GAO

United States General Accounting Office

Report to Congressional Committees

June 1999 DEFENSE 

MODERNIZATION 

ACCOUNT

Operations and 

Benefits

GAO/NSIAD-99-134

Page 1 GAO/NSIAD-99-134 Defense Modernization 

United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-282491 Letter

June 11, 1999

Congressional Committees

The Secretary of Defense or the secretary of a military department may 

transfer certain unexpired funds from their appropriations1

 to the Defense 

Modernization Account, established by law in 1996.2

 Funds must come 

from savings achieved through efficient management of procurement or 

support of installations and facilities.3

 Account funds may be used only for 

increasing procurement or for modernizing an existing system or a system 

being procured under an ongoing procurement program. Congressional 

intent in establishing the account was to encourage savings by the 

Department of Defense (DOD) and its military departments and to make 

those savings available for meeting shortfalls in funding for modernization. 

DOD is required to submit quarterly reports on the activities of the account 

to the six committees specified in the legislation.4

The legislation establishing the account requires us to review operations 

and benefits by March 1, 2000, and again by March 1, 2003. To satisfy the 

first review requirement, we determined the status of the funding and uses 

of the account, and whether DOD has reported to the six committees on 

the activities of the account.

Neither DOD nor the services have ever transferred funds into the Defense 

Modernization Account, and hence it has never been used. The services 

maintained that the reason for the inactivity in the account is that funds 

have not been available. In fact, the legislation prohibits the transfer of 

funds to the account if the secretary of a military department or the 

1

At the end of the period of availability of a fixed-year appropriation, the appropriation “expires” and is 

available only for recording, adjusting, and liquidating obligations chargeable to that appropriation. 

2

Section 912 of the National Defense Authorization Act for Fiscal Year 1996 (P.L.104-106).

3The statute provides that the Secretary of Defense and the secretaries of military departments may 

transfer unexpired funds in appropriation accounts available for procurement and unexpired funds 

available in the last 30 days of a fiscal year for support of installations and facilities, which are excess to 

requirements, to the Defense Modernization Account. 

4

The Senate Committees on Armed Services, on Appropriations, and on Governmental Affairs and the 

House Committees on National Security (now the Committee on Armed Services), on Appropriations, 

and on Government Reform and Oversight.
B-282491

Page 2 GAO/NSIAD-99-134 Defense Modernization 

Secretary of Defense determines that there are greater priorities for the use 

of funds. According to the Air Force, it uses available funds for other 

purposes such as reprogrammings or as offsets to congressionally directed 

rescissions. The Marine Corps stated that it does not have excess funds in 

support of installations, facilities, or procurement. The Navy emphasized 

the lack of availability of funds to use for the account. The Army stated 

that it has not been able to afford transfers to the account because of tight 

budgets, readiness priorities, and support for contingency operations not 

always completely reimbursed by supplemental appropriations.

We also found that DOD has never submitted any of the required quarterly 

reports on the activities of the account to the specified congressional 

committees. According to DOD, the reason reports have not been 

submitted is that the account has been inactive. Nevertheless, had DOD 

submitted reports, the committees would have been informed that the 

account has been inactive. 

DOD concurred with our findings. DOD also noted that considerable work 

had been done to formulate policies and procedures for operation of the 

account. 

To satisfy our final review requirement, we plan to look at the account and 

report on its status before March 1, 2003. Please call me on (202) 512-5140 if 

you or your staff have any questions about this report. 

Mark E. Gebicke

Director, National Security Preparedness Issues
B-282491

Page 3 GAO/NSIAD-99-134 Defense Modernization 

List of Congressional Committees

The Honorable John W. Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Ted Stevens

Chairman

The Honorable David K. Inouye

Ranking Minority Member 

Subcommittee of Defense

Committee on Appropriations

United States Senate

The Honorable Floyd Spence

Chairman

The Honorable Ike Skelton

Ranking Minority Member 

Committee on Armed Services

House of Representatives

The Honorable Jerry Lewis

Chairman

The Honorable John P. Murtha

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives

The Honorable Fred Thompson

Chairman

The Honorable Joseph I. Lieberman

Ranking Minority Member

Committee on Governmental Affairs

United States Senate
B-282491

Page 4 GAO/NSIAD-99-134 Defense Modernization 

The Honorable Dan Burton

Chairman

The Honorable Henry A. Waxman

Ranking Minority Member

Committee on Government Reform

House of Representatives

(701152) Letr
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