United States Government Accountability Office

GAO Report to Congressional Committees

DEFENSE 

ACQUISITIONS 

DOD’s Research and 

Development Budget 

Requests to Congress 

Do Not Provide 

Consistent, Complete, 

and Clear Information 

September 2007 

 

GAO-07-1058 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2007

DEFENSE ACQUISITIONS 

DOD’s Research and Development 

Budget Requests to Congress Do Not 

Provide Consistent, Complete, and Clear 

Information 

Highlights of GAO-07-1058, a report to 

congressional committees 

The Department of Defense (DOD)

asked Congress for $73.2 billion in 

fiscal year 2007 for research, 

development, testing, and 

evaluation (RDT&E). DOD

organized this request using 

program element (PE) codes, 

which are designed to convey key

information about the budget 

request. DOD also provides

documents called budget exhibits 

detailing the activities for which

funds are being requested. The 

National Defense Authorization Act 

for Fiscal Year 2006 mandated that

GAO examine the program 

elements and budget exhibits. GAO

assessed (1) whether the RDT&E

program element code structure

and the associated budget exhibits 

provide accurate, consistent, 

complete, and clear information, 

and (2) what factors contribute to

any problems found. In conducting

this review GAO analyzed all of the 

fiscal year 2007 program element

codes and 47 budget exhibits. GAO

also interviewed key DOD officials. 

What GAO Recommends

GAO recommends the Secretary of

Defense take several actions aimed 

at providing Congress with more

clear and complete information on 

RDT&E funding requests. In 

addition, Congress may wish to 

have the DOD Comptroller work 

with relevant committees to 

determine how best to revise these 

budget materials. DOD partially

concurred with these 

recommendations. 

Neither the RDT&E program element code structure nor the budget exhibits 

consistently provide accurate, clear, and complete information on the nature 

of DOD’s proposed research and development efforts. First, one-third of the 

requested RDT&E funding is for efforts that are not identified as research 

and development in their program element codes. In addition, a majority of 

the remaining funding request misidentifies the budget activity (which is a 

classification of the stage of development and ranges from BA 1 for basic 

research to BA 6 for management support) as it is stated in program element 

codes. Second, some of the budget exhibits justifying the programs’ funding 

requests do not provide consistent, complete, and clear information with 

suitable levels of detail needed to understand DOD’s research and 

development efforts. GAO found that DOD budget exhibits were difficult to 

understand, frequently lacked information about the accomplishments and 

planned efforts of each project, lacked appropriate cross-references between 

efforts, and were frequently missing key schedule data. 

Number of Program Elements That Match Their Assigned Budget Activity 

0

25

50

75

100

125

150

BA1 BA2 BA3 BA4 BA5 BA6

Number of PE codes in fiscal year 2007

Source: GAO analysis of DOD program element code data.

Budget activities

15 15 10 12

0

57 60

79 82

115

135

82

Number of PE codes that match BA Total number of PE codes

The RDT&E program element codes are not always accurate nor are the

budget exhibits always accurate, clear, consistent and complete for two 

major reasons. First, DOD’s regulation does not require identification of any 

RDT&E effort as such in its program element code if it is taking place on a 

weapon system that is approved for production or already fielded. This 

affects over a third of all RDT&E funds. Second, the regulation governing the 

structuring of the coding and the content of the exhibits is vague. For 

example, the regulation does not require the coding to be updated from one 

year to the next to ensure the correct stage of development has been 

accurately identified. The regulation also does not provide sufficiently 

detailed guidance to ensure consistency in the format and content of the 

budget exhibits. This results in budget exhibits being insufficient as decisionmaking tools, according to DOD officials.

www.gao.gov/cgi-bin/getrpt?GAO-07-1058.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Mike Sullivan at 

(202) 512-4841 or sullivanm@gao.gov. 
Contents 

Letter 1

Results in Brief 2 

Background 3

Program Element Codes and Budget Exhibits Do Not Consistently 

Provide Key Information 5 

One-Third of the Requested RDT&E Funding Is Not Identified as 

RDT&E Programs 6 

Program Element Codes also Misidentified the Specific Nature of 

R&D Efforts 7 

Budget Exhibits Were Sometimes Inconsistent, Incomplete, or

Unclear 9

DOD Guidance and Practices Contribute to Reduced Visibility 11 

Conclusion 11

Recommendations for Executive Action 12 

Matter for Congressional Consideration 13 

Agency Comments and Our Evaluation 13 

Appendix I Scope & Methodology 16 

Appendix II Comments from the Department of Defense 18 

Figures 

Figure 1: Sample Research and Development PE Code Structure 

Based on the FMR 4 

Figure 2: Fiscal Year 2007 Budget Activity 7 Programs Occur in 

Most Phases of Development 7 

Figure 3: Number of Fiscal Year 2007 Program Elements That 

Match Their Assigned Budget Activity 8 

Figure 4: Total Fiscal Year 2007 RDT&E Requests by Budget 

Activity 9

Page i GAO-07-1058 Defense Acquisitions
Abbreviations 

AMP Avionics Modernization Program 

BA budget activity

DOD Department of Defense 

GPS Global Positioning System 

FMR Financial Management Regulation 

JLENS Joint Land Attack Cruise Missiles Defense Elevated 

 Netted Sensor 

MFP Major Force Program 

PE program element 

R&D research and development 

RDT&E research, development, testing, and evaluation 

UAV unmanned aerial vehicle 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately. 

Page ii GAO-07-1058 Defense Acquisitions
United States Government Accountability Office

Washington, DC 20548 

September 5, 2007 

Congressional Committees 

In fiscal year 2007, the Department of Defense (DOD) asked Congress for 

$73.2 billion for research, development, testing, and evaluation (RDT&E). 

DOD organized this request for funds for more than 1,000 projects by using 

the long-standing program element (PE) code structure. This system 

produces a code that is structured to give decision makers key information 

such as the development stage of the project. The PE code, for example, 

describes whether the effort is for basic research in a laboratory on 

directed energies, integration of weapon system prototypes, or upgrades 

to long-fielded weapon systems such as the B-52 bomber. PE codes are the 

building blocks of the defense programming and budgeting system, and 

can be aggregated to display total resources assigned to specific programs, 

to specific military services, or in other ways for analytical purposes. For 

example, decision makers use the reported stages of development to 

assess how much is being invested in fundamental science and technology. 

These efforts determine the future capabilities of U.S. military forces. 

Each development effort that is assigned a unique PE code has its 

activities detailed in accompanying documents known as budget exhibits.

DOD directs that these documents include such information as a 

description of the effort, an assessment of progress, and the expected 

accomplishments. 

Although other sources of information are also available to Congress 

about some of these RDT&E programs, the decision to authorize and 

appropriate funds for many programs is based primarily on budget 

exhibits. Accurate classifications of programs and projects by budget

activity are needed for decision-makers to readily understand how 

projects are progressing and on what money is being spent. The National 

Defense Authorization Act for Fiscal Year 20061

 required that we examine 

the program element codes and budget exhibits. We responded with a 

briefing to the committees in February 2007. In this follow-on report, 

which summarizes the briefing, we assess: 

 1

Pub. L. No. 109-163, section 251. 

Page 1 GAO-07-1058 Defense Acquisitions
1. Whether the RDT&E program element code structure and the 

associated budget exhibits provide accurate, consistent, complete and

clear information, and 

2. What factors contribute to any problems found. 

In conducting our evaluation, we reviewed pertinent program element and 

budget justification policies and guidance; analyzed all of the fiscal year 

2007 program elements and the associated budget exhibits for over 47 of

these programs; and interviewed officials from the offices of the Secretary

of Defense and each of the military services. We conducted our review 

from June 2006 to July 2007 in accordance with generally accepted 

government auditing standards. Additional information about our 

methodology is contained in appendix I. 

Neither the RDT&E program element code structure nor the budget

exhibits consistently provide accurate, clear, and complete information on 

the nature of DOD’s proposed research and development efforts. First, 

one-third of the requested RDT&E funding is for efforts that are not 

identified as RDT&E in their program element codes. In addition, 

65 percent of the remaining funding request misidentified the stage of 

development as it is stated in program element codes. Second, the budget 

exhibits justifying the programs’ funding requests do not consistently 

provide complete, and clear information with suitable levels of detail 

needed to understand DOD’s research and development efforts. We found 

that DOD budget exhibits were difficult to understand, frequently lacked 

information about the accomplishments and planned efforts of each 

project, lacked appropriate cross-references between efforts, and were 

frequently missing key schedule data.

Results in Brief 

There are two major reasons why the program element codes and budget 

exhibits are not always accurate, clear, consistent, and complete. First, 

once a weapon system is fielded or approved for production, DOD’s 

regulation does not require the identification of any RDT&E effort as such 

in its program element code. This affects the visibility of more than onethird of all RDT&E funds. Second, the regulation governing the structuring 

of the coding and the content of the exhibits is vague. For example, the 

regulation does not require the coding to be updated from one year to the 

next to ensure the correct stage of development has been accurately 

identified. The regulation also does not provide sufficiently detailed 

guidance to ensure consistency in the format and content of the budget

Page 2 GAO-07-1058 Defense Acquisitions
exhibits. This results in budget exhibits being insufficient as decisionmaking tools, according to DOD officials. 

Taken together, current reporting policies and practices for justifying R&D 

requests to Congress could be improved to provide more useful 

information to decision makers and to strengthen accountability for 

performance. This report makes two recommendations to DOD. First, 

DOD should adjust the current RDT&E program element code structure to 

enhance the visibility that Congress has into the nature of the proposed 

development. Second, DOD should revise the regulation governing the 

budget exhibits to provide more specific direction and ensure a more 

disciplined process is used to provide Congress with accurate, clear, 

consistent, and complete information. 

We have also included a matter for congressional consideration that 

Congress may wish to have the DOD Comptroller work with the relevant 

committees to revise the budget exhibit format and content to meet the 

needs of both Congress and DOD. 

In written comments on a draft of this report, DOD partially concurred 

with our recommendations. However, it is unclear from DOD’s response 

what specific actions the department will take in response to our 

recommendations other than to put additional emphasis on properly 

reporting program progress and planned efforts. DOD’s comments are 

reproduced in their entirety in appendix II. 

Under the DOD Financial Management Regulation (FMR),2

 all major new 

systems are to be identified with a unique PE code. PE codes have 

10 positions. In general, each position conveys information, as seen in 

figure 1. 

Background 

 2

DOD’s Financial Management Regulation (FMR), DoD 7000.14-R, Volume 2B, Chapter 5, 

details what information is to be included in the individual PE code budget exhibits or 

R-docs. This regulation is maintained and updated by the Office of the Under Secretary of 

Defense (Comptroller). 

Page 3 GAO-07-1058 Defense Acquisitions
Figure 1: Sample Research and Development PE Code Structure Based on the FMR 

Program element code

0 6 0 4 2 2 0 F

Major force programs

01 Strategic forces

02 General purpose forces

03 Command, control, 

 communications, and intelligence

04 Mobility forces

05 Guard and reserve forces

06 Research and development

07 Central supply and maintenance

08 Training, medical, and other 

 general personnel activities

09 Administration and associated activities

10 Support of other nations

11 Special operations forces

Budget activity

01 Basic research

02 Applied research

03 Advanced technology development

04 Advanced component 

 development prototypes

05 System development 

and demonstration

06 RDT&E management support

DOD 

components

A Army

D DOD

F Air Force

M USMC

N Navy

(partial list)

Source: GAO.

Note: Budget activity codes are required only if the major force program is 06. The seventh budget 

activity—systems approved for production or already fielded—is not identified in the code. 

The first and second positions of the PE code illustrated above define the 

Major Force Program (MFP), which contain the resources necessary to 

achieve a broad objective or plan. In figure 1, for example, the “06” in the

first positions indicate this is a research and development effort. Because

it is a research and development effort beginning with “06,” under the 

FMR, the third and fourth positions must define the budget activity. In

general, the budget activity codes that fill positions three and four are 

intended to describe the current nature of the research and development 

effort for each PE code. For example, budget activities 1 through 3 cover 

initial development efforts and should describe activities that take place in

what is often called the science and technology realm. Research and 

development efforts in these first three budget activities may produce 

scientific studies and experimentation, develop paper studies of 

alternative concepts, or test integration of subsystems and components. 

Budget activities 4 and 5 cover efforts used to fully develop and acquire

integrated weapon systems respectively. Programs in these budget 

activities may perform efforts necessary to further mature a technology or 

conduct engineering and manufacturing development tasks. Budget 

activity 6 funds efforts to sustain or modernize the installations or 

operations required for general RDT&E. Test ranges, military construction, 

maintenance support of laboratories, studies and analysis, and operations 

Page 4 GAO-07-1058 Defense Acquisitions
and maintenance of test aircraft and ships are funded with this budget 

activity. 

Budget activity 7 is used to designate R&D efforts for systems that have

already been approved for production or those that have already been

fielded. Unlike budget activities 1 through 6, budget activity 7 is not 

indicated in a PE code. This information is seen in the accompanying 

budget exhibits. Despite the fact that these are research and development 

efforts, their program element code does not contain any indication that 

they are for research and development. 

The FMR also requires that DOD justify the annual RDT&E budgets 

requests in budget exhibit documents. These accompanying budget 

exhibits are the primary information source for Congress and analysts 

throughout the government. Generally, there are six sections in each

budget exhibit that are used to justify each funding request made using an 

RDT&E PE code. These include a mission description and budget item 

justification section; an accomplishments and planned program section; a 

program change summary section showing total funding, schedule, and

technical changes to the program element that have occurred since the 

previous budget submission; a performance measures section to justify 

100 percent of resources requested; a section that shows connections and 

dependencies among projects, which should also include information such 

as the appropriation, budget activity, line item, and program element 

number of the related efforts; and, a section providing a schematic display 

of major program milestones that reflect engineering milestones, 

acquisition approvals, test and evaluation events, and other key milestones 

for the program events. 

The program element code structure and budget exhibits do not 

consistently provide accurate, clear, and complete information regarding 

RDT&E budget requests. The PE codes given for many programs do not 

indicate that they are for an R&D effort at all or do not accurately reflect 

the reported nature of the development. Budget exhibits sometimes omit 

required information about programs and their links to other programs, 

and may provide only minimal information. 

Program Element 

Codes and Budget 

Exhibits Do Not 

Consistently Provide 

Key Information 

Page 5 GAO-07-1058 Defense Acquisitions
Programs that were requested in budget activity 7—RDT&E efforts for 

fielded systems and programs approved for production—presented the 

greatest visibility problem. Under DOD’s current regulation, programs in 

this budget activity are not required to report in the code itself that the 

funds are for research and development, nor are they required to report 

the nature of the development effort. This budget activity was used to 

request $23.5 billion in fiscal year 2007, or about a third of DOD’s entire 

RDT&E funding request. Instead, the information available about these 

funding requests is contained in their budget exhibits. 

One-Third of the 

Requested RDT&E 

Funding Is Not 

Identified as RDT&E 

Programs 

Programs classified as budget activity 7 do not begin their PE code with 

06, which would identify them as RDT&E requests. Instead, budget activity

7 RDT&E efforts use PE codes that begin with the major force program 

code established for the system being modified. For example, PE 

0102419A, the Joint Land Attack Cruise Missiles Defense Elevated Netted

Sensor System (JLENS) program, provides no indication that the effort 

uses RDT&E funds, nor does it identify the nature of the development. It 

begins with 01, indicating it is for strategic forces and ends with A, 

indicating that it is an Army request. 

In addition, we found that nature of the efforts funded in budget activity 

7 overlap with the nature of the efforts undertaken in other budget 

activities, making it difficult to determine the amounts requested for the 

different stages of development across the entire RDT&E budget. While

the definition for budget activity 7 describes efforts that are fielded or 

approved for production, several defense acquisition efforts covered under 

budget activity 7 are involved in phases ranging from technology 

development to production, as shown in figure 2. The JLENS program, for 

example, is currently developing an aerostat for cruise missile defense, but 

its code does not indicate that it is in system development and 

demonstration. There is a separate code, budget activity 5, which also 

funds efforts in system development and demonstration. 

Page 6 GAO-07-1058 Defense Acquisitions
Figure 2: Fiscal Year 2007 Budget Activity 7 Programs Occur in Most Phases of 

Development

Concept

refinement

Acquisition

phases

Source: GAO analysis of DOD data.

Technology

development

Production and 

development

Operations and 

support

System

development and

demonstration

Programs 

acquired ACS

Warrior UAS

MUOS, JLENS

Global Hawk

GPS ll

Note: The programs represented above are the Aerial Common Sensor (ACS), the Warrior 

Unmanned Aircraft System, Mobile User Objective System (MUOS), Joint Land Attack Cruise Missile 

Defense Elevated Netted Sensor System (JLENS), Global Hawk Unmanned Aircraft System, and 

Navstar Global Positioning System II. 

We found that 65 percent of the RDT&E PE codes for budget activities 

1 through 6 misidentified the nature or stage of the development in fiscal 

year 2007. While the early development efforts described by budget 

activities 1 through 3 generally properly identified the nature of the effort 

in their codes, budget activities 4 through 6 generally did not, as seen in 

figure 3. Programs reported in budget activities 4 through 6 requested 

more than half of the total RDT&E funding. 

Program Element 

Codes also 

Misidentified the 

Specific Nature of 

R&D Efforts 

Page 7 GAO-07-1058 Defense Acquisitions
Figure 3: Number of Fiscal Year 2007 Program Elements That Match Their Assigned

Budget Activity

0

25

50

75

100

125

150

BA1 BA2 BA3 BA4 BA5 BA6

Number of PE codes in fiscal year 2007

Source: GAO analysis of DOD program element code data.

Budget activities

Number of PE codes that match BA

Total number of PE codes

15 15

10 12

0

57 60

79 82

115

135

82

Note: A total of 207 program element codes funded under BA7 are excluded from the figure because

they are not required by the FMR to identify the budget activity in the program element code. 

The challenge of clearly identifying the nature of the development efforts 

is actually much worse when the budget activity 7 programs are 

considered along with the misidentified programs in budget activities 

1 through 6. As a result of these combined problems, the PE code provides 

only limited visibility into 85 percent of the requested funding, as seen in 

figure 4. 

Page 8 GAO-07-1058 Defense Acquisitions
Figure 4: Total Fiscal Year 2007 RDT&E Requests by Budget Activity 

0

5

10

15

20

25

30

BA1 BA2 BA3 BA4 BA5 BA6 BA7

Dollars in billions (fiscal year 2007)

Source: GAO analysis.

Budget activities

1.4

4.5 5.2

15.4

19.3

23.5

85% of total dollars are in BAs 4,5,6, and 7

3.9

While reviewing a set of 47 RDT&E budget exhibits from fiscal years 2006 

and 2007, we observed that some of the exhibits omitted key information. 

While DOD presents some valuable information in these exhibits, we 

found in many cases that the justification narratives were not clear or 

provided little or no additional information from the previous year’s 

justification. In a number of cases the narratives appeared to be “copy and 

paste” descriptions of activities from prior years, making it difficult to 

determine recent changes or program progress. We also observed that 

information on accomplishments from the past year was provided for few 

programs. In addition, few programs provided detailed narratives of 

planned activities for the current budget year. For the few exhibits that did

contain narratives on planned activities, the level of detail was minimal. 

For example, the Air Force Global Positioning System (GPS) Block III 

program requested $315 million for fiscal year 2007 and had requested 

$119 million combined in the previous 2 fiscal years. In this section, the 

accomplishments were described as “Continue Program Support and 

Modernization Development for GPS III,” and the planned program was 

described as “Begin Modernization Segment.” 

Budget Exhibits Were 

Sometimes 

Inconsistent, 

Incomplete, or 

Unclear 

Furthermore, funding changes from year to year were inconsistently 

reported. In some cases they were provided at the PE code level and in 

Page 9 GAO-07-1058 Defense Acquisitions
other cases at the project level, when the PE code involved multiple 

projects. These funding change summaries also routinely provide limited 

detail on the reasons for the changes. For example, the Navy’s EA-18G and

DD(X) programs had funding changes of millions of dollars to their 

previous and current budgets but failed to provide details of why these 

changes had occurred. 

Additionally, the budget exhibits did not always identify the connections 

and dependencies among related projects consistently as required by the 

FMR. In general, these connections can be vital to the successful 

development of some programs. In some instances, key components to a 

system under development are being developed in other programs. A delay 

or failure in one program can mean delay and failure in the related 

program. For example: 

• C-130 Avionics Modernization Program (AMP) exhibit did not identify 

all of the required information for related programs in the Navy and 

Special Forces nor did it identify C-130 Talon II procurement, which 

included C-130 AMP upgrades. 

• DDG-1000 (formerly the DD(X)) destroyer program is developing dualband radar that will be used on the CVN-21 aircraft carrier. No 

reference is made to this link/dependency in the exhibit. 

• Expeditionary Fire Support System is being developed to be 

transported by the V-22 aircraft, but makes no reference to the V-22 

program. 

• Warrior UAV (unmanned aerial vehicle) is being developed in two 

PEs—one for the system and one to weaponize. Only one program 

references the other. 

Our review found the schedule profiles in the budget exhibits were 

generally provided but sometimes did not provide a detailed display of 

major program milestones such as engineering milestones, acquisition 

approvals, or test and evaluation events. Also, we could not find the 

standard program milestones in a number of the schedule profiles we 

reviewed. In some cases we found it difficult to determine the program’s 

phase of development. For example, in two cases the development 

schedule showed “continue development” across all fiscal years displayed. 

In another example, a program simply reported “S/W Development” with a 

bar covering all fiscal years. 

Page 10 GAO-07-1058 Defense Acquisitions
We found the RDT&E program element code and the budget exhibits are 

not always accurate, clear, consistent, and complete for two major 

reasons. First, DOD’s own regulation for constructing program element 

codes does not require a large part of the RDT&E effort to be reflected in

program element codes. Second, the regulation governing the structuring 

of the coding and the content of the exhibits is vague. For example, it does 

not require the coding to be updated from one year to the next to ensure 

the correct stage of development has been accurately identified. The 

regulation also does not provide sufficiently detailed guidance to ensure 

consistency in the format and content of the budget exhibits. This leads to 

inconsistencies in how it is applied by different organizations and officials

within DOD.

The FMR requires that once a weapon system is fielded or approved for 

production that it be identified not as R&D efforts in the program element 

code, but rather under a different code. These PE codes are required to 

carry the Major Force Program code of the fielded systems. As a result, 

these PE codes, accounting for one-third of the requested RDT&E budget,

do not identify the efforts as R&D activities and do not indicate the nature

of the R&D effort. 

In addition, the regulation is unclear on how or when program element 

coding should change over time as the development progresses into a 

different stage. As a result, even if the program element code is accurate 

when a program is assigned a code, without updating the code, the 

programs that successfully mature will automatically develop inaccurate

coding over time. 

Several DOD officials said that one of the reasons that the budget exhibits 

are insufficient as decision-making tools is the lack of clear and consistent 

guidance for the budget exhibits in the FMR. For example, while the FMR 

requires a “Program Schedule Profile” exhibit, it is not standardized. The 

FMR provides examples of the budget exhibits that include an 

“Accomplishment/Planned Program” section. However, it is unclear 

whether this section has to contain specific information about both the 

accomplishments achieved from previous funds and the activities to be 

achieved with requested funds. 

Congress has the difficult task of choosing which RDT&E efforts to fund 

from the many competing demands. These RDT&E efforts are critical to 

the national interest. However, they must be balanced within the other 

fiscal pressures facing the government, including the large and growing 

DOD Guidance and 

Practices Contribute 

to Reduced Visibility 

Conclusion 

Page 11 GAO-07-1058 Defense Acquisitions
structural deficit. These factors make it especially important that Congress 

get the justifications for these R&D efforts in a clear, consistent, and 

readily useable form. 

However, the department’s policies and practices are not providing this 

key information to congressional decision makers. The RDT&E 

justification material often obscures rather than reveals the nature of the 

efforts under way and prevents a determination of the specifics regarding

why the money is needed. 

A number of opportunities exist for DOD to provide Congress with clearer 

justifications for the funds requested for these efforts. Congress needs a 

structure that will (1) properly identify the development status of projects 

for which funds are requested, (2) bring complete visibility to all of the 

activities for which funds are requested, and (3) provide consistent 

information about how well these projects are progressing in order to 

make efficient decisions.

More specific guidance could improve the ability of the program element 

codes and budget exhibits to aid Congress in focusing oversight where it is 

needed, facilitate early corrective action, and improve accountability. 

This report makes two recommendations. To provide Congress with 

greater understanding of the nature of developmental activities proposed, 

as well as to improve the consistency and completeness of the justification 

material provided for the RDT&E funds requested, the Secretary of 

Defense should ensure that the DOD Comptroller: 

Recommendations for 

Executive Action 

• Revises the Financial Management Regulation to, (1) in the case of 

programs approved for production or fielded, ensure that the code or 

the budget exhibit indicates which stage of development—from basic 

research through system development and demonstration—the effort is 

undertaking, and (2) ensure that the program element codes reflect the 

stage of development—that is from basic research through system 

development and demonstration—of the requested research and 

development effort. 

• Develops more specific guidance for budget exhibits to ensure that 

they are accurate, consistent, clear, and complete, and enforce a 

disciplined process for ensuring proper reporting of program progress 

and planned efforts. 

Page 12 GAO-07-1058 Defense Acquisitions
Congress may wish to have DOD’s Comptroller work with relevant

committees to reach agreement on how to revise budget exhibits and the 

program element code structure to meet congressional oversight needs as 

well as serve the needs of DOD. In these discussions, consideration could 

be given to:

• The value and cost of modifying or replacing the current PE code 

structure so that it more readily informs Congress as to the nature 

of the R&D effort for systems in development as well as fielded 

systems and systems approved for production. 

• The best means to inform Congress of the state of development of 

the requested effort as it progresses toward production. 

• The changes needed to the format and content of the budget

exhibits to more effectively communicate the purpose for which 

funding is sought, the progress made with prior funding, and other 

key funding justification information. 

• The time frames and funding needed to develop and implement any 

changes. 

DOD partially concurred with both of our recommendations. However, it 

is unclear from DOD’s response what specific actions the department will 

take in response to our recommendations other than to put additional 

emphasis on properly reporting program progress and planned efforts. 

Matter for 

Congressional 

Consideration 

Agency Comments 

and Our Evaluation 

In partially concurring with our first recommendation, DOD commented 

that in the case of systems that have been approved for production and 

fielded, specifically capturing RDT&E funding would be 

counterproductive to how the departmental leadership makes decisions. 

We recognize the importance to the department of enabling the 

department’s leadership to make decisions on the full scope of a program; 

however, we note that program element codes also have the purpose of 

providing important oversight information to Congress and the current 

practice significantly lacks the clarity of the RDT&E funding justifications 

to Congress. As we reported, RDT&E funds for programs approved for 

production and fielded systems currently represents one-third of the total 

RDT&E budget. As a result, we believe this level of investment warrants 

improved clarity. We have modified the wording in the recommendation to 

focus on providing clearer information to Congress either through the 

program element code structure or the budget exhibits. 

Page 13 GAO-07-1058 Defense Acquisitions
DOD fully concurred with the second part of that recommendation to 

ensure that the program element codes reflect the state of development of

the requested effort as it progresses toward production. DOD noted that 

the program element structure accommodates this progression. However, 

our analysis found that a significant amount of funding is misidentified in 

the coding. DOD has not identified any proposed actions to correct this 

misidentification. 

DOD partially concurred with our second recommendation and will place 

greater emphasis on proper reporting of program progress and planned

efforts as reported in its budget exhibits. However, DOD took issue with 

developing a template, stating that it is doubtful any single template would 

be feasible or desirable given the complexity of the RDT&E activity. We

believe more specific guidance is needed to ensure that DOD is more 

effectively communicating the purpose for which funding is sought, the 

progress made with prior funding, as well as the other key funding 

justification information. We have modified the wording of the 

recommendation to remove the term “template.” We still believe that 

greater standardization is called for, but recognize that templates are but 

one means among many to achieve that end. 

We are sending copies of this report to interested congressional 

committees; the Secretary of Defense; the Secretaries of the Air Force, 

Navy, Army, and the Commandant of the Marine Corps; and the Director, 

Office of Management and Budget. We will provide copies to others on 

request. This report will also be available at no charge on GAO’s Web site 

at http://www.gao.gov. 

Should you or any of your staff have any questions on matters discussed in 

this report, please contact me on (202)512-4841 or by e-mail at

sullivanm@gao.gov. Contact points for our offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

Principal contributors to this report were David Best (Assistant Director), 

Jerry Clark, Chris Deperro, Greg Campell, Anna Russell, Julie Hadley, and 

Noah Bleicher. 

Michael Sullivan 

Director, Acquisition and Sourcing Management

Page 14 GAO-07-1058 Defense Acquisitions
List of Congressional Committees

The Honorable Carl Levin 

Chairman 

The Honorable John McCain 

Ranking Member 

Committee on Armed Services 

United States Senate 

The Honorable Daniel K. Inouye 

Chairman 

The Honorable Ted Stevens 

Ranking Member 

Subcommittee on Defense 

Committee on Appropriations 

United States Senate 

The Honorable Ike Skelton 

Chairman 

The Honorable Duncan Hunter 

Ranking Member 

Committee on Armed Services 

House of Representatives 

The Honorable John P. Murtha, Jr. 

Chairman 

The Honorable C.W. Bill Young 

Ranking Member 

Subcommittee on Defense 

Committee on Appropriations 

House of Representatives 

Page 15 GAO-07-1058 Defense Acquisitions
Appendix I: Scope & Methodology Appendix I: Scope & Methodology 

To assess whether DOD’s RDT&E program element code structure 

provides Congress consistent, complete and clear information, we 

reviewed relevant guidance while analyzing all 696 program elements 

contained in the fiscal year 2007 RDT&E budget request. We assessed 

program elements by budget activity, dollar value, number of projects, and 

phase of development. We also determined the number of program 

elements that properly matched their assigned budget activity to 

determine if guidance contained in the Financial Management Regulation 

was properly followed. To determine the actual phase of development for 

programs requesting funding in budget activity 07, we reviewed both their 

budget exhibits and other documents, such as their Selected Acquisition 

Reports. For this analysis, we reviewed the Global Hawk Unmanned 

Aircraft System, Aerial Common Sensor, Warrior Unmanned Aircraft 

System, Mobile User Objective System, Joint Land Attack Cruise Missile 

Defense Elevated Netted Sensor System, and Navstar Global Positioning 

System. 

We assessed the information contained the RDT&E budget justification 

documents by reviewing the content, structure, clarity, and completeness 

of all components of the budget exhibits, including sections related to the 

program’s description and budget item justification, schedule profile, and 

funding summaries. We reviewed multiple budget justification documents 

from 47 program element codes reported in February 2005 and 2006. We

ensured that this review encompassed all military services and covered 

multiple fiscal years. This review focused on budget exhibits for programs 

in budget activities 4, 5, and 7 to identify any differences in the 

consistency, completeness and clarity of information presented. To assess 

connections and dependency information, we included additional 

programs that GAO has recently reported on because a more detailed 

understanding of the programs involved is required to identify these 

connections. To assess consistency, we compared the level of detail 

reported from year to year and compared the treatment of funding 

changes from program to program. To assess completeness, we compared 

the information in the budget exhibits to the requirements of the FMR. To 

assess the clarity of the information, we reviewed the details provided in 

the narrative language in the exhibits. 

To determine the factors that contribute to any problems found, we also 

reviewed the Department of Defense Financial Management Regulation 

and the Future Years Defense Planning Handbook policies and guidance 

related to developing program elements and budget justification 

documents. To better understand the processes involved with developing 

program elements and budget justification documents, we interviewed 

Page 16 GAO-07-1058 Defense Acquisitions
Appendix I: Scope & Methodology 

officials from the offices of the Under Secretary of Defense for 

Acquisition, Technology, and Logistics Director, Defense Research and 

Engineering; Under Secretary of Defense (Comptroller); Principal Deputy 

Under Secretary of Defense (Comptroller); Director, Program Analysis and 

Evaluation; Assistant Secretary of the Army for Financial Management and 

Comptroller; Office of the Assistant Secretary of the Navy Financial 

Management and Comptroller; Office of the Secretary of the Air Force; and 

the Air Force Office for the Deputy Chief of Staff for Strategic Plans and 

Programs. 

We conducted our review from June 2006 to January 2007 in accordance 

with generally accepted government auditing standards. 

Page 17 GAO-07-1058 Defense Acquisitions
Appendix II: Comments from the Department Appendix II: Comments from the Department of Defense 

of Defense 

Page 18 GAO-07-1058 Defense Acquisitions
Appendix II: Comments from the Department 

of Defense 

(120630) Page 19 GAO-07-1058 Defense Acquisitions
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