom comparison group, master trusts with greater than $3 billion in assets  These data also included the year-end return results for the total fund (also known as the combined fund) as well as returns by subcategory such as a specific named fiduciary or fund  For example, subcategories listed for year-end 2006 included the results for both named fiduciaries (Goldman Sachs and Northern Trust) as well as the passively-managed accounts (then known as the CSSS fund)  The custom comparison groups for the 1999 through 2016 data were determined each year in early-February of the year following the December 31 return results for the prior year  Thus, over time more master trusts were added (or subtracted) depending on the level of assets for the master trusts in that year  For example, the return results for year- end 1999 are determined as of February 10, 2000 and the group of master trusts with more than $3 billion contains 62 observations  The number of trusts in the custom group of master trusts with more than $3 billion generally grew over time with the number peaking with the return results for year-end 2014 (determined as of February 9, 2015), which contains 124 observations  The TUCS data from 1995 through 1998 was provided by Wilshire  The comparison group for these data were not selected each year, but, instead, selected retrospectively  For example, the comparison group of master trusts with more than $3 billion from 1995 through 1998 was selected as of January 9, 2017  There were 99 reported observations in 1995 and 132 observations in 1998  In addition, the 1995 through 1998 TUCS data did not include specific returns for CSPF  We were able to find the annual year-end return in the December (i e  year-end) management report, which for these years was provided by the named fiduciary, Morgan Stanley  Below is a list of selected events that have affected the Central States, Southeast and Southwest Areas Pension Fund (CSPF) as identified through a review of relevant documentation and interviews with stakeholders and agency officials  It is not intended to be an exhaustive list of the events that have impacted CSPF, nor is it intended to include comprehensive descriptions of each event  On September 22, 1982, the Department of Labor (DOL) entered into a court-enforceable consent decree with the Central States Southeast and Southwest Areas Pension Fund (CSPF) to help ensure the plan’s assets were managed for the sole benefit of the plan’s participants and beneficiaries as required by the Employee Retirement Income Security Act of 1974 (ERISA)  The consent decree has been amended several times and currently remains in effect, as amended, under the jurisdiction of the Federal Court for the Northern District of Illinois, Eastern Division  Below is a description of the key parties to and their primary responsibilities under the consent decree  The consent decree defines roles and responsibilities for its parties, including the court, the court-appointed independent special counsel, DOL, the plan and its Board of Trustees, and the independent asset manager, which is called the named fiduciary  The primary role of the court is to oversee and enforce the consent decree  Specifically, the court: appointed an independent special counsel to assist it in administering has approval over the appointment of named fiduciaries and trustees; has approval over the appointment of investment managers of the may, for good cause shown, remove a named fiduciary after 60 days’ notice provided to the named fiduciary and DOL; and may, upon request by the plan, dissolve the consent decree absent good cause shown by DOL why the consent decree should continue in effect  The court-appointed independent special counsel is intended to serve the court by assisting in identifying and resolving issues that arise in connection with the plan’s compliance with the consent decree and Part 4 of Title I of ERISA, and to report on the plan to the court  Specifically, the independent special counsel: has full authority to examine the plan’s activities and oversee and report on the plan’s performance of the undertakings of the consent decree; may, with court approval, employ attorneys, accountants, investigators, and others reasonably necessary and appropriate to aid him in the exercise of his responsibilities; has full access to all documents, books, records, personnel, files, and information of whatever type or description in the possession, custody, or control of the plan; may attend meetings of the plan, including meetings of the board of trustees and any meetings at which plan-related matters are discussed or considered; can petition the court to compel the plan to cooperate with the independent special counsel in the performance of his duties and responsibilities; may consult with DOL, the Internal Revenue Service, and other agencies, as appropriate, but must provide access to DOL upon its request to any documents prepared by the independent special counsel within the exercise of his power; is required to file quarterly reports, as well as any other reports the independent special counsel deems necessary or appropriate, with the court, and provide copies to DOL and the plan; may have other powers, duties, and responsibilities that the court may later determine are appropriate; and cannot be discharged or terminated during the duration of the consent decree except for leave of court, and upon the termination, discharge, death, incapacity, or resignation of an independent special counsel, the court will appoint a successor  Under the consent decree, DOL has an oversight role and may object to certain proposed plan changes  Specifically, DOL: may request and review certain reports provided by the plan and any documents prepared by the independent special counsel in the exercise of his authority; may object to the appointment of proposed trustees, named fiduciaries, investment managers of the passively-managed accounts, and asset custodians; receives notice of proposed changes to the plan’s investment policy statements from the plan; and may object to the dissolution of the consent decree  The plan must operate in full compliance with the consent decree, with ERISA, and with any conditions contained in determination letters it receives from the Internal Revenue Service  Specifically, CSPF, its board of trustees, and its internal audit staff must meet certain requirements  is required to use an independent asset manager known as the named fiduciary; must rebid the named fiduciary role at least once within every 6 years, with the option to extend the appointment for 1 calendar year; may remove a named fiduciary without cause shown on 6 months’ written notice to the named fiduciary and DOL; must cooperate with the independent special counsel in the performance of his duties and responsibilities and with DOL in its continuing investigation and enforcement responsibilities under ERISA; is required to recommend to the court three replacement candidates, agreeable to DOL, to replace an outgoing independent special counsel; and is required to maintain a qualified internal audit staff to monitor its affairs  is required to appoint, subject to court approval, the investment managers of the passively-managed accounts; is prohibited from authorizing any future acquisitions, investments, or dispositions of plan assets on a direct or indirect basis unless specifically allowed by the consent decree; and is required to comply with ERISA fiduciary duties, such as monitoring the performance of the assets of the plan, under Part 4 of Title I of ERISA  is required to review benefit administration, administrative expenditures, and the allocation of plan receipts to investments and administration; and is required to prepare monthly reports setting forth any findings and recommendations, in cooperation with the executive director of the plan, and make copies available to the independent special counsel and, upon request, to DOL and the court  The independent asset managers, known as named fiduciaries, are appointed by the plan’s trustees, subject to court approval, and have exclusive responsibility and authority to manage and control all assets of the plan allocated to them  Specifically, the named fiduciaries: may allocate plan assets among different types of investments and have exclusive authority to appoint, replace, and remove those have responsibility and authority to monitor the performance of their are required to develop, in consultation with the Board of Trustees, and implement investment policy statements for the assets they manage, giving appropriate regards to CSPF’s actuarial requirements  In addition to the individual named above David Lehrer (Assistant Director), Charles J  Ford, (Analyst-in-Charge), Laurel Beedon, Jessica Moscovitch, Layla Moughari, Joseph Silvestri, Anjali Tekchandani, Margaret J  Weber, Adam Wendel, and Miranda J  Wickham made key contributions to this report  Also contributing to this report were Susan Aschoff, Deborah K  Bland, Helen Desaulniers, Laura Hoffrey, Jennifer Gregory, Sheila McCoy, Mimi Nguyen, Jessica Orr, Monica P  Savoy, and Seyda Wentworth  Central States Pension Fund: Department of Labor Activities under the Consent Decree and Federal Law  GAO-18-105  Washington, D C : June 4, 2018  High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others  GAO-17-317  Washington, D C : February 15, 2017  Pension Plan Valuation: Views on Using Multiple Measures to Offer a More Complete Financial Picture  GAO-14-264  Washington, D C : September 30, 2014  Private Pensions: Clarity of Required Reports and Disclosures Could Be Improved  GAO-14-92  Washington, D C : November 21, 2013  Private Pensions: Timely Action Needed to Address Impending Multiemployer Plan Insolvencies  GAO-13-240  Washington, D C : March 28, 2013  Private Pensions: Multiemployer Plans and PBGC Face Urgent Challenges  GAO-13-428T  Washington, D C : March 5, 2013  Pension Benefit Guaranty Corporation: Redesigned Premium Structure Could Better Align Rates with Risk from Plan Sponsors  GAO-13-58  Washington, D C : November 7, 2012  Private Pensions: Changes Needed to Better Protect Multiemployer Pension Benefits  GAO-11-79  Washington, D C : October 18, 2010  Private Pensions: Long-standing Challenges Remain for Multiemployer Pension Plans  GAO-10-708T  Washington, D C : May 27, 2010  The Department of Labor’s Oversight of the Management of the Teamsters’ Central States Pension and Health and Welfare Funds  GAO/HRD-85-73  Washington, D C : July 18, 1985  Investigation to Reform Teamsters’ Central States Pension Fund Found Inadequate  HRD-82-13  Washington, D C : April 28, 1982 

ground_truth: DOD spends billions of dollars annually to sustain its weapon systems to support current and future operations. The Air Force and Navy are operating many of their fixed-wing aircraft well beyond their original designed service lives and therefore are confronted with sustainment challenges. House Report 114-537 included a provision for GAO to evaluate the sustainment of major weapon systems. This report, among other things, (1) examines the trends in availability and O&S costs for selected Air Force and Navy fixed-wing aircraft since fiscal year 2011, including whether they met availability goals, and (2) assesses the extent that the departments documented sustainment strategies, reviewed sustainment metrics, and implemented plans to improve aircraft availability. GAO selected a nongeneralizable sample of 12 fixed-wing aircraft by considering a variety of factors, such as the type, age, and manufacturer of the aircraft, among other factors, and analyzed condition and availability data, O&S costs, and sustainment challenges from fiscal year 2011 through March 2017 for each aircraft in a “Sustainment Quick Look.” GAO also analyzed policies, strategies, and plans, and interviewed Navy and Air Force officials in program offices, squadrons, and maintenance depots. Between fiscal years 2011 and 2016, the Air Force and Navy generally did not meet aircraft availability goals, and operating and support (O&S) cost trends for GAO's selected fixed-wing aircraft varied. Specifically, GAO found that availability declined for 6 of 12 aircraft—3 from each service—between fiscal years 2011 and 2016; availability fell short of goals for 9 of 12 aircraft in fiscal year 2016; and O&S costs increased for 5 of the aircraft, and maintenance costs—the largest share—increased for 8 of 12 aircraft. GAO found, and officials agreed, that these aircraft face similar challenges. a Obsolescence means a part is unavailable due to its lack of usefulness or it is no longer current or available for production. b Diminishing manufacturing sources is a loss or impending loss of manufacturers or suppliers. The Air Force and Navy have documented sustainment strategies for some aircraft, regularly reviewed sustainment metrics, and implemented improvement plans. The Air Force has documented sustainment strategies for all aircraft GAO reviewed; however, the Navy has not documented or updated its sustainment strategies for four aircraft. Specifically, the Navy does not have a documented sustainment strategy for the C-2A, and has not updated the strategies for the E2C, EA-18G, and F/A-18A-D since before 2012. The Navy is in the process of documenting its strategies, but Department of Defense (DOD) policy is unclear on whether a sustainment strategy is required and has to be updated every 5 years for weapon systems that are in the operations and support phase of their life cycle (i.e., legacy systems). Also, Navy guidance does not specify a requirement for legacy systems, although Air Force guidance does. Clarifying the requirements to document sustainment strategies for legacy systems, and documenting those strategies, would add additional visibility over the availability and O&S costs of DOD aircraft and any associated sustainment risks. This is a public version of a sensitive report issued in April 2018. Information on aircraft availability and other related information was deemed to be sensitive and has been omitted from this report. GAO is recommending that DOD and the Navy update or issue new policy and guidance clarifying the requirements for documenting sustainment strategies for legacy weapon systems. DOD concurred with the recommendations.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: Section 420 of the Robert T  Stafford Disaster Relief and Emergency Assistance Act ( P L  93-288 , hereinafter the Stafford Act) authorizes the President to "declare" a Fire Management Assistance Grant (FMAG)  The current FMAG system was established by regulation in October of 2001  These grants provide federal assistance for fire suppression activities  This authority has been delegated to the Federal Emergency Management Agency's (FEMA's) Regional Administrators  Once issued, the FMAG declaration authorizes various forms of federal assistance such as the provision of equipment, personnel, and grants to state, local, and tribal governments for the control, management, and mitigation of any fire on certain public or private forest land or grassland that might become a major disaster  This federal assistance requires a cost-sharing component such that state, local, and tribal governments are responsible for 25% of the expenses  This report discusses the most frequently asked questions received by the Congressional Research Service on FMAGs  It addresses questions regarding how FMAGs are requested, how requests are evaluated using thresholds, and the types of assistance provided under an FMAG declaration  FMAGs can be requested by a state when the governor determines that a fire is burning out of control and threatens to become a major disaster  At that point, a request for assistance can be submitted to FEMA  Typically, requests are submitted to the FEMA Regional Administrator  Requests can be submitted any time—day or night—and can be submitted by telephone to expedite the process  Telephone requests must be followed by written confirmation within 14 days of the phone request  Under the Sandy Recovery Improvement Act of 2013 (SRIA, Division B of P L  113-2 ), tribes are equivalent to states in their ability to request a major disaster declaration, an emergency declaration, or a request for an FMAG declaration  Note that some tribal land holdings are administered by the federal government and, therefore, receive fire suppression support through the National Interagency Fire Center (NIFC)  The NIFC supports interagency "wildland" firefighting efforts on federal lands by the U S  Forest Service, National Weather Service, National Park Service, Bureau of Indian Affairs (BIA), U S  Fish and Wildlife Service and FEMA's U S  Fire Administration  Unlike FMAGs, such support generally does not require tribes to reimburse firefighting costs (FMAGs require the state to pay a 25% cost-share)  In addition, tribes with their own fire suppression resources may receive reimbursement from BIA for their costs related to fire suppression on tribal lands  The FMAG request should include cost estimates to support the request as well as information about the fire including the size of the fire(s) in acres or square miles, the population of the community (or communities) threatened, the number of persons evacuated (if applicable), weather conditions, and the degree to which state and local resources are committed to this fire and other fires in federal, state, and/or local jurisdictions  The verbal request must be followed up with a completed "Request for Fire Management Assistance Declaration" (FEMA form 078-0-1) and the "Principal Advisor's Report" (FEMA form 078-0-2)  The following criteria are used to evaluate wildfires and make a determination whether to issue an FMAG: the threat to lives and property including critical facilities, infrastructures, and watershed areas; the availability of state and local fire resources; high fire danger conditions based on nationally accepted indices such as the National Fire Danger Ratings System; and the potential economic impacts of the fire  In addition, FEMA has developed fire cost thresholds that are typically updated on an annual basis  There are two types of fire cost thresholds used to help determine if a state or tribal nation is eligible for fire assistance: (1) individual thresholds for a single fire, and (2) cumulative thresholds for multiple fires  Cumulative thresholds are applied to multiple fires burning simultaneously, or the accumulation of multiple fires in a single fire season  Threshold amounts vary by state (see Table 1 )  Taking Pennsylvania as an example, generally, a single fire would need to meet or exceed $927,274 in damages for Pennsylvania to be eligible for an FMAG declaration  In contrast, the formula for the cumulative fire threshold for a given state is one of two amounts—$500,000 or the amount of that state's individual fire threshold multiplied by three, whichever is greater  Returning to the Pennsylvania example, the sum of three individual fire thresholds equals $2,781,822  Since that amount is larger than $500,000, cumulative fire damages in Pennsylvania must meet or exceed $2,781,822 to be eligible for assistance  In contrast, the individual fire threshold for Alaska is $100,000, but the cumulative threshold is $500,000, not the sum of three individual fire thresholds ($300,000)  If FEMA denies the request for assistance, the state has one opportunity to appeal the denial  The appeal must be submitted in writing to the Regional Administrator no later than 30 days from the date of the denial letter  The appeal should contain any additional information that strengthens the original request for assistance  The Regional Administrator will review the appeal, prepare a recommendation, and forward the appeal package to the FEMA Headquarters Office  The FEMA Headquarters Office will notify the state of its determination in writing within 90 days of receipt of the appeal (or receipt of additional requested information)  The state may request a time extension to submit the appeal  The request for an extension must be submitted in writing to the Regional Administrator no later than 30 days from the date of the denial letter  The request for an extension must include a justification for the need for an extension  The FEMA Headquarters Office will notify the state in writing whether the extension request is granted or denied  No, an emergency or major disaster can be declared after an FMAG declaration has been issued  However, the emergency or major disaster declaration must be initiated by a separate request for assistance by the state or tribal government


Report 2:  FMAGs are funded through FEMA's Disaster Relief Fund (DRF), the main account FEMA uses to provide disaster assistance  The DRF is a no-year account—unused funds from the previous fiscal year are carried over to the next fiscal year  Funds in the DRF fall into two categories  The first category is for disaster relief costs associated with major disasters under the Stafford Act  This category reflects the impact of the Budget Control Act ( P L  112-25 , BCA), which allows appropriations to cover the costs incurred as a result of major disasters to be paid through an "allowable adjustment" to the discretionary spending limits  The second category is colloquially known as "base funding " Base funding includes activities not tied to major disasters under the Stafford Act  Base funding is scored as discretionary spending that counts against the discretionary spending limits, whereas FMAGs are funded through the DRF's base funding category  The decision to issue a FMAG declaration is not contingent on the DRF balance  Similarly, FMAGs do not reduce the amount of funding available for major disasters  When the DRF balance was low in the past, FEMA used its "immediate needs funding" (INF) policy until supplemental appropriations were passed to replenish the DRF  Under INF, long-term projects (such as mitigation work) are put on hold and only activities deemed urgent are funded  FMAGs would most likely fall into the category of events with an "urgent" need  Under the INF policy, FEMA also delays interagency reimbursements, and recovers funds from previous years in order to stretch its available funds  As with many other Stafford Act disaster assistance grant programs (Public Assistance, Hazard Mitigation Grant assistance, Other Needs Assistance) the cost-share for FMAGs is based on a federal share of 75% of eligible expenses  The grantee (the state) and subgrantees (local communities) assume the remaining 25% of eligible costs  Under the FMAG process, FEMA reimburses grantees for eligible activities they have undertaken  The state application for specific grant funds must be submitted within 90 days after the FMAG is granted  That time frame permits the state to gather all information and supporting data on potentially eligible spending to include in their grant application package  The package must also stipulate that the fire cost threshold was met  Following submission of the grant application FEMA has 45 days to approve or deny the application  FMAG assistance is similar in some basic respects to other FEMA assistance  For example, FMAGs will not replicate or displace the work of other federal agencies, nor will FEMA pay straight-time salaries for public safety forces, though it will reimburse overtime expenses for the event  Other eligible expenses can include costs for equipment and supplies (less insurance proceeds); mobilization and demobilization; emergency work (evacuations and sheltering, police barricading and traffic control, arson investigation); prepositioning federal, out-of-state, and international resources for up to 21 days when approved by the FEMA Regional Administrator; personal comfort and safety items for firefighter health and safety; field camps and meals in lieu of per diem; and/or the mitigation, management, and control of declared fires burning on comingled federal land, when such costs are not reimbursable by another federal agency  Until recently, only major disaster declarations made statewide hazard mitigation grants available  Division D of P L  115-254 (Disaster Recovery Reform Act, hereinafter DRRA) amended the Stafford Act to make hazard mitigation available for FMAG declarations as well  Under Section 404 of the Stafford Act as amended by DRRA, mitigation grants from the Hazard Mitigation Grant Program (HMGP) are provided to states and tribes on a sliding scale based on the percentage of funds spent for FMAG assistance  For states and federally recognized tribes with a FEMA-approved Standard State or Tribal Mitigation Plan, the formula provides for up to 15% of the first $2 billion of estimated aggregate amounts of disaster assistance, up to 10% for amounts between $2 billion and $10 billion, and 7 5% for amounts between $10 billion and $35 333 billion  FEMA assistance through FMAGs is a direct relationship with the states to assist the state in fighting the fire on state lands  FMAGs are employed so a disaster declaration may not be necessary  The Forest Service and other federal agencies do provide other types of assistance related to wildfire management, such as postfire recovery assistance, or assistance planning and mitigating the potential risk from future wildfires  Most of these programs provide financial and technical assistance to state partners  In addition, other USDA agencies administer various other programs to provide disaster recovery assistance to nonfederal forest landowners, including the Emergency Forest Restoration Program and the Emergency Watershed Program  This depends on the type of assistance being provided by the Forest Service  FMAG assistance is not generally available in conjunction with emergency suppression assistance from the Forest Service, or any other federal agency engaged in suppression operations  FMAGs provide assistance for suppression operations on nonfederal lands, whereas suppression operations on federal lands are the responsibility of the federal agency with jurisdiction  Limited exceptions may occur for declared fires on lands in which the ownership is comingled federal and nonfederal, and the costs incurred by the eligible entity are not entitled to any other type of federal reimbursement  However, FMAGs may be provided in conjunction with other Forest Service assistance programs, such as any technical and financial assistance provided through the agency's state and volunteer fire assistance programs or state and private forestry office  FMAG and other federal assistance may potentially occur in conjunction when there is a cooperative agreement between federal, state, and other governmental or tribal partners to coordinate emergency wildfire protection and response activities  The cooperative agreement often delineates different geographic areas where the state government is responsible for initial suppression operations, regardless of land ownership, and vice versa, where the federal government may be responsible for providing suppression operations in lands under nonfederal ownership  The cooperative agreements (sometimes referred to as "fire compacts") specify how costs are to be apportioned among the partners, including provisions allowing for reimbursement, in accordance with applicable federal and state statutes  In the circumstance where a state (or other eligible entity) conducted suppression operations on federal land and the costs were not reimbursable, an FMAG may potentially be applied for and used to cover eligible costs  No, most fires that begin on federal land are the responsibility of the federal agency that owns or manages the land, and are not eligible to receive FMAG assistance  There are some exceptions, however  For example, FMAGs may be available to assist with declared fires that occur in areas with a mix of federal and nonfederal land, if the state has a responsibility for suppression activities under a cooperative agreement with the applicable federal agency, and those costs are not reimbursable under another federal statute 

ground_truth: Multiemployer plans are collectively bargained pension agreements often between labor unions and two or more employers. CSPF is one of the nation's largest multiemployer defined benefit pension plans, covering about 385,000 participants. Since 1982, the plan has operated under a court-enforceable consent decree which, among other things, requires that the plan's assets be managed by independent parties. Within 7 years, CSPF estimates that the plan's financial condition will require severe benefit cuts. GAO was asked to review the events and factors that led to the plan's critical financial status and how its investment outcomes compare to similar plans. GAO describes (1) what is known about the factors that contributed to CSPF's critical financial condition; (2) what has been CSPF's investment policy, and the process for setting and executing it, since the consent decree was established; and (3) how CSPF's investments have performed over time, particularly compared to similar pension plans. GAO reviewed relevant federal laws and regulations; interviewed CSPF representatives, International Brotherhood of Teamsters officials and members, federal officials, and knowledgeable industry stakeholders; reviewed CSPF documentation including investment policy statements and board of trustee meeting minutes; and analyzed investment returns and fees from required, annual pension plan filings and from consultant benchmarking reports. The Central States, Southeast and Southwest Areas Pension Fund (CSPF) was established in 1955 to provide pension benefits to trucking industry workers, and is one of the largest multiemployer plans. According to its regulatory filings, CSPF had less than half the estimated funds needed to cover plan liabilities in 1982 at the time it entered into a court-enforceable consent decree that provides for oversight of certain plan activities. Since then, CSPF has made some progress toward achieving its targeted level of funding; however, CSPF has never been more than 75 percent funded and its funding level has weakened since 2002, as shown in the figure below. Stakeholders GAO interviewed identified numerous factors that contributed to CSPF's financial condition. For example, stakeholders stated that changes within the trucking industry as well as a decline in union membership contributed to CSPF's inability to maintain a healthy contribution base. CSPF's active participants made up about 69 percent of all participants in 1982, but accounted for only 16 percent in 2016. The most dramatic change in active participants occurred in 2007 when the United Parcel Service, Inc. (UPS) withdrew from the plan. At that time, UPS accounted for about 30 percent of the plan's active participants (i.e. workers). In addition, the market declines of 2001 to 2002 and 2008 had a significant negative impact on the plan's long-term investment performance. Stakeholders noted that while each individual factor contributed to CSPF's critical financial condition, the interrelated nature of the factors also had a cumulative effect on the plan's financial condition. Both CSPF's investment policy and the process for setting and executing it have changed several times since the consent decree was established in 1982. The original consent decree gave an independent asset manager—called a named fiduciary—exclusive authority to set and change the plan's investment policies and manage plan assets, and prohibited CSPF trustees from managing assets or making investment decisions. Initially, the named fiduciaries sold the troubled real estate assets acquired during the pre-consent decree era. Subsequent changes include the following: In 1993, the named fiduciaries started to increase investment in equities, and their policies continued to direct that asset allocations be weighted toward equities until early 2017. Between 2003 and 2010, the court approved three plan decisions to move a total of 50 percent of CSPF's assets into passively-managed accounts (passive management typically seeks to match the performance of a specific market index and reduce investment fees). An early-2017 investment policy change precipitated by CSPF's deteriorating financial condition will continue to move plan assets into fixed income investments ahead of projected insolvency, or the date when CSPF is expected to have insufficient assets to pay promised benefits when due. As a result, assets will be gradually transitioned from “return-seeking assets”—such as equities and emerging markets debt—to high-quality investment grade debt and U.S. Treasury securities with intermediate and short-term maturities. The plan is projected to become insolvent on January 1, 2025. CSPF officials and named fiduciary representatives said these changes are intended to reduce the plan's exposure to market risk and volatility, and provide participants greater certainty prior to projected insolvency. GAO found that CSPF's investment returns and expenses were generally in line with similarly sized institutional investors and with demographically similar multiemployer pension plans. For example, GAO's analysis of returns using the peer group measure used by CSPF known as the Wilshire Associates' Trust Universe Comparison Service (TUCS), showed that CSPF's annual investment returns since 1995 were above the median about as many times as they were below. Similarly, comparing CSPF's returns to a peer group of similar multiemployer defined benefit plans using federally required annual reports found that CSPF's annual investment returns were in line with those of its peers. Specifically, CSPF's annual returns were above the median nine times and below it six times—and CSPF's overall (dollar-weighted) average annual return from 2000 through 2014 was close to that of the peer median average return of 4.8 percent. In addition, GAO found that CSPF's investment fees and other administrative expenses have also been in line with other large multiemployer plans. For example: CSPF's investment fees as a percentage of assets were about 9 percent lower than the median of large defined benefit multiemployer plans over the 2000 through 2014 period—though much of that difference is accounted for by a relative reduction in investment fees since 2007. CSPF's investment fees as a percentage of assets were, on average, about 34 basis points (or 0.34 percent). CSPF's administrative expenses related to the day-to-day operations of the plan have also been in line with other large multiemployer plans. CSPF's administrative expenses per participant were below the median for large defined benefit multiemployer plans for 12 of the 15 years over the 2000 through 2014 period. As of 2014, CSPF's administrative expense was $98 per participant, which is about 16 percent less than the median for large defined benefit multiemployer plans. GAO is not making recommendations in this report.