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Audit Report

Do not release outside the Department of the Navy

or post on non-NAVAUDSVC Web site, or in Navy Taskers,

without prior approval of the Auditor General of the Navy

Requirements for Programs 

Managed by Program Executive 

Office Integrated Warfare 

Systems

Naval Audit Service

This report contains information exempt from 

release under the Freedom of Information Act. 

Exemption (b)(6) applies.

N2014-0035

6 August 2014
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Naval Audit Service

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1006 Beatty Place SE

Washington Navy Yard DC 20374-5005
1

7510

2013-081

6 Aug 2014

MEMORANDUM FOR PROGRAM EXECUTIVE OFFICE INTEGRATED 

WARFARE SYSTEMS

Subj: REQUIREMENTS FOR PROGRAMS MANAGED BY PROGRAM 

EXECUTIVE OFFICE INTEGRATED WARFARE SYSTEMS

(AUDIT REPORT N2014-0035)

Ref: (a) NAVAUDSVC Announcement Letter 2013-081, dated 03 July 2013

(b) SECNAV Instruction 7510.7F, “Department of the Navy Internal Audit”

Encl: 1. Background

2. Scope and Methodology

3. Pertinent Guidance

1. Introduction. We have completed the subject audit announced in reference (a) and

are providing this report in accordance with reference (b). Overall, Program Executive 

Office Integrated Warfare Systems (PEO IWS) ensured that programs had approved 

requirements documentation before proceeding through the system development process. 

Specifically, approved requirements documentation was available for each of the

20 programs that we reviewed. Therefore, we are making no recommendations in this 

report and no response is necessary. However, we noted an opportunity for improvement 

when providing information about PEO IWS programs to outside entities (see paragraph 

6).

2. Reason for Audit. This audit was initiated in response to submissions to the Fiscal 

Year (FY) 2013 Risk and Opportunity Assessment. The objective of the audit was to 

verify that programs managed by PEO IWS had approved requirements documentation 

before proceeding through the system development process.

3. Background.

a. PEO IWS manages surface ship and submarine combat technologies and 

systems and coordinates Navy Open Architecture across ship platforms. As of 

DEPARTMENT OF THE NAVY

NAVAL AUDIT SERVICE

1006 BEATTY PLACE SE

WASHINGTON NAVY YARD, DC 20374-5005
Subj: REQUIREMENTS FOR PROGRAMS MANAGED BY PROGRAM 

EXECUTIVE OFFICE INTEGRATED WARFARE SYSTEMS 

(AUDIT REPORT N2014-0035)

 

2

April 2013, PEO IWS was managing 136 Navy programs/projects1 with an estimated 

budget of $22.5 billion for Fiscal Years (FYs) 2014-2018. 

b. We evaluated whether PEO IWS programs had approved requirements

documentation prior to proceeding through the system development process. 

Specifically, we selected 20 programs2budgeted for approximately $5.1 billion for 

FYs 2014 through 2018. We selected these programs with the goal of providing broad 

coverage of the various categories of programs managed by PEO IWS. We conducted 

this audit from 26 March 2013 through 6 August 2014.

c. Throughout the audit we kept the Acquisition Officer for PEO IWS informed of 

potential issues with our sampled programs. Specifically, we met with the Acquisition 

Officer and the Audit Liaison for PEO IWS on 29 August 2013 to discuss the status of 

the audit. We also met with the Director, Integrated Combat Systems;

3

the PEO IWS 

Chief of Staff; and the Acquisition Officer for PEO IWS on 18 November 2013 to 

discuss the status of the audit. We met again with the Director, Integrated Combat 

Systems and the Acquisition Officer for PEO IWS on 15 January and 25 March 2014 to 

discuss our preliminary audit results.

d. For additional background, see Enclosure 1.

4. Federal Managers’ Financial Integrity Act. The Federal Managers’ Financial 

Integrity Act (FMFIA) of 1982, as codified in Title 31, United States Code, requires each 

Federal Agency head to annually certify the effectiveness of the agency’s internal and 

accounting system controls. In our opinion, the conditions noted in this report do not 

warrant reporting in the Auditor General’s annual FMFIA memorandum identifying 

management control weaknesses to the Secretary of the Navy.

5. Summary of Audit Results. We found that properly approved requirements

documentation was provided for each of the 20 reviewed programs, budgeted for an 

estimated $5.1 billion for FYs 2014-2018, as required by Secretary of the Navy 

(SECNAV) Instruction 5000.2 series. As a result of proper alignment of program 

requirements and system development, PEO IWS program managers had information 

needed to plan, execute, and manage programs. In contrast, system development 

performed without approved requirements creates the potential for unrealized capability 

growth, which could lead to additional costs and program schedule delays.

 

1 We excluded Foreign Military Sales programs from the universe because they are not Navy requirements.

2 Selected programs included programs reported by PEO IWS as ACAT programs, non-ACAT programs, Pre-Major Defense Acquisition 

Programs, New Starts, and Abbreviated Acquisition Programs.

3

The Director, Integrated Combat Systems was also Acting Director, Above Water Systems, at the time of the meeting.
Subj: REQUIREMENTS FOR PROGRAMS MANAGED BY PROGRAM 

EXECUTIVE OFFICE INTEGRATED WARFARE SYSTEMS 

(AUDIT REPORT N2014-0035)

 

3

6. Other Observations. We found that PEO IWS mistakenly reported eight 

acquisition programs, budgeted for an estimated $180.3 million for FYs 2014-2018, as 

non-acquisition programs in the NAVSEA & Affiliated PEO Acquisition Index,

4

dated 

16 January 2013. PEO IWS representatives acknowledged this administrative error and 

plan to develop Standard Operating Procedures to ensure that all programs are properly 

reported to NAVSEA Acquisition Policy Office (SEA-0213). We do not consider this 

error to be material.

7. Other Information.

a. Correspondence should be addressed to the Assistant Auditor General for 

Research, Development, Acquisition, and Logistics Audits, XXXXXXXXXX, by e-mail 

at XXXXXXXXXXXXXXX, with a copy to the Director, Policy and Oversight, 

XXXXXXXXXXXXXXXXX. Please submit correspondence in electronic format 

(Microsoft Word or Adobe Acrobat file), and ensure that it is on letterhead and includes a 

scanned signature.

b. Any requests for this report under the Freedom of Information Act must be 

approved by the Auditor General of the Navy as required by reference (b).

c. In order to protect privacy and other sensitive information included in this report, 

we request that you do not release this report outside the Department of the Navy, post on 

non-NAVAUDSVC Web sites, or post in Navy Taskers without the prior approval of the 

Auditor General of the Navy.

d. We appreciate the cooperation and courtesies extended to our auditors.

 

 XXXXXXXXXXXXXXXX

Assistant Auditor General

Research, Development, Acquisition, and 

Logistics Audits 

Copy to: (next page)

 

4

This listing of NAVSEA programs is prepared twice a year. It is sent to NAVSEA Program Managers and to the Assistant Secretary of the 

Navy (Research, Development & Acquisition) (ASN (RDA)).

FOIA (b)(6)

FOIA (b)(6)
Subj: REQUIREMENTS FOR PROGRAMS MANAGED BY PROGRAM 

EXECUTIVE OFFICE INTEGRATED WARFARE SYSTEMS 

(AUDIT REPORT N2014-0035)

 

4

Copy to:

UNSECNAV

DCMO

OGC

ASSTSECNAV FMC

ASSTSECNAV FMC (FMO)

ASSTSECNAV EIE

ASSTSECNAV MRA

ASSTSECNAV RDA

CNO (VCNO, DNS-33, N40, N41)

CMC (DMCS, ACMC)

DON CIO

NAVINSGEN (NAVIG-14)

NAVSEA

AFAA/DO
Enclosure 1

Page 1 of 1

Enclosure 1:

Background

The Naval Sea Systems Command (NAVSEA) is comprised of command staff, 

headquarters directorates, five affiliated Program Executive Offices (PEOs), and 

numerous field activities. The command and affiliates engineer, build, buy, and 

maintain ships, submarines, and combat systems that meet the Fleet’s current and 

future operational requirements.

In October 2002, the Assistant Secretary of the Navy for Research, Development, and 

Acquisition (ASN (RD&A)) issued a Naval Message that created “a new PEO for 

Integrated Warfare Systems in order to provide the required discipline and coordination 

of the architecture and overarching interface principles to which our systems will be 

developed.” This Naval Message established PEO IWS’ responsibility for all surface 

ships and submarine combat systems, missiles (except Trident and Tomahawk), radars, 

launchers (except Trident), Electronic Warfare, and gun systems.

PEO IWS used the following definitions when categorizing their programs:

 Acquisition Category (ACAT) I-IV Programs are acquisition programs that are 

assigned to categories based on an assessment of cost, complexity, and risk as defined 

in Secretary of the Navy Instruction 5000.2E.

 Pre-Major Defense Acquisition Programs are efforts that may eventually become 

Major Defense Acquisition Programs. 

 Non-ACATs are legacy programs that were not designated as ACAT programs; 

programs that are components of other programs; and Non-Acquisition 

efforts/activities/projects which do not directly result in the acquisition of items 

for operational deployment. Typically, they are enterprise efforts that support 

acquisition, such as Enterprise Test and Evaluation.

5

 Abbreviated Acquisition Programs are small non-complex DON acquisitions and 

modifications that do not require Operational Test and Evaluation and are below 

dollar thresholds and other criteria for ACAT I-IV programs.

 New Starts are planned efforts that may transition to an active acquisition program in 

the future.

 Inactive ACATs are programs that have delivered more than 90 percent of their total 

quantity or expended more than 90 percent of total program costs.

 

5

This definition was provided by PEO IWS and includes the SECNAV Instruction 5000.2E definition of a non-acquisition program.
Enclosure 2

Page 1 of 2

Enclosure 2:

Scope and Methodology 

We conducted the audit from 26 March 2013 through 6 August 2014. Our audit work 

focused on programs managed by Program Executive Office Integrated Warfare Systems 

(PEO IWS). This audit concentrated on review, management, and oversight of 

requirements documentation.

We reviewed Office of Management and Budget (OMB), Department of Defense (DoD),

and Department of the Navy (DON) policies and procedures applicable to acquisition 

programs and non-acquisition programs. We interviewed Assistant Secretary of the Navy 

(Research, Development, and Acquisition) (ASN (RD&A)) personnel; the PEO IWS 

Acquisition Officer; Chief of Naval Operations Resource Sponsors; and PEO IWS 

Program Managers.

PEO IWS provided a list of their programs/projects as of 22 April 2013. This list

consisted of 149 programs/projects. We excluded 13 Foreign Military Sales programs 

because they were not Navy requirements. We used the remaining 136 PEO IWS 

acquisition programs/projects as our universe. These 136 programs/projects

were budgeted for an estimated $22.5 billion based on PEO IWS budget data for Fiscal 

Years (FYs) 2014-2018.

From this universe, we selected a sample of 20 programs to provide broad coverage of 

the various categories listed (e.g. Acquisition Category (ACAT) programs, pre-Major

Defense Acquisition Programs (pre-MDAPs), non-ACAT programs, Abbreviated 

Acquisition Programs (AAPs), New Start programs, and Inactive ACAT programs6). 

These programs were budgeted for an estimated $5.1 billion for FYs 2014-2018. 

PEO IWS categorized the 20 programs we selected as follows:

 ACAT – 5

 Pre-MDAP – 1

 Non-ACATs – 8

 AAP – 1

 New Start – 1

 Inactive ACAT – 4

 

6 According to the PEO IWS Acquisition Officer, an Inactive ACAT program is one that has expended more than 90 percent of its RDT&E and 

Procurement Budget as defined in the Acquisition Program Baseline (APB) or one that has delivered more than 90 percent of its APB total 

quantity of end items.
ENCLOSURE 2: SCOPE AND METHODOLOGY

Enclosure 2

Page 2 of 2

For the 20 programs in our sample we obtained, reviewed, and evaluated the following 

documents, as appropriate, to verify that the program had approved requirements 

documentation before proceeding through the system development process:

 Mission Needs Statement

 Initial Capabilities Document

 Tentative Operational Requirements document

 Operational Requirement Document

 Capability Development Document

 Capability Production Document

 Rapid Deployment Capabilities document

 Specific Operating Requirements document

In addition, we reviewed the Acquisition Decision Memorandums for the ACAT

programs to ensure that the Milestone Decision Authority had approved the program to 

proceed to the next phase of the system development process. Further, we compared 

selected information shown on the list to information listed in the NAVSEA Acquisition 

Index dated 16 January 2013.

7

We coordinated efforts with the Government Accountability Office, the Department of 

Defense Inspector General, the Naval Inspector General, and the Naval Criminal 

Investigative Service to determine if these agencies had any current or planned projects 

which may have had an impact on this performance audit. Within the past 5 years, there 

were no audit reports issued specifically covering requirements documentation for 

acquisition programs or non-acquisition programs, so no followup was necessary.

We reviewed internal controls over requirements documentation. Specifically, we 

reviewed the procedures followed by PEO IWS to approve requirements documentation 

before programs proceeded through the system development process. In addition, we 

obtained Naval Sea Systems Command’s Management Internal Control Program 

Statement of Assurance for FYs 2011-2013 and reviewed the documentation to determine 

whether PEO IWS identified any reportable conditions relating to requirements 

documentation or any material weaknesses relating to our audit objective.

We conducted this performance audit in accordance with Generally Accepted 

Government Auditing Standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objective. We believe the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objective.

 

7

This listing of Naval Sea Systems Command programs is prepared twice a year. It is sent to NAVSEA Program Managers and to the

ASN (RD&A).
Enclosure 3

Page 1 of 1

Enclosure 3:

Pertinent Guidance

Office of Management and Budget (OMB) Circular A-123, Management’s 

Responsibility for Internal Control, dated December 21, 2004, provides guidance to 

Federal managers on improving the accountability and effectiveness of Federal programs 

and operations by establishing, assessing, correcting, and reporting on internal control.

Department of Defense Instruction (DODI) 5000.02, Operation of the Defense 

Acquisition System, dated December 8, 2008, establishes a simplified and flexible 

management framework for translating capability needs, and translating technology 

opportunities based on approved capability needs into stable, affordable, and 

well-managed acquisition programs that include weapon systems, services, and 

automated information systems. DODI 5000.02 provides the description and decision 

authority for Acquisition Categories (ACATs) I-III, as well as the types of requirements 

documentation mandated for each phase of the Defense Acquisition System. It also 

requires decision authorities to document program decisions in an Acquisition Decision 

Memorandum.

Secretary of the Navy (SECNAV) Instruction 5000.2 series, 1996 to present, provides 

mandatory procedures for the Department of the Navy’s implementation of higher level 

policy for major and non-major defense acquisition programs and information technology 

acquisition programs. SECNAV Instruction 5000.2 series adds ACAT IV, Abbreviated 

Acquisition Programs, and non-acquisition programs to the program categories defined in 

the DODI 5000.02.

Secretary of the Navy Manual 5000.2, Department of the Navy Acquisition and 

Capabilities Guidebook, dated May 2012, is intended to be used as a companion 

document to SECNAV Instruction 5000.2E. It contains citations from SECNAV

Instruction 5000.2E and other mandatory references for process clarification. 

SECNAV M-5000.2 further describes the management of the non-acquisition 

programs discussed in the SECNAV Instruction 5000.2 series.
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