United States General Accounting Office

GAO Report to Congressional Requesters

September 1993 DRUG CONTROL

DOD Operated

Aerostat Ship Although

Conferees Denied

Funds

GAO/NSIAD-93-213

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-252952 

September 10, 1993

The Honorable Daniel K. Inouye

Chairman, Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable John P. Murtha

Chairman, Subcommittee on Defense

Committee on Appropriations

House of Representatives

Between 1989 and 1993, the U.S. Army operated three Small Aerostat

Surveillance System (SASS) ships to detect and monitor ships and aircraft

suspected of drug smuggling. The U.S. Coast Guard conducted similar

operations between 1987 and 1991, using Sea-Based Aerostat (SBA) ships.

In fiscal year 1992, the Department of Defense (DOD) Appropriations

conferees directed the transfer of the Coast Guard’s five SBA ships to the

Department of Defense’s (DOD) operational control to support Coast Guard

operations. While the conferees approved funding for the operation of the

five SBA ships, they approved funding for only two of the SASS ships.

The fiscal year 1993 DOD Appropriations Conference Report (H. Rpt.

102-1015) directed us to report on (1) DOD’s efforts to combine SBA and SASS

missions in the Caribbean and (2) DOD’s use of funds appropriated in fiscal

year 1992 for the operations and maintenance of SBA ships for purposes

not authorized by Congress.

Results in Brief As intended by the 1992 conferees, DOD took operational control of the five

Coast Guard SBA ships in December 1991 and combined SBA and SASS

counterdrug missions in the Caribbean in the following month. Although

the conferees funded the operation of seven ships, DOD decided to operate

only four ships: three SASS ships and one SBA ship in support of the Coast

Guard mission. It placed three other SBA ships into storage and used one

SBA ship for an SBA/SASS comparison test of operational capabilities.

In implementing this decision, DOD spent about $4.5 million of its fiscal

year 1992 funds to operate the third SASS ship (called SASS III). DOD took

this action even though the fiscal year 1992 appropriations conferees

declined to fund the third ship, and without processing the funding as a

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B-252952 

reprogramming. By doing so, DOD moved funds provided for specifically

requested projects to a project for which funds were specifically denied.

In addition, by failing to properly record this expenditure, DOD officials

could not show us which fiscal year 1992 account was used to fund SASS III

operations from January through September 1992 or how DOD realized

savings it stated were achieved within the counterdrug program.

Background The SBA and SASS ships are small, 200-foot, leased commercial vessels with

tethered blimps called aerostats (see fig. 1 and fig. 2). Radars mounted on

the aerostats are capable of detecting and monitoring ships and aircraft

suspected of drug smuggling. SASS ships supported the Army’s military

counterinsurgency mission in the Caribbean and Central America until

1989, when DOD assigned the ships to the counterdrug mission. Between

1987 and 1991, the Coast Guard deployed SBA ships to intercept illegal

maritime drug and immigration traffic.

Page 2 GAO/NSIAD-93-213 Drug Control
B-252952 

Figure 1: An SBA Ship

Source: U.S. Army.

Page 3 GAO/NSIAD-93-213 Drug Control
B-252952 

Figure 2: A SASS Ship

Source: U.S. Army.

DOD Combined SBA

and SASS Missions

DOD combined the SBA and SASS counterdrug missions in January 1992, 1

month after it took operational control of the five Coast Guard SBA ships.

The conferees intended that DOD operate the SBA ships to support the Coast

Guard’s counterdrug mission. Although the conferees funded the

operation of seven ships, DOD decided to reduce the total number to five to

meet its requirement in the Caribbean. The Army believed the SASS ships to

be more capable than the SBA ships and therefore decided to operate one

SBA and three SASS ships in a counterdrug role, use one SBA ship for an

SBA/SASS comparison test of operational capabilities, and place three SBA

ships into storage.

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B-252952 

After comparing both the costs and operational effectiveness of the SBA

and SASS ships, the Army concluded in the summer of 1992 that the SBA

ships were a better value than the SASS ships and opted to retire the three

SASS ships instead. By the spring of 1993, the Army had terminated the

operation of all three SASS ships. The Army currently operates all five SBA

ships in the Caribbean to support the counterdrug mission. The fifth SBA

ship was deployed on July 9, 1993. In order to provide the equipment to

allow military command and control, the Army removed military radios

from SASS ships and installed them on SBA ships.

DOD Continued SASS

III Operations Even

Though Conferees Did

Not Fund SASS III

DOD contracted to operate the third SASS ship—SASS III—even though the

congressional conferees, on the fiscal year 1992 defense appropriations,

had provided no funds for the project. We believe that DOD’s actions

committed it to a reprogramming; however, DOD did not process the

funding transaction as a reprogramming.

Army Awarded a Contract,

Although Funds Were Not

Approved

DOD’s fiscal year 1992 appropriation1 included a total of $38.4 million to

operate the SBA and SASS ships: $19.4 million for the SBA ships and

$19 million for SASS I and SASS II. DOD requested $16.2 million to operate

SASS III and a fourth ship, SASS IV, but the conferees provided no funds for

this purpose. Table 1 shows the congressionally approved operation and

maintenance funding levels and project codes for the SASS and SBA ships.

Table 1: Fiscal Year 1992 Funds

Approved for the Operations and

Maintenance of SASS and SBA Ships

Dollars in millions

Project Code

Amount

approved

SASS I 2312 $10.9

SASS II 2306 8.1

SASS III/IV 2311 0.0a

SBA None 19.4

Total $38.4b

Note: Fiscal year 1992 DOD Appropriations Conference Report (H. Rpt. 102-328), November 18,

1991.

aDOD requested $16.2 million for SASS III/IV, but the conferees did not include funds for this

project.

bAccording to the SBA Product Manager, $2.3 million was reprogrammed on September 12,

1992, from the “Drug Interdiction and Counterdrug Activities - Defense” account to cover

unanticipated costs to conduct SBA/SASS comparison tests and install SASS military radios on

SBA ships. This brought the fiscal year 1992 total expenditure for SBA and SASS to $40.7 million.

1

Public Law 102-172, November 26, 1991.

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B-252952 

Table 1 shows clearly that no funds were approved for the third SASS

ship—SASS III. Notwithstanding the conferees’ denial of funds for SASS III,

the Army awarded a contract that included operating funds for SASS III.

The contract was awarded on December 31, 1991—1 month after the

conference report was issued (Nov. 18) and the appropriations act became

law (Nov. 26). DOD spent about $4.5 million to operate SASS III from January

through September 1992.

Although Army officials confirmed that the contract was signed after the

denial of SASS III funding, officials from the Office of the Secretary of

Defense told us they were not aware of the December 1991 contract2

 and

that contract execution is the responsibility of Army program officials.

The Chairmen of the Subcommittees on Defense, Senate and House

Appropriations Committees, in a joint letter dated March 18, 1992, to the

Secretary of Defense, explained their position regarding the funding of

SASS III. (See app. I.) The Chairmen stated that because the conferees had

denied funding for SASS III and IV for fiscal year 1992, no funds could be

transferred to these projects during the fiscal year and that DOD’s failure to

operate the SBA ships (in support of the Coast Guard counterdrug mission)

was a “clear violation” of the conferees’ intent. The Chairmen specifically

objected to “standing down” the Coast Guard ships. In addition, according

to the Coast Guard, DOD’s deactivation of SBAs was unresponsive to its

counterdrug requirements.

DOD Did Not Follow

Reprogramming

Regulations

DOD regulations define reprogramming actions as changes in the

application of financial resources from the purpose originally

contemplated and budgeted for, testified to, and described to Congress in

budget requests. The regulations set forth specific procedures that must be

followed when funds are reprogrammed, including seeking approval from

House and Senate Armed Services and Appropriations Committees in

some circumstances and notifying the Committees in others.3

DOD had requested specific funding from Congress for SASS I, SASS II, SASS

III/IV, and the SBA ships. The appropriations conferees responded to DOD’s

request in a similarly specific format, providing funds for all but SASS III/IV,

for a total of $38.4 million. DOD then placed three SBAs in storage, used one

2

The Army operated SASS I, II, and III from October through December 1991 by extending an existing

fiscal year 1991 contract. This contract expired on December 31, 1991.

3

DOD Directive 7250.5, “Reprogramming of Appropriated Funds,” Jan. 9, 1980, and DOD Instruction

7250.10, “Implementation of Reprogramming of Appropriated Funds,” Jan. 10, 1980.

Page 6 GAO/NSIAD-93-213 Drug Control
B-252952 

for operational testing, operated the remaining SBA, and continued to

operate SASS III, although no funds were approved.

The Army’s obligation of funds in the December 31, 1991, contract award

to continue operation of SASS III from January through September 1992

committed the Army to a reprogramming, since the conferees had

specifically denied funds for SASS III. Given the conferees’ action and DOD’s

knowledge of their interest in the SBA/SASS mission, DOD should have

processed the funding of SASS III as a reprogramming action.

DOD Financial

Controls Not Adhered

to

The Army project office obligated funds and signed a SASS contract

(including SASS III) without a valid Funding Authorization Document. Army

officials told us that they contracted for SASS III based on verbal

authorization from headquarters Army officials. However, under DOD and

Army regulations, funds cannot be obligated or contracts entered into

without a Funding Authorization Document.4

Although DOD officials subsequently provided us with two Funding

Authorization Documents, neither document supported the contract

award. One document was issued in March 1992, 3 months after the

contract was awarded, and although it addressed counterdrug projects, it

did not specifically include the operation of SASS III. The other document,

issued in early December 1991, addressed SASS III operations prior to

December 31, 1991. The Army extended a contract on October 1, 1991,

under fiscal year 1992 Continuing Resolution authority5

 for SASS operations

for the first quarter of the fiscal year.

Because DOD did not properly document the source of funds used to

operate SASS III from January through September 1992, it could not show

whether the funds came from the fiscal year 1992 “Drug Interdiction and

Counterdrug Activities—Defense” or some other defense account.

Although DOD stated that it funded SASS III operations from savings in other

areas, without the proper documentation, the source and amount of such

savings cannot be determined.

4

DOD Accounting Manual, 7220.9-M, chapter 25, October 1983 (Change 9, June 6, 1988); Army

Regulation 37-1, Army Accounting and Fund Control, chapter 6, April 30, 1991.

5

Public Law 102-109, September 30, 1991.

Page 7 GAO/NSIAD-93-213 Drug Control
B-252952 

Agency Comments

and Our Evaluation

DOD disagreed with our report, stating that it did not violate the intent of

Congress regarding the operation of SASS III during fiscal year 1992.

(See app. II.) DOD believed that while Congress did not fund SASS III

operations for fiscal year 1992, it did so for budgetary reasons rather than

a desire to prohibit SASS III operations. Consequently, DOD believed that

because it funded SASS III operations from savings in other parts of the

program, it did not contravene the intent of Congress.

In our opinion, DOD’s decision to store three SBAs and to fund SASS III was a

significant departure from the fiscal year 1992 conference report. Under

these circumstances, we think DOD at a minimum should have sought

clarification from Congress on this matter. In fact, while DOD may have

believed that funds for SASS III were denied strictly for budgetary reasons,

it concedes that the conferees’ denial of funds could reasonably have been

viewed as a denial of SASS III operations. Moreover, the March 18, 1992,

letter sent to the Secretary of Defense by the Chairmen of the

Subcommittees on Defense of the Senate and House Appropriations

Committees clarified their intent that SASS III was not to be operated

during fiscal year 1992.

DOD also stated that its reprogramming regulations were not applicable to

SASS III because its operations were funded through SBA savings within the

same program element, thus representing a reprioritization of funds rather

than a reprogramming. However, reprioritization generally refers to

funding changes within program elements that are often necessitated by,

for example, delays in contract performance or increases due to changed

priorities. These changes are usually considered to be minor and not

controversial. Because the conferees specifically denied fiscal year 1992

funding for SASS III and because the Chairmen expressly stated in

March 1992 that no funds were to be transferred to SASS III during the

fiscal year, we believe the SASS III funding change could not be viewed as

minor or noncontroversial. Further, absent funding documentation, DOD

has not been able to show that the $4.5 million transferred to SASS III came

from savings within the program element. In our view, terming its action a

reprioritization instead of a reprogramming does not alter the fact that DOD

moved funds provided for specifically requested projects to a project for

which funds were specifically denied.

DOD also suggested that Congress endorsed suspension of reprogramming

procedures to the counterdrug mission based on a statement in the

conference report that some flexibility is needed to transfer funds between

appropriations and that “the Committees must be able to track these

Page 8 GAO/NSIAD-93-213 Drug Control
B-252952 

transfers without going through the reprogramming process.” DOD said that

the report thus “clearly indicates that regular reprogramming procedures

were not applicable to the counterdrug program for FY 1992.”

The conference report explicitly states that “Formal reprogramming

procedures will need to be followed for . . . any adjustments to

Congressional interest items.” In fact, DOD applied reprogramming

procedures to another counterdrug funding transfer between the same two

accounts. DOD formally reprogrammed $2.3 million from the Drug

Interdiction and Counterdrug Activities - Defense account to the

Operations and Maintenance, Army, account to conduct SBA/SASS tests.

Thus, DOD’s view that regular reprogramming procedures were not

applicable to the $4.5 million SASS III transaction is inconsistent with its

reprogramming of the $2.3 million.

DOD also said that it kept congressional oversight committees thoroughly

and continually informed in a timely manner about its management

decisions regarding SASS III operations in fiscal year 1992. However, when

we asked DOD officials for documentation to support this statement, they

referred to notes indicating contact with appropriations committees

shortly before counterdrug oversight hearings in March 1992, 3 months

after the conference report was issued. DOD officials agreed that the notes

did not show or in any way suggest the Committees’ approval to continue

SASS III operations.

Scope and

Methodology

We met with and received documents from the U.S. Army Product

Manager, Ocean-Based Aerostats. We also met with officials and reviewed

documents from the Office of the Secretary of Defense, the Joint Staff, the

U.S. Commander in Chief Atlantic and its Joint Task Force 4, and the U.S.

Coast Guard. We analyzed these documents, compared available budget

and financial data, and reviewed pertinent legislation.

We conducted our review from December 1992 to June 1993 in accordance

with generally accepted government auditing standards.

We are sending copies of this report to the Chairmen, Senate and House

Committees on Appropriations; the Secretaries of Defense and the Army;

the Commandant, U.S. Coast Guard; and the Director, Office of

Management and Budget. We will also make copies available to others on

request.

Page 9 GAO/NSIAD-93-213 Drug Control
B-252952 

Please contact me at (202) 512-3504 if you or your staff have any questions

concerning this report. Major contributors to this report were Gary K.

Weeter, Assistant Director; Elizabeth G. Mead, Evaluator-in-Charge; and

Richard B. Kelley, Evaluator.

Richard Davis

Director, National

 Security Analysis

Page 10 GAO/NSIAD-93-213 Drug Control
Page 11 GAO/NSIAD-93-213 Drug Control
Appendix I 

Letter From Defense Appropriations

Subcommittee Chairmen on Aerostat Ship

Operations

Page 12 GAO/NSIAD-93-213 Drug Control
Appendix II 

Comments From the Department of Defense

Page 13 GAO/NSIAD-93-213 Drug Control
Appendix II 

Comments From the Department of Defense

Page 14 GAO/NSIAD-93-213 Drug Control
Appendix II 

Comments From the Department of Defense

Now on pp. 4-5.

Page 15 GAO/NSIAD-93-213 Drug Control
Appendix II 

Comments From the Department of Defense

Now on pp. 5-6.

Page 16 GAO/NSIAD-93-213 Drug Control
Appendix II 

Comments From the Department of Defense

Page 17 GAO/NSIAD-93-213 Drug Control
Appendix II 

Comments From the Department of Defense

Now on pp. 6-7.

Page 18 GAO/NSIAD-93-213 Drug Control
Appendix II 

Comments From the Department of Defense

Page 19 GAO/NSIAD-93-213 Drug Control
Appendix II 

Comments From the Department of Defense

Now on p. 7.

(395221) Page 20 GAO/NSIAD-93-213 Drug Control
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