United States General Accounting Office

GAO Report to the Chairman and Ranking

Minority Member, Subcommittee on

Defense, Committee on Appropriations

U.S. Senate

May 1998 DOD CONSULTING

SERVICES

Erroneous Accounting

and Reporting of Costs

GAO/NSIAD-98-136

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-277895 

May 18, 1998

The Honorable Ted Stevens

Chairman

The Honorable Daniel K. Inouye

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

Long-standing congressional concerns exist regarding the accuracy and

reliability of costs reported by the Department of Defense (DOD) for

consulting services, also known as advisory and assistance services. In an

earlier report, we noted that while the President’s budget had reported DOD

expenditures of $3 billion for these services, we had identified $12 billion

of DOD expenditures that could be advisory and assistance services.1

 This

report responds to your request for additional information on DOD’s

underreporting of advisory and assistance services costs and whether

costs for these services may be included in a miscellaneous budget

category. You also asked that we provide you a summary of previous audit

reports and studies on DOD’s reporting of these costs.

Background Congress enacted legislation requiring that the Office of Management and

Budget (OMB) establish a separate object class for reporting actual and

planned obligations for advisory and assistance services.2, 3

 Congress

mandated that the separate advisory and assistance services object class

include three categories of services: (1) management and professional

support services; (2) studies, analyses, and evaluations; and

(3) engineering and technical services.4

 To implement this congressional

mandate, OMB established object class 25.1 and included definitions for

each of the three categories. As seen in figure 1, there are also other object

classes for reporting service contracts’ costs, including object classes for

1

Defense Advisory and Assistance Service Contracts (GAO/NSIAD 97-166R, June 13, 1997).

2

The object classification structure is one of several ways to present financial data in budgetary

presentations and is used to report obligations for each government account according to the nature of

the services or articles acquired.

3

In 1992, section 512 of P.L. 102-394 directed that OMB create a new object class for reporting actual

and planned obligations for advisory and assistance services. This provision was to become effective

beginning in fiscal year 1994. In 1994, the Federal Acquisition Streamlining Act (FASA), section 2454,

put into law the three categories to be included in the advisory and assistance services object class and

also included three exemptions.

4

31 U.S.C. 1105 (g).

Page 1 GAO/NSIAD-98-136 DOD Consulting Services
B-277895 

research and development contracts and interagency transactions. OMB

retained object class 25.2 for other or miscellaneous services. OMB

describes other services as those services that are not otherwise classified.

In fiscal year 1996, DOD reported a total of $96 billion in contractual

services (object class series 25), including $47 billion for miscellaneous

contract services (object class 25.2) and about $3 billion for advisory and

assistance services (object class 25.1).

Figure 1: DOD’s Other Contractual

Services: Object Class Series 25 Fiscal

Year 1996 Obligations (dollars in

billions)

Total: $96 billion

Other services/miscellaneous $47

Advisory and assistance services $3

a Various $6

b Interagency transactions $22

Research and development $18

aIncludes various other categories such as operation and maintenance of facilities and equipment

and medical care.

bPurchases from government accounts.

Source: Federal Budget, fiscal year 1998.

To implement these special reporting requirements, DOD developed

enhanced management and oversight guidance for advisory and assistance

services. For example, DOD’s directive for acquiring and managing such

services requires the appointment of a DOD advisory and assistance

services director to provide (1) coordination with other DOD functional

areas and (2) guidance for the identification, acquisition, management, and

use of these services. In addition, the head of each DOD component is to

designate its own advisory and assistance services director responsible for

Page 2 GAO/NSIAD-98-136 DOD Consulting Services
B-277895 

ensuring proper identification, accounting, and reporting of these services.

Furthermore, each proposed contract action for these services must

undergo close scrutiny and be planned and justified by senior officials.5

 To

implement DOD’s guidance, each service has issued detailed regulations to

manage and control these services.

Results in Brief DOD’s directives and instructions require increased scrutiny of advisory

and assistance services and affirm the need for enhanced management and

oversight of these services. Despite DOD’s guidance to properly identify and

report advisory and assistance services costs, our analysis of selected

contract actions shows that costs for these services are being reported as

miscellaneous contract services. A limited analysis of costs included in the

Army’s miscellaneous budget category showed that some advisory and

assistance costs were erroneously shown as miscellaneous costs. Army

officials agreed that these costs should have been recorded as advisory

and assistance services costs. The Navy’s and the Air Force’s accounting

systems did not have the capability of generating information on contracts

included in the miscellaneous budget category. However, discussions with

Navy officials and prior Air Force audits indicate similar underreporting

concerns. DOD officials also indicated that there is a tendency to report

costs for these services in the miscellaneous category to avoid the closer

scrutiny and spending limitations on contract services identified as

advisory and assistance services.

DOD-wide problems with the management of advisory and assistance

services, including accurate identification and reporting of costs, have

been documented since 1985.6

 Despite congressional action requiring

detailed reporting of advisory and assistance services costs,7

 problems

continue. Officials in the DOD Comptroller’s office stated that there is no

incentive for accurate reporting of advisory and assistance services costs

due to past congressional funding cuts in this area.

5

The DOD directive requires that each component maintain an advisory and assistance services

management plan that includes a summary of planned actions and dollars for each of the three

categories.

6

Appendix I provides information on selected previous audits of DOD advisory and assistance services.

7

31 U.S.C. 1105 (g).

Page 3 GAO/NSIAD-98-136 DOD Consulting Services
B-277895 

Advisory and

Assistance Costs Are

Erroneously Included

in Miscellaneous

Budget Category

Advisory and assistance services costs are being included in a

miscellaneous budget category, but there was insufficient descriptive

information in the Army, the Navy, and the Air Force accounting systems

for us to determine the full amount of advisory and assistance services

costs reported as miscellaneous costs. Such a determination could only be

made by reviewing each individual contract file. The Army’s accounting

system uses codes to classify the types of services acquired, but this

system, as used, provides only limited information. For example, in fiscal

year 1996, the Army Materiel Command (AMC) reported $1.1 billion in

miscellaneous services and $130.5 million in advisory and assistance

services, but little descriptive information on the $1.1 billion in

miscellaneous services was provided (see app. II). At our request, AMC

identified specific contract actions associated with the costs included in

the miscellaneous category. As a result, we were able to review selected

AMC contract actions. This review showed that obligations for advisory and

assistance services were being reported as miscellaneous contract

services, thereby avoiding the scrutiny and administrative controls

associated with advisory and assistance services. We could not make an

accurate and reliable estimate of the total advisory and assistance services

included in the $47 billion reported as miscellaneous services, in part,

because DOD’s accounting system provided little descriptive information

on miscellaneous services.

Our review of 21 contract actions at AMC revealed that 16 were erroneously

classified as other or miscellaneous services when a more appropriate

classification code should have been selected. The misclassified contract

actions totaled $12.3 million, of which approximately $11.6 million was

erroneously identified and coded as other or miscellaneous services

instead of advisory and assistance services. These miscellaneous services

included advisory and assistance services, such as technical assistance to

develop market strategies and to support engineering and business

planning functions. We asked AMC personnel to reassess the coding of

these contract actions and, after careful review, the officials agreed with

our findings. Appendix II provides more detailed information on the

Army’s contract file review.

We found that the Navy’s accounting system does not have the capability

to generate information on the types of services included in the

miscellaneous category and on contracts associated with that category.

Also, each naval command maintains a different accounting and

classification system for such costs. In a March 1996 report, we noted that

although the Navy’s finance and accounting system used expense element

Page 4 GAO/NSIAD-98-136 DOD Consulting Services
B-277895 

codes to record transactions, a large number of the transactions analyzed

did not have expense element codes or the recorded codes were invalid.8

Furthermore, our interviews with officials at two major naval commands

revealed that different management interpretations of advisory and

assistance services definitions could result in underreporting of costs for

such services. For example, in the Naval Sea Systems Command (NAVSEA),

the Comptroller’s office uses a management approach to identify and

report advisory and assistance services that, in our view, is inconsistent

with OMB’s definitions. Officials told us that definitions for advisory and

assistance services contracts are read in the context of potential

management concerns. Thus, services for engineering and technical

support would be identified as advisory and assistance services only when

the nature of the task raises management concerns. One such concern

would be placing the contractor in a situation where there is a perceived

“risk” of influencing government decision-making.

We requested information from the Air Force Comptroller’s office on the

types of services included in the miscellaneous category, but we were

informed that this information could only be obtained with extensive base

level research into each individual contract. We, therefore, did not conduct

any additional work at the Air Force. However, as discussed later, several

recent Air Force Audit Agency reports have discussed problems with

accurate identification and reporting of advisory and assistance services

costs.

Underreporting of

Advisory and

Assistance Services

Costs Is a

Long-Standing

Concern

There are long-standing concerns about DOD’s accuracy, reliability, and

underreporting of costs associated with advisory and assistance services.

Since 1985, over 30 reports have identified problems with DOD’s

management and reporting of these services, including (1) inadequate

accounting systems to identify advisory and assistance services

expenditures, (2) inaccurate reporting of advisory and assistance services

expenditures, (3) improper justification of advisory and assistance

services contracts, and (4) improper use or administration of advisory and

assistance services contracts. For example, the DOD Inspector General has

issued several reports outlining difficulties with accurate reporting of

advisory and assistance services expenditures. One report estimated that

$4 billion to $9 billion in advisory and assistance services costs was

8

CFO Act Financial Audits: Increased Attention Must be Given to Preparing Navy’s Financial Reports

(GAO/AIMD-96-7, Mar. 27, 1996). In February 1997, the Navy started to implement the OMB object

class system in its Standard Accounting and Reporting System. Prior to that date, each command used

different codes and there was no way to associate accounting data with object classification data.

Page 5 GAO/NSIAD-98-136 DOD Consulting Services
B-277895 

underreported in fiscal year 1987.9 This underreporting was attributed, in

part, to unclear terminology. Other reasons included difficulties with the

finance and accounting systems; lack of consistency in identifying,

recording, and reporting advisory and assistance services costs; and

opportunities for flexible interpretation of definitions. Air Force, Army,

and Navy organizations have also performed various audits. For example,

the Air Force Audit Agency has issued nine audit reports since 1991

dealing with advisory and assistance services contracting issues, including

inaccurate reporting of costs for such services. One recent Air Force Audit

Agency report identified weaknesses in the Air Force’s accounting systems

that limited the collection of advisory and assistance services costs at

laboratory and test centers.10 (See app. I for a list of these reports and

related findings.)

Governmentwide reports on advisory and assistance services were issued

by the President’s Council on Integrity and Efficiency and OMB’s Office of

Federal Procurement Policy. For example, one of these reports

summarized the results of audits made by 21 Inspectors General to fulfill

the requirement for an annual evaluation of the progress made in

establishing effective management controls and improving the accuracy

and completeness of advisory and assistance services data in the Federal

Procurement Data System.11 The report stated that the management and

oversight of advisory and assistance services were long-standing problems

and that improvements were needed in the accuracy and completeness of

reporting of advisory and assistance services.

DOD Cites Disincentives to

Accurate Cost Reporting

DOD’s directives and regulations require increased scrutiny of advisory and

assistance services and affirm the need for enhanced management and

oversight, yet problems continue. In part, DOD officials attribute this

situation to remaining ambiguities on how to interpret advisory and

assistance services definitions.12 DOD officials believe that problems with

inaccurate identification of advisory and assistance services continue

because the enhanced scrutiny and management controls have, in effect,

9

Audit Report, Office of the Inspector General, Department of Defense: DOD Reporting and Controls

for Contracted Support Services, Report No. 95-295, Aug. 21, 1995.

10Air Force Audit Agency Report of Audit: Laboratory and Test Center Advisory and Assistance

Services, Project 96064034, Aug. 28, 1997.

11President’s Council on Integrity and Efficiency: Summary Report on Audits of Contracted Advisory

and Assistance Services Conducted During FY 1989 in Compliance with United States Code, Title 31,

Jan. 1990.

12Varying interpretations of what constitutes advisory and assistance services was the matter at issue

in the bid protest resolved in the Matter of: Nations Inc., B-272455, 96-2 CPD 170, Nov. 5, 1996.

Page 6 GAO/NSIAD-98-136 DOD Consulting Services
B-277895 

become a disincentive to accurately identifying these services, particularly

when alternatives exist. For example, while a contract identified as

advisory and assistance services has to undergo substantial management

and administrative oversight, contracts identified as “other services” do

not require such scrutiny.

DOD officials also suggested that congressional funding cuts for advisory

and assistance services are the most powerful disincentive to accurately

identifying and reporting these costs. DOD officials pointed out that in

fiscal year 1998 the defense appropriations act reduced advisory and

assistance services funding by $300 million and that in the previous year

Congress reduced advisory and assistance services funding by

$102.3 million.13

Agency Comments In commenting on our draft report, DOD had no overall objections to its

content but did offer some additional perspectives. DOD’s comments are

contained in appendix III. DOD stated that given its increased emphasis on

competition of noninherently governmental functions for potential

outsourcing to private industry, advisory and assistance services will likely

increase markedly over the next few years. However, DOD sees little reason

to continue to report expenditures for these services in a separate budget

account. The issues raised in our report as well as the continued interest

of several congressional committees led us to an opposite perspective than

that reached by DOD and we do not endorse the elimination of a separate

budget account for these expenditures. DOD suggested that we expand the

historical background leading to the 1994 FASA requirement for a separate

object class. We have annotated the report to provide an additional legal

citation.

We agree with DOD’s comment that until 1997 the Navy’s accounting

system did not generate OMB object class information and the draft report

provided that information. We do not agree with DOD’s view that NAVSEA

reports advisory and assistance services in a manner consistent with OMB’s

object class definitions. As stated in our draft report, NAVSEA officials’

views are that a consideration of management risk determines the nature

of (and subsequent accounting for) advisory and assistance services. We

find nothing in the specific language of either 31 U.S.C. 1105(g) or the OMB

circular’s object class 25.1 descriptions of what are and are not advisory

and assistance services that supports NAVSEA’s position. Management risk

13Public Law 105-56, section 8041, 111 Stat. 1230 and Public Law 104-208, section 8037, 110 Stat.

3009-96.

Page 7 GAO/NSIAD-98-136 DOD Consulting Services
B-277895 

is undoubtedly a significant consideration in contract management. In the

arena of accounting, however, it introduces a subjective factor that

compromises the attempt to capture the costs associated with defined

categories of advisory and assistance services.

Scope and

Methodology

To analyze DOD obligations for contractual services in general, we analyzed

OMB data for fiscal year 1996.14 To obtain information on what types of

services are being reported as other services (object class 25.2), we

contacted each of the military services to determine what information was

available in their databases. Data were not available from the Navy’s and

Air Force’s accounting systems, but limited data were available from the

Army’s finance and accounting system regarding obligations reported as

other services. Thus, we visited AMC and analyzed available data from the

finance and accounting system15 and reviewed contract actions at one of

its subordinate commands, the Army Research Laboratory in Adelphi,

Maryland. At the laboratory, we judgmentally selected 21 contract actions

to review that were classified as other services. As part of our

methodology, we asked laboratory personnel to review 16 actions that we

thought were not correctly classified as other services. After a careful

review of the contracts by both budget and procurement personnel, the

officials concluded that in each case there were alternatives to the “other”

category that more appropriately described the nature and type of services

purchased. Eleven of the 16 contract actions should have been classified

as advisory and assistance services instead of other services.

To determine the reasons for underreporting of advisory and assistance

services, we identified and reviewed selected prior audit reports by the

DOD Inspector General, the Air Force Audit Agency, and the Army Audit

Agency, the Center for Naval Analysis, the President’s Council on Integrity

and Efficiency, and OMB’s Office of Federal Procurement Policy. We also

met with DOD, Army, Navy, Air Force, and Defense Logistics Agency

officials with responsibility for managing and reporting advisory and

assistance services. We contacted OMB officials regarding the advisory and

assistance services budget exhibit to Congress and object class reporting.

14As part of their annual budget submissions to OMB, departments and agencies are required to report

actual and planned obligations. OMB collects and processes this information through the MAX budget

system, which is used to prepare the President’s annual budget request. We extracted and accumulated

DOD data and aggregated these data into object class 25 series subcategories. We did not verify the

data submitted by DOD to OMB.

15The data provided by the Army and AMC were extracted from the defense finance and accounting

system, which uses four-digit identification codes to identify the resources being used. The first and

second positions are usually related to an OMB object classification. We did not verify the data

submitted by the Army and AMC.

Page 8 GAO/NSIAD-98-136 DOD Consulting Services
B-277895 

We discussed underreporting issues with DOD’s advisory and assistance

services director and explored options for improving advisory and

assistance services cost reporting with DOD’s Assistant Deputy Comptroller

and other officials. We conducted our review from June 1997 to

March 1998 in accordance with generally accepted government audit

standards.

We are sending copies of this report to the Chairmen and Ranking

Minority Members of the Subcommittee on National Security, House

Committee on Appropriations, and to the House Committee on National

Security and the Senate Committee on Armed Services; the Director,

Office of Management and Budget; and the Secretary of Defense. We will

also provide copies to others on request.

Please contact me at (202) 512-4841 or Ralph Dawn, Assistant Director, if

you or your staffs have any questions concerning this report. Other

contributors to this report were Gretchen Bornhop, M. Cristina Gobin, and

Benjamin Mannen.

David E. Cooper

Associate Director, Defense Acquisitions Issues

Page 9 GAO/NSIAD-98-136 DOD Consulting Services
Contents

Letter 1

Appendix I 

Selected Reports

About Advisory and

Assistance Services

Management and

Reporting Problems

12

Appendix II 

Army Contract Files

Review

15

Appendix III 

Comments From the

Department of

Defense

17

Figures Figure 1: DOD’s Other Contractual Services: Object Class Series

25 Fiscal Year 1996 Obligations

2

Figure II.1: Army Materiel Command: Object Class 25.2 Fiscal

Year 1996 Obligations

15

Abbreviations

AMC Army Material Command

DOD Department of Defense

FASA Federal Acquisition and Streamlining Act

NAVSEA Naval Sea Systems Command

OMB Office of Management and Budget

Page 10 GAO/NSIAD-98-136 DOD Consulting Services
Page 11 GAO/NSIAD-98-136 DOD Consulting Services
Appendix I 

Selected Reports About Advisory and

Assistance Services Management and

Reporting Problems

Date Report title Selected findings

10/31/97 Inspectors General: Concerns About Advisory and

Assistance Service Contracts (GAO/T-OSI/ 

AIMD-98-28)

Improper use of other than full and open competition

08/28/97 Report of Audit, Laboratory and Test Center

Advisory and Assistance Services (Air Force Audit

Agency Project 96064034)

(1) Inadequate accounting systems to identify

advisory and assistance services expenditures

(2) Inaccurate reporting of advisory and assistance

services

06/13/97 Defense Advisory and Assistance Service Contracts

(GAO/NSIAD-97-166R)

Inaccurate reporting of advisory and assistance

services

11/26/96 Management Advisory Services, Research,

Development, Test and Evaluation Manpower

Review, Kirtland AFB NM (Air Force Audit Agency

Project 96411026)

Inaccurate reporting of advisory and assistance

services

03/19/96 Project Manager Core Support Contracts (Army

Audit Agency Report AA 96-140)

(1) Improper justification of advisory and assistance

services contracts

(2) Improper use of other than full and open

competition

01/05/96 Acquisition Management Staffing at the Ballistic

Missile Defense Organization (DOD Inspector

General Report 96-056)

Improper use of or administration of advisory and

assistance services contracts

08/21/95 DOD Reporting and Controls for Contracted Support

Services (DOD Inspector General Report 95-295)

(1) Improper justification of advisory and assistance

services contracts

(2) Inaccurate reporting of advisory and assistance

services

04/03/95 Pricing Orders for Contracted Advisory and

Assistance Services, Space and Missile Systems

Center, Los Angeles AFB, CA (Air Force Audit

Agency Project 41295013)

Improper use or administration of advisory and

assistance services contracts

12/30/94 Cost-Effectiveness of Contracting for Services (DOD

Inspector General Report 95-063)

Improper justification of advisory and assistance

services contracts

12/16/94 Pricing Orders for Contracted Advisory and

Assistance Services (CAAS), Aeronautical Systems

Center (ASC), Wright-Paterson AFB, OH (Air Force

Audit Agency Report 44595014)

Improper use or administration of advisory and

assistance services contracts

06/09/94 Cost-Effectiveness of Contracted Advisory and

Assistance Services at Space and Missile Systems

Center (Air Force Audit Agency Project 94064002)

Improper justification of advisory and assistance

services contracts

05/27/94 Procurement of Support Services by the Air Force

Electronic Systems Center, Hansom Air Force Base,

Massachusetts (DOD Inspector General Report

94-112)

(1) Improper justification of advisory and assistance

services contracts

(2) Inaccurate reporting of advisory and assistance

services

04/08/94 “Super” Scientific, Engineering, and Technical

Assistance Contracts at the Ballistic Missile Defense

Organization (DOD Inspector General Report 94-077)

Improper justification of advisory and assistance

services contracts

03/10/94 Government Contractors: Measuring Costs of

Service Contractors Versus Federal Employees

(GAO/GGD-94-95)

Improved guidance needed

(continued)

Page 12 GAO/NSIAD-98-136 DOD Consulting Services
Appendix I 

Selected Reports About Advisory and

Assistance Services Management and

Reporting Problems

Date Report title Selected findings

01/27/94 Price Reasonableness of Contracted Advisory and

Assistance Services, Space and Missile Systems

Center, Los Angeles AFB, CA (Air Force Audit

Agency Report 41294006)

Improper justification of advisory and assistance

services contracts

1/94 Summary Report of Agencies’ Service Contracting

Practices (OMB, Office of Federal Procurement

Policy)

Improved guidance needed

08/17/92 Selected Service Contracts at Wright-Paterson Air

Force Base (DOD Inspector General Report 92-128)

Improper justification of advisory and assistance

services contracts

08/07/92 Review of Contracting for Advisory and Assistance

Services (CAAS), Warner Robins Air Logistics

Center, Robins AFB, GA (Air Force Audit Agency

Report 91425101)

(1) Improper use of other than full and open

competition

(2) Inaccurate reporting of advisory and assistance

services

06/04/92 Contracting for Advisory and Assistance Services

(Air Force Audit Agency Project 91064041)

(1) Improper justification of advisory and assistance

services contracts

(2) Inaccurate reporting of advisory and assistance

services

12/16/91 Contracting for Advisory and Assistance Services,

Aeronautical Systems Division (ASD),

Wright-Paterson AFB, OH (Air Force Audit Agency

Report 91445053)

(1) Inaccurate reporting of advisory and assistance

services

(2) Improper use or administration of advisory and

assistance services contracts

10/30/91 Consulting Services (DOD Inspector General Report

92-010)

Inaccurate reporting of advisory and assistance

services

08/22/91 Consulting Services Contracts for Operational Test

and Evaluation (DOD Inspector General Report

91-115)

Improper justification of advisory and assistance

services contracts

05/08/91 Consulting Services: Contract Obligations for Fiscal

Years 1987, 1988, and 1989 (GAO/GGD-91-62FS)

Inaccurate reporting of advisory and assistance

services

02/01/91 Contracted Advisory and Assistance Services

Contracts (DOD Inspector General Report 91-041)

(1) Improper justification of advisory and assistance

services contracts

(2) Inaccurate reporting of advisory and assistance

services

08/20/90 Consulting Services: Role and Use in Acquiring

Three Weapon Systems (GAO/NSIAD-90-119)

Inaccurate reporting of advisory and assistance

services

1/90 Summary Report on Audits of Contracted Advisory

and Assistance Services Conducted During FY 1989

in Compliance with United State Code, Title 31

(President’s Council on Integrity and Efficiency)

Inaccurate reporting of advisory and assistance

services

06/07/89 Use of Consulting Services in Defense Acquisition

(GAO/T-NSIAD-89-36)

Inaccurate reporting of advisory and assistance

services

9/88 Report on the Government’s Use of Contracted

Advisory and Assistance Services (OMB, Office of

Federal Procurement Policy)

(1) Inaccurate reporting of advisory and assistance

services

(2) Inadequate definition of advisory and assistance

services

9/88 Summary Report on Contracted Advisory and

Assistance Services (President’s Council on Integrity

and Efficiency)

(1) Improper justification of advisory and assistance

services contracts

(2) Inaccurate reporting of advisory and assistance

services

(continued)

Page 13 GAO/NSIAD-98-136 DOD Consulting Services
Appendix I 

Selected Reports About Advisory and

Assistance Services Management and

Reporting Problems

Date Report title Selected findings

11/22/85 Support Services: Actions to Gain Management

Control Over DOD’s Contract Support Services

(GAO/NSIAD-86-8)

(1) Inaccurate reporting of advisory and assistance

services

(2) Inadequate accounting systems to identify

advisory and assistance services expenditures

9/85 The Problems of Budget Presentation and Recording

of Contracted Advisory and Assistance Services

(CAAS) (Center for Naval Analysis Report CRM

85-65)

Inaccurate reporting of advisory and assistance

services

9/85 Proposed Solutions to the Definitional Problems of

Contracted Advisory and Assistance Services

(Center for Naval Analysis Report CRM 85-66)

Inadequate definition of advisory and assistance

services

8/85 The General Problems of Contracted Advisory and

Assistance Services (CAAS) (Center for Naval

Analysis Report CRM 85-63)

Inadequate definition of advisory and assistance

services

Page 14 GAO/NSIAD-98-136 DOD Consulting Services
Appendix II 

Army Contract Files Review

Our review of data from the Army’s finance and accounting database

disclosed that the accounting system had assigned descriptive codes for

less than half of the Army’s fiscal year 1996 expenditures of $11.6 billion

reported as other, or miscellaneous, services (object class 25.2). However,

about $6 billion in expenditures had codes that provided no descriptive

information.

To determine whether advisory and assistance services were reported as

miscellaneous services, we examined expenditures data from the Army

Materiel Command’s (AMC) finance and accounting system that totaled

$1.1 billion in direct obligations for miscellaneous services.1

 As shown in

figure II.1, the AMC’s data contained little descriptive information on the

$1.1 billion.

Figure II.1: Army Materiel Command:

Object Class 25.2 Fiscal Year 1996

Obligations (dollars in millions)

Other

Other

No details provided

 $968 million $99

million

Includes:

OMB Cir. A-76 Contracts

Cost Distributions

Tuition Costs

Facility Maintenance

Ship Maintenace

Custodial Service

ADP Equipment Installation

ADP Systems Analysis/ 

 Design & Programming

Total: $1.1 billion

Source: Army’s Finance and Accounting System.

1

We used fiscal year 1996 data because fiscal year 1997 data were incomplete at the time of our review.

The data provided by AMC were “execution” or actual obligation data that contained expenditures by

major command, appropriation account, and element of resource. The data were not disaggregated to

the contract or contract action level.

Page 15 GAO/NSIAD-98-136 DOD Consulting Services
Appendix II 

Army Contract Files Review

The Army Comptroller’s Office and AMC both informed us that there was

no way to associate reported expenditures with specific contracts without

requesting such data from each subcommand. Accordingly, we requested

such data from AMC for all of its major subcommands, which proved to be

a labor intensive and slow process. The Army Research Laboratory was

the first to provide contract data to conduct our analysis. For fiscal

year 1996, the laboratory provided a list of contract actions, with a value of

$113.5 million, that had been classified as other, with no explanation or

detail as to the type of expense.

Our review of contract actions at the laboratory disclosed that advisory

and assistance services such as technical assistance to develop market

strategies and engineering and business planning support were being

misclassified in the other category. Of 21 contract actions reviewed, 16

actions, with a value of $12.3 million, were misclassified as miscellaneous

services. The misclassified actions included 11 actions, with a value of

$11.6 million, that should have been classified as advisory and assistance

services. Laboratory budget and procurement personnel agreed that the

actions should have been more appropriately described as advisory and

assistance services.

Page 16 GAO/NSIAD-98-136 DOD Consulting Services
Appendix III 

Comments From the Department of Defense

See page 7.

See page 1.

Page 17 GAO/NSIAD-98-136 DOD Consulting Services
Appendix III 

Comments From the Department of Defense

See page 1.

See pages 7-8.

(707273) Page 18 GAO/NSIAD-98-136 DOD Consulting Services
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