United States General Accounting Office

GAO Report to Congressional Committees

April 1998 U.S. COAST GUARD

Use of DOD Funds for

National Security

Functions

GAO/NSIAD-98-110

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-279369 

April 15, 1998

Congressional Committees

The Fiscal Year 1997 Department of Defense (DOD) Appropriations Act

(P.L. 104-208) made $300 million available for transfer from DOD to the

Coast Guard. The National Defense Authorization Act for Fiscal Year 1997

(P.L. 104-201) required these transferred funds to be used only for the

Coast Guard’s performance of national security functions in support of

DOD. This authorization act required us to review the use of the fiscal year

1997 transferred funds to verify that the transferred funds were used only

for the performance of national security functions in support of DOD.

We determined whether the transfer of the DOD funds to the Coast Guard

in fiscal year 1997 was made is in accordance with the legislative

provisions and examined the Coast Guard’s expected use of the

transferred funds for fiscal year 1997 and the Coast Guard’s actual

expenditure of them for national security functions in fiscal year 1997.

Results in Brief The $300 million was transferred to the Coast Guard in compliance with

the statutorily required certification by the Secretary of Transportation

and the Secretary of Defense that those funds would be used only for the

performance of national security functions. The funds were transferred to

the operating expense account from which all Coast Guard programs and

activities are paid. Since the Coast Guard’s operating expense account is

not set up to distinguish between national security expenses and civilian

expenses, it is not possible to precisely identify how the transferred funds

were used.

The Coast Guard estimated that it would spend approximately

$324 million in fiscal year 1997 for four selected national security

functions in support of DOD. These functions included defense readiness,

domestic support of ports and waterways, specific functions spelled out in

a memorandum of agreement with DOD, and support of commanders in

chief operation plans. These functions appear to be appropriately

designated as national security functions in support of DOD. The Coast

Guard also identified other substantial national security expenses in the

areas of military personnel and assets that are not included in their

estimated expenses. In addition, $320 million was planned for drug

interdiction, which the Coast Guard currently considers to be a national

security function in support of DOD.

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In fiscal year 1997, the Coast Guard spent approximately $254 million of

the $324 million budgeted for the above four national security functions.

The Coast Guard stated that it spent less than expected in the four

categories because of a shift in mission priorities to drug interdiction.

Drug interdiction expenses totaled $472 million for fiscal year 1997,

exceeding the $320 million budgeted. Combining the four national security

functions with drug interdiction yields $726 million, which is more than

the $300 million received from DOD.

Background The Coast Guard, as established by title 14 of the U.S. Code, is a branch of

the U.S. armed forces. The Coast Guard is a service in the Department of

Transportation (DOT), except when operating as a service in the Navy. The

Coast Guard’s role as a service in the Navy is limited to wartime or by

presidential direction. Coast Guard personnel are trained as military

personnel. For example, Coast Guard pilots attend the Naval Flight School

at Pensacola, Florida. The Coast Guard’s normal maritime missions

include conducting search and rescue operations; providing port security;

protecting the marine environment; enforcing fisheries, immigration, and

drug laws; facilitating the safe navigation of vessels through U.S. waters;

and maintaining defense readiness. Some of these functions have both

civilian and defense implications.

The Coast Guard considers that its national security functions include

training and participating in exercises with DOD components to achieve

defense readiness, providing domestic support in the form of repairing and

maintaining aids to navigation on strategic waterways and providing port

safety and security at strategic ports, supporting the theater commanders

in chief operation plans, and participating in drug interdiction efforts.

The Navy and the Coast Guard Board was formed in 1980 to provide

high-level coordination and make recommendations on major policy

issues, such as naval warfare capabilities, doctrine, and objectives. In

1992, a formal working group was chartered by the Board to define Coast

Guard national defense roles, missions, and functions. This group

recommended that maritime interception operations, deployed/foreign

port control, and environmental defense operations be added to the above

Coast Guard’s national security functions. An October 3, 1995,

Memorandum of Agreement signed by representatives of DOD and DOT

formalized the working group’s recommendation.

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In addition, the Senate Committee on Armed Services report on the

National Defense Authorization Act of 1997 includes drug interdiction as a

national security function. That report stated that the DOD transfer

payment should be used for “the national security functions of the Coast

Guard, including its support of the DOD counter-narcotics program.”

DOD Transfer

Payment

Since fiscal year 1982, Congress has annually authorized DOD funds to be

transferred to the Coast Guard to help fund defense activities.1

 The fiscal

year 1997 DOD Appropriations Act made $300 million of DOD’s funds

available for transfer to the Coast Guard. For the first time, language in the

authorization act (P.L. 104-201) attached specific conditions and

limitations to the use of these funds. Section 1007(a) of the act required

these transferred funds to be used only for the performance of national

security functions in support of DOD. In addition, the funds were not to be

transferred until the Secretary of Defense and the Secretary of

Transportation jointly certified that the funds would be used only in

accordance with this limitation.

The Secretary of Transportation and the Secretary of Defense made the

required certification to the President of the Senate and the Speaker of the

House on December 13, 1996. The transfer of funds was authorized on

February 14, 1997, and the funds were transferred to the Coast Guard’s

operating expense account,2

 from which all its programs and activities are

paid. Coast Guard officials responsible for managing the operating

expense account stated that once the funds become an indistinguishable

part of this account, expenses likewise are not able to be tracked by

civilian or military purpose. Thus, it is not possible to precisely identify

how the specific $300 million was used.

Expected National

Security Expenses of

the Coast Guard

Exceed $300 Million

The Coast Guard planned specific expenditures totaling approximately

$324 million in four national security functions for fiscal year 1997:

(1) Defense Readiness: Maintaining and exercising readiness to operate

with DOD, including military training for operational units, joint exercises

with the DOD, 100 liaison positions with DOD, and joint operations.

1

Coast Guard activities are principally funded by annual appropriations through DOT. In fiscal

year 1997, this amounted to $3.4 billion. Lesser amounts are received from other sources, including

user fees such as the Marine Safety Program.

2

The $300 million transfer payment was offset by a charge of $282,000, levied by section 8138 of the

DOD Appropriation Act. The charge was the Coast Guard’s cost for force protection from terrorism.

The net sum of $299.718 million was the actual amount transferred to the Coast Guard.

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B-279369 

(2) Domestic Support: Maintaining aids to navigation and port safety and

security missions focusing on the 124 domestic waterways and 13 strategic

ports designated as “militarily critical.”

(3) Missions Specified in Memorandum of Agreement Annexes:

Performing the missions of maritime interception operations in support of

sanctions against another nation or group of nations; environmental

defense operations where the Coast Guard responds to environmental

disasters overseas that could disrupt military actions; and deployed port

operations, security and defense in support of DOD commanders in chief.

(4) Support for Commanders in Chief Operation Plans: Operating and

maintaining Coast Guard assets for use under DOD plans for two regional

conflicts that may occur simultaneously.

These functions appear to be appropriately designated as national security

functions in support of DOD.

Beyond the $324 million expected to be spent for the four functions listed,

$320 million was budgeted for drug interdiction. The Senate Committee on

Armed Services Report on the Defense Authorization Act for Fiscal

Year 1997 stated that the DOD transfer payment should be used for “the

national security functions of the Coast Guard, including its support of the

DOD counter-narcotics program.” On the basis of the senate report’s

language, the Coast Guard currently considers its drug interdiction

activities as a national security function in support of DOD.

Use of Funds in Fiscal

Year 1997

We reviewed total Coast Guard fiscal year 1997 operating expenditures for

the designated national security functions and determined that we could

not isolate all expenditures to support national security functions. Since

some functions provide both national security and civilian benefit, the

Coast Guard had to estimate the amount of those functions that could be

attributed to national security. For example, since the militarily critical

aids to navigation make up about 22 percent of all the aids to navigation

that the Coast Guard maintains, 22 percent of the aids to navigation

program is estimated to be in support of DOD. Likewise, the 13 strategic

ports form 27 percent of all ports covered by the Coast Guard. Thus,

27 percent of the domestic port safety and security program is attributable

to DOD support costs.

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Using this methodology, the Coast Guard estimated that it spent

$726 million for the designated national security functions in fiscal

year 1997 contrasted to $594 million in 1996 (see table 1). The fiscal

year 1997 expenditures include approximately $254 million for the four

designated categories outlined above and $472 million for drug

interdiction. This is compared with $292 million and $302 million for the

four categories and drug interdiction in 1996.

Table 1: Estimated Coast Guard

Expenditures for Operating Expenses

in Support of National Security for

Fiscal Years 1996 and 1997

Dollars in millions

National security function

FY 1996

expenditures

FY 1997

budgeted

FY 1997

expenditures

Defense readiness $68.186 $88.426 $34.813

Domestic support

Aids to navigation 99.630a 102.602 95.604a

Port safety 23.312a 24.746 18.003a

Port security 0.869a 2.406 2.307a

DOD Memorandum of Agreement

Port security units 2.036 6.330 4.834

Environmental defense strike teams 11.288 10.092 16.453

Maritime interception 9.080b 9.344 2.248b

Support commanders in chief operation

plans 77.535b 80.309 79.946b

Subtotal $291.936 $324.255 $254.208

Drug interdiction 302.298 319.737 471.741

Total $594.234 $643.992 $725.949

aEstimates based on Coast Guard’s allocation of expenses between national security and civilian

functions.

bAmounts estimated because not all assets are cost centers in the Coast Guard’s accounting

system.

Source: U.S. Coast Guard.

The Coast Guard states that it has taken a conservative approach in

defining the preceding categories as national security related. Although

not included in the table, Coast Guard officials believe that some portion

of other budget items, such as military personnel costs and the cost of

operating and maintaining aircraft and cutters (its “ready force in being”),

should also be considered as national security related.

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Agency Comments We provided a draft of this report for review to the Coast Guard, DOT, and

DOD, and they had no comments.

Scope and

Methodology

To identify the amount of fiscal year 1997 funds that DOD transferred to the

Coast Guard for use in national security functions, we interviewed Coast

Guard and DOD officials and reviewed financial documents. To identify the

limitations placed upon the Coast Guard and DOD concerning the

availability and use of the funds, we reviewed the appropriations and

authorization legislation and interviewed Coast Guard and DOD officials.

To analyze how the Coast Guard budgeted and spent fiscal year 1997 funds

for support of national security functions, we examined the Coast Guard’s

budget and financial documents and verified the allocation methods. Since

the expenditures that the Coast Guard provided are a combination of

actual and allocations of actual costs, figures representing total costs are

not precise.

We conducted this review from June 1997 to February 1998 in accordance

with generally accepted government auditing standards.

We are sending copies of this report to the Secretaries of Defense and

Transportation, the Commandant of the Coast Guard, the Director of the

Office of Management and Budget, and other appropriate congressional

committees. We will make copies available to others upon request.

If you should have any questions, please contact me on (202) 512-5140 or

my Assistant Director, Mr. William Meredith, on (202) 512-4275. Other

major contributors to this report are listed in appendix I.

Mark E. Gebicke

Director, Military Operations

 and Capabilities Issues

Page 6 GAO/NSIAD-98-110 National Security Functions
B-279369 

List of Congressional Committees

The Honorable Strom Thurmond

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable John McCain

Chairman

The Honorable Ernest Hollings

Ranking Minority Member

Committee on Commerce, Science, and Transportation

United States Senate

The Honorable Ted Stevens

Chairman

The Honorable Daniel K. Inouye

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Richard C. Shelby

Chairman

The Honorable Frank R. Lautenberg

Ranking Minority Member

Subcommittee on Transportation

Committee on Appropriations

United States Senate

The Honorable Floyd C. Spence

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on National Security

House of Representatives

Page 7 GAO/NSIAD-98-110 National Security Functions
B-279369 

The Honorable Bud Shuster

Chairman

The Honorable James L. Oberstar

Ranking Minority Member

Committee on Transportation and Infrastructure

House of Representatives

The Honorable C. W. Bill Young

Chairman

The Honorable John P. Murtha

Ranking Minority Member

Subcommittee on National Security

Committee on Appropriations

House of Representatives

The Honorable Frank R. Wolf

Chairman

The Honorable Martin Olav Sabo

Ranking Minority Member

Subcommittee on Transportation and Related Agencies

Committee on Appropriations

House of Representatives

Page 8 GAO/NSIAD-98-110 National Security Functions
Page 9 GAO/NSIAD-98-110 National Security Functions
Appendix I 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Carol Schuster

William Meredith

Jane Trahan

Mae Jones

Jay Willer

Office of the General

Counsel

Maureen Murphy

(703204) Page 10 GAO/NSIAD-98-110 National Security Functions
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