MARINE CORPS 

DEPOT 

MAINTENANCE

Budgeting and 

Management of 

Carryover Could Be 

Improved

Report to the Chairman, Subcommittee 

on Readiness and Management 

Support, Committee on Armed 

Services, U.S. Senate

June 2012

GAO-12-539

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-539, a report to the 

Chairman, Subcommittee on Readiness and 

Management Support, Committee on Armed 

Services, U.S. Senate 

June 2012 

MARINE CORPS DEPOT MAINTENANCE 

Budgeting and Management of Carryover Could Be 

Improved

Why GAO Did This Study

The Marine Corps DMAG repairs and 

overhauls weapon systems and 

support equipment to battle-ready 

condition for deployed and soon-to-be 

deployed units. To the extent that 

DMAG does not complete work at 

year-end, the work and related funding 

will be carried over into the next fiscal 

year. Carryover is the reported dollar 

value of work that has been ordered 

and funded by customers but not 

completed by DMAG at the end of the 

fiscal year. GAO was asked to 

determine (1) if DMAG’s actual 

carryover exceeded the allowable 

amount and actions the Marine Corps 

is taking to reduce carryover; (2) if 

budget information on DMAG carryover 

approximated actual results; (3) if there 

was growth in carryover during the 

period of OIF/OEF and the reasons for 

any such growth; and (4) reasons for 

recent years’ carryover. To address 

these objectives, GAO (1) reviewed 

relevant carryover guidance, 

(2) obtained and analyzed reported 

carryover and related data for DMAG

against requirements, and 

(3) interviewed DOD, Navy, and 

Marine Corps officials.

What GAO Recommends

GAO recommends that DOD improve 

the budgeting and management of 

DMAG carryover by comparing 

budgeted to actual information on 

carryover and orders and making 

adjustments to budget estimates as 

appropriate. DOD concurred with 

GAO’s recommendations and cited 

related actions planned. 

What GAO Found

GAO’s analysis of Marine Corps depot maintenance activity group (DMAG) 

reports showed that from fiscal years 2004 through 2011, reported actual 

carryover exceeded the allowable amounts in the most recent 6 years of the 

8- year period, ranging from $59 million in fiscal year 2007 to $7 million in fiscal 

year 2011. GAO’s analysis also showed that the amounts of carryover exceeding 

the allowable amounts have declined in each of the past 4 years. These 

reductions could be attributed to DMAG actions, including implementing

production efficiencies that reduced the time required to repair weapon systems. 

In contrast, DMAG’s budgeted carryover amounts were less than the allowable 

amounts for all 8 years GAO reviewed. In the most recent 6 years, DMAG’s 

reported actual carryover amounts exceeded budgeted carryover by at least 

$50 million. GAO’s analysis showed this occurred because the Marine Corps 

underestimated DMAG’s new orders every year during this 6-year period from a 

low of 51 percent to a high of 175 percent.

Table: Comparison of Budgeted and Reported Actual DMAG Carryover That Was Over or 

Under the Allowable Amounts (Fiscal Years 2004–2011) 

Dollars in millions

Fiscal year

Budgeted over 

(under) allowable 

Actual over (under) 

allowable Difference 

2004 ($32) ($6) $26 

2005 (30) (26) 4

2006 (32) 21 53

2007 (19) 59 78

2008 (43) 39 82 

2009 (58) 38 95

2010 (74) 19 93

2011 (68) 7 75

Source: GAO analysis of Marine Corps DMAG budgets.

Note: Dollar amounts do not always add due to rounding. 

The reported dollar value of DMAG carryover significantly increased during the 

initial years of Operation Iraqi Freedom/Operation Enduring Freedom (OIF/OEF) 

from $49 million in fiscal year 2002 to $271 million in fiscal year 2005. This 

increase could be primarily attributed to new orders from customers more than

tripling over this period. GAO’s analysis found that the increase in new orders 

was the result of higher depot maintenance requirements supporting OIF/OEF. 

Since fiscal year 2005, reported actual carryover amounts have remained 

relatively stable, averaging $296 million or 6.4 months of work. 

GAO identified three factors that were key to DMAG’s carryover in fiscal years 

2010 and 2011 including: (1) experiencing unanticipated increases in its

workload requirements, (2) starting DMAG work on new orders later in the fiscal 

year because it was already performing work on other orders, and (3) accepting 

amendments on existing orders in the last quarter of the fiscal year that 

increased the scope of work. 

View GAO-12-539. For more information, 

contact Asif A. Khan at (202) 512-9869 or 

khana@gao.gov. 
Page i GAO-12-539 Marine Corps Depot Maintenance

Letter 1 

Background 3

DMAG Reported Actual Carryover Exceeded the Allowable 

Amount Since Fiscal Year 2006, but Actions Are Under Way to 

Reduce Carryover 5

Marine Corps Underestimated Carryover in Its Budgets 7

DMAG Carryover Grew Significantly as a Result of OIF/OEF 12

Primary Reasons for Carryover at the End of Fiscal Years 2010 and 

2011 15

Conclusions 21

Recommendations for Executive Action 22

Agency Comments and Our Evaluation 22

Appendix I Scope and Methodology 24

Appendix II Comments from the Department of Defense 26

Appendix III GAO Contact and Staff Acknowledgments 28

Tables

Table 1: Comparison of DMAG Reported Actual Carryover and 

Allowable Carryover (Fiscal Years 2004–2011) 6

Table 2: Comparison of Budgeted and Actual DMAG Carryover 

That Was Over or Under the Allowable Amounts (Fiscal 

Years 2004–2011) 8

Table 3: DMAG Budgeted New Orders Compared to Actual New 

Orders (Fiscal Years 2004–2011) 11

Table 4: Comparison of DMAG Financial Management Information 

during Pre-, Early Buildup, and Continuing OIF/OEF 14

Table 5: Summary of Primary Reasons for DMAG Carryover by 

Number of Orders in Each Category (Fiscal Years 2010–

2011) 16

Contents
Page ii GAO-12-539 Marine Corps Depot Maintenance

Figures

Figure 1: DMAG Budgeted New Orders, Revenue, and Carryover 

(Fiscal Years 2004–2011) 9

Figure 2: DMAG Actual New Orders, Revenue, and Carryover (as 

Shown in DMAG Budgets for Fiscal Years 2004–2011) 10

Figure 3: DMAG Reported Actual New Orders, Revenue, Carryover, 

and Months of Carryover (Fiscal Years 1998–2011) 13

Abbreviations

DMAG depot maintenance activity group

DOD Department of Defense

HMMWV High Mobility Multi-purpose Wheeled Vehicles

LAV Light Armored Vehicle

MCLC Marine Corps Logistics Command

OIF/OEF Operation Iraqi Freedom/Operation Enduring Freedom

SMC Supply Management Center

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

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Page 1 GAO-12-539 Marine Corps Depot Maintenance

United States Government Accountability Office 

Washington, DC 20548

June 19, 2012

The Honorable Claire McCaskill

Chairman

Subcommittee on Readiness 

and Management Support

Committee on Armed Services

United States Senate

Dear Madam Chairman:

The Marine Corps depot maintenance activity group (DMAG) is part of the 

Navy Working Capital Fund. It provides for the repair and overhaul of 

weapon systems and support equipment to battle-ready condition for 

deployed and soon-to-be deployed Marine Corps units, including 

repairing and overhauling such Marine Corps ground combat vehicles 

and equipment as the High Mobility Multi-purpose Wheeled Vehicles 

(HMMWV) and Assault Amphibious Vehicles.

DMAG operates two maintenance centers1

 

1

The two maintenance centers are the Albany maintenance center, Albany, Georgia; and 

the Barstow maintenance center, Barstow, California.

under the working capital fund 

concept, under which customers (such as the military services) are to be 

charged for the anticipated full cost of goods and services provided. To 

the extent that DMAG does not complete work at year-end, the work and 

related funding are to be carried into the next fiscal year. The term 

“carryover” refers to the reported dollar value of DMAG work that has 

been ordered and funded (obligated) by customers (such as the Marine 

Corps) but not completed by DMAG at the end of the fiscal year. The 

congressional defense committees have recognized that some carryover 

is appropriate to facilitate a smooth flow of work during the transition from 

one fiscal year to the next. However, past congressional defense 

committee reports have raised concerns that the level of carryover in 

military service working capital funds may be more than is needed. 

Excessive amounts of carryover financed with customer appropriations 

may result in future requests being subject to reductions by the 

Department of Defense (DOD) and the congressional defense 

committees during the budget review process.

 
 

Page 2 GAO-12-539 Marine Corps Depot Maintenance

In response to your request, this report provides the results of our 

assessment to determine (1) if DMAG reported actual carryover 

exceeded the allowable amount of carryover from fiscal years 2004 

through 2011 and any actions the Marine Corps is taking to reduce 

carryover; (2) if budget information on DMAG carryover from fiscal years 

2004 through 2011 approximated reported actual results; (3) if there was 

growth in DMAG carryover during the period of Operation Iraqi 

Freedom/Operation Enduring Freedom (OIF/OEF)2

To address the first and second objectives, we obtained and analyzed 

DMAG reports that contained information on budgeted and reported 

actual carryover against the allowable amount of carryover for fiscal years 

2004 through 2011. We analyzed carryover since fiscal year 2004 

because prior to fiscal year 2004 DOD had a different policy for 

determining the allowable amount of carryover. We met with responsible 

officials from the Navy and Marine Corps to determine the reasons for 

significant variances between (1) reported actual carryover and the 

allowable amount or (2) budgeted and reported actual carryover. We also 

met with these officials to discuss the actions the Marine Corps has and is 

taking to reduce the amount of carryover.

and the reasons for 

any such growth; and (4) the reasons for the fiscal years 2010 and 2011 

carryover. 

To address the third objective, we analyzed reported order, revenue, and 

carryover amounts and months of carryover from fiscal years 1998 

through 2011 to determine the extent to which OIF/OEF impacted DMAG 

workload and carryover. We selected the period from fiscal years 1998 

through 2011 to highlight any changes in reported actual carryover 

information from the period before and during OIF/OEF. We reviewed and 

analyzed Marine Corps documentation, including the DMAG budgets, to 

determine the reasons for the growth in carryover.

To address the fourth objective, we met with responsible officials from the 

Navy and Marine Corps to identify contributing factors that led to the 

 

2

Since the September 11, 2001, terrorist attacks, the Department of Defense has been 

engaged in overseas military operations around the world. These operations include 

Operation Enduring Freedom that takes place principally in and around Afghanistan, but 

also covers additional operations in the Horn of Africa, the Philippines, and elsewhere, 

and Operation Iraqi Freedom that focuses principally on Iraq. Customers have issued 

orders to DMAG since operations began for the overhaul and repair of military equipment 

in support of these operations.
 

Page 3 GAO-12-539 Marine Corps Depot Maintenance

carryover. We also performed walkthroughs of the Albany and Barstow 

maintenance centers’ operations and discussed with officials reasons for 

fiscal years 2010 and 2011 carryover. In order to more fully understand 

the reasons for carryover at the maintenance centers, we obtained and 

analyzed 60 orders (30 orders for fiscal year 2010 and 30 orders for fiscal 

year 2011) that had the largest dollar amount of carryover. Carryover 

amounts associated with these orders represented 49 percent and 68 

percent of DMAG’s total carryover for fiscal years 2010 and 2011, 

respectively. We selected 60 orders because they were the largest and 

most recent orders at the time of our audit. We reviewed the orders and 

related amendments and discussed the information in these documents 

with Marine Corps and DMAG maintenance center officials at Albany and 

Barstow to determine the reasons for the carryover. Further details on our 

scope and methodology are provided in appendix I.

We conducted this performance audit from July 2011 through June 2012 

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 objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. We requested comments on a 

draft of this report from the Secretary of Defense or his designee. Written 

comments from the Office of the Under Secretary of Defense 

(Comptroller) are reprinted in appendix II.

The Marine Corps Logistics Command (MCLC) (Programs and 

Resources Department), in conjunction with the Office of the Marine 

Corps Deputy Commandant (Programs and Resources) are responsible 

for developing DMAG’s budget. The budget is then submitted to the 

Office of the Assistant Secretary of the Navy (Financial Management and 

Comptroller) for review and inclusion in the Navy Working Capital Fund 

budget submission to Congress. 

DMAG relies on sales revenue rather than direct appropriations to finance 

its continuing operations. DMAG is intended to (1) generate sufficient 

resources to cover the full costs of its operations and (2) operate on a 

break-even basis over time—that is, neither make a gain nor incur a loss. 

Customers, such as the Marine Corps, use appropriated funds, (primarily 

operations and maintenance and to a lesser extent procurement 

appropriations), to finance orders placed with DMAG. DMAG repairs, 

overhauls, and modifies all types of ground combat and combat support 

Background
 

Page 4 GAO-12-539 Marine Corps Depot Maintenance

equipment, including such major-end items as the HMMWV, Medium 

Tactical Vehicle Replacement, Assault Amphibious Vehicle, and the Light 

Armored Vehicle (LAV).

DOD uses the term “carryover” to refer to the reported dollar value of 

working capital fund activities work that has been ordered and funded 

(obligated) by customers but not completed by the end of the fiscal year. 

As such, carryover consists of both the unfinished portion of working 

capital fund activities work started but not completed, as well as work that 

was accepted, but that has not yet begun. Both DOD and congressional 

defense committees have agreed that some carryover is appropriate at 

the end of the fiscal year in order for working capital funds to operate 

efficiently and effectively. For example, if customers do not receive new 

appropriations at the beginning of the fiscal year, carryover is necessary 

to ensure that working capital fund activities (1) have enough work to 

continue operations in the new fiscal year and (2) retain the appropriate 

number of personnel with sufficient skill sets to perform depot 

maintenance work. Too little carryover could result in some personnel not 

having work to perform at the beginning of the fiscal year. On the other 

hand, too much carryover could result in an activity group receiving funds 

from customers in one fiscal year but not performing the work until well 

into the next fiscal year. By limiting the amount of carryover, DOD can 

use its resources in the most efficient and effective manner and minimize 

the backlog of work and “banking” of related funding for work and 

programs to be performed in subsequent years.

DOD’s carryover policy is provided in DOD Financial Management 

Regulation 7000.14-R, volume 2B, chapter 9. Under the policy, the 

allowable amount of carryover each year is based on the amount of new 

orders received in a given year and the outlay rate of the customers’ 

appropriations financing the work.3

 

3

The outlay rate for appropriations is contained in the DOD Financial Summary Tables, 

which are published each year. The outlay rate figures may vary from year to year.

For example, DMAG received about 

$462 million in new orders funded with the Marine Corps operation and 

maintenance appropriation—one of several appropriations funding orders 

DMAG received in fiscal year 2010. The DOD outlay rate for this 

appropriation was 57.5 percent. Therefore, the amount of funds DMAG 

Carryover and Its Use

DOD’s Carryover Policy
 

Page 5 GAO-12-539 Marine Corps Depot Maintenance

was allowed to carry over into fiscal year 2011 was $196 million ($462 

million multiplied by 42.5 percent, which represents 1 minus the 57.5 

percent outlay rate for the operation and maintenance, Marine Corps 

appropriation). The DOD carryover policy provides that the work on the 

fiscal year 2010 orders is expected to be completed by the end of fiscal 

year 2011. According to the DOD regulation, this carryover metric allows 

for an analytical-based approach that holds working capital fund activities 

to the same standard as general fund execution and allows for 

meaningful budget execution analysis.

In accordance with the DOD Financial Management Regulation,4

 (1) 

nonfederal orders, (2) non-DOD orders, (3) foreign military sales, (4) work 

related to base realignment and closure, and (5) work-in-progress are to 

be excluded from the carryover calculation. The reported actual carryover 

(net of exclusions) is then compared to the amount of allowable carryover 

using the above-described outlay-rate method to determine whether the 

actual carryover amount is over or under the allowable carryover amount.

Our analysis of DMAG reports showed that from fiscal year 2004 through 

fiscal year 2011, reported actual carryover exceeded the allowable 

amounts in 6 of the 8 years. During the most recent 6-year period, the 

reported amounts of actual carryover exceeded the allowable amounts 

each year, ranging from a high of $59 million in fiscal year 2007 to a low 

of $7 million in fiscal year 2011. Our analysis also showed that the extent 

to which DMAG carryover exceeded the allowable amounts declined each 

year since fiscal year 2007. Table 1 shows the reported DMAG actual 

carryover, allowable carryover, and the amount over (or under) the 

allowable carryover for fiscal years 2004 through 2011.

 

4

See DOD Financial Management Regulation 7000.14-R, vol. 2B, ch. 9, Defense Working 

Capital Funds Activity Group Analysis, § 090204(c)(3) (June 2010), for orders excluded 

from the carryover calculation. 

DMAG Reported 

Actual Carryover 

Exceeded the 

Allowable Amount 

Since Fiscal Year 

2006, but Actions Are 

Under Way to Reduce 

Carryover
 

Page 6 GAO-12-539 Marine Corps Depot Maintenance

Table 1: Comparison of DMAG Reported Actual Carryover and Allowable Carryover 

(Fiscal Years 2004–2011)

Dollars in millions

Fiscal year Actual carryover Allowable carryover

Actual over (under) 

allowable amount 

2004 $166 $171 ($6) 

2005 263 288 (26) 

2006 274 254 21

2007 270 211 59

2008 324 284 39

2009 281 244 38

2010 315 296 19

2011 281 274 7 

Source: GAO analysis of DMAG data.

Note: Actual over (under) allowable dollar amounts do not always add due to rounding. 

According to MCLC (Programs and Resources Department) officials, 

DMAG has implemented actions to reduce carryover, and actions taken 

have contributed to recent declines in the carryover amounts that 

exceeded the allowable amounts. Specifically, these officials cited the 

following four actions:

• Beginning in the second quarter of each fiscal year, MCLC evaluates 

new orders for their impact on the amount of workload that will carry 

over to the next fiscal year that potentially could exceed the allowable 

amount. Considering the impact that new orders have on carryover, in 

2008 MCLC established criteria for the acceptance of new orders 

including (1) determining if the customer order supports OIF/OEF 

workload and if there are viable alternatives to the scope of the order 

and/or source of repair for which the customer is able to mitigate, and 

(2) determining whether there are alternatives that DMAG can use to 

avoid carrying over workload into the new fiscal year (i.e., increase 

overtime, augment personnel, and/or subcontract portions of the 

workload).

• Beginning in 2008, DMAG formed a working group to engage its 

customers and the Defense Finance and Accounting Service to 

reduce times for closing completed orders. In addition, DMAG closed 

out orders with small remaining balances that reduced the unobligated 

balances on the orders. For example, DMAG has earned an additional 

$2.3 million in revenue in fiscal year 2011 due to an August 2011 
 

Page 7 GAO-12-539 Marine Corps Depot Maintenance

change to the Defense Industrial Financial Management System to 

automatically bill to revenue the residual dollar amounts left on 

customer orders. This reduced the customers’ outstanding 

unliquidated obligation balances to zero—thus eliminating $2.3 million 

in fiscal year 2011 that would carry over to the next fiscal year.

• Twice annually, DMAG formally meets with its major customers to 

validate the current and upcoming fiscal year workload requirements 

and modify plans at the MCLC maintenance centers to address 

current bona fide need of the orders. Beginning in the 2007-2008 time 

frame, MCLC began developing mitigating strategies for controlling or 

reducing carryover due to the elevated carryover levels (i.e., schedule 

realignments or alternate sources of repair or supply).

• MCLC’s two maintenance centers have implemented production and 

workflow efficiencies, including new concepts of operations intended 

to streamline operations, that are expected to reduce repair cycle 

times for damaged weapon systems. For example, efforts to improve 

the efficiency of production processes for a variant of the HMMWV at 

the Barstow maintenance center reduced repair cycle time by 45 days 

from 86 days in fiscal year 2010 to 41 days in fiscal year 2011. 

Reduced repair cycle times allow the centers to perform more work in 

the same period of time, generating more revenue by the centers and 

thus reducing carryover.

DMAG budget estimates for carryover were consistently less than 

allowable amounts each year from fiscal year 2004 through fiscal year 

2011. However, in contrast, for the most recent 6 years, DMAG’s actual 

reported amount of carryover exceeded budgeted carryover amounts by at 

least $50 million each year. Our analysis showed the actual amounts of 

reported carryover exceeded budgeted amounts primarily because the 

Marine Corps underestimated DMAG’s new orders received from 

customers. Reliable budget information on carryover is critical because 

decision makers use this information when reviewing DMAG’s budgets. 

Table 2 summarizes the dollar amounts of budgeted and actual DMAG 

carryover that was over or under the allowable dollar amounts and the 

difference as shown in DMAG budgets for fiscal years 2004 through 2011.

Marine Corps 

Underestimated 

Carryover in Its 

Budgets
 

Page 8 GAO-12-539 Marine Corps Depot Maintenance

Table 2: Comparison of Budgeted and Actual DMAG Carryover That Was Over or 

Under the Allowable Amounts (Fiscal Years 2004–2011)

Dollars in millions

Fiscal year

Budgeted over (under) 

allowable amount

Actual over (under) 

allowable amount Difference 

2004 ($32) ($6) $26 

2005 (30) (26) 4 

2006 (32) 21 53

2007 (19) 59 78

2008 (43) 39 82

2009 (58) 38 95

2010 (74) 19 93

2011 (68) 7 75

Source: GAO analysis of DMAG budgets.

Note: Dollar amounts do not always add due to rounding. 

Our analysis of DMAG budget documents showed that for fiscal years 

2004 through 2011, the Marine Corps budgeted DMAG’s revenue (work 

to be performed) to be more than the budgeted dollar value of new orders 

to be received each year. Specifically, during the 8-year period, the 

DMAG budgets showed revenue would be approximately $2.5 billion. 

This revenue estimate was almost $400 million more than the budgeted 

$2.1 billion for expected new orders. As a result, planned carryover would 

remain relatively stable and under $100 million. Figure 1 shows the 

DMAG budgeted new orders, revenue, and carryover amounts for fiscal 

years 2004 through 2011.
 

Page 9 GAO-12-539 Marine Corps Depot Maintenance

Figure 1: DMAG Budgeted New Orders, Revenue, and Carryover (Fiscal Years 2004–2011)

Note: Dollar amounts do not always add due to rounding. 

Although the Marine Corps budgeted for DMAG’s revenue to exceed new 

orders and carryover to remain relatively stable as shown in figure 1, 

subsequent DMAG reporting showed that for fiscal years 2004 through 

2011, it actually received more new orders than revenue as shown in 

figure 2. In fact, for 5 of the 8 years, reported actual new orders received 

exceeded actual revenue. For the 8-year period, actual reported revenue 

was about $4.1 billion or $156 million less than the $4.3 billion in actual 

reported new orders received. As a result, reported actual carryover 

increased from a low of $168 million in fiscal year 2004 to a high of $326 

million in fiscal year 2008 during the 8-year period. Figure 2 shows the 

actual new orders, revenue, and carryover amounts shown in DMAG 

budgets for fiscal years 2004 through 2011.
 

Page 10 GAO-12-539 Marine Corps Depot Maintenance

Figure 2: DMAG Actual New Orders, Revenue, and Carryover (as Shown in DMAG Budgets for Fiscal Years 2004–2011)

Our further analysis of DMAG budget documents showed that the Marine 

Corps significantly underestimated the amount of new orders to be 

received from DMAG’s customers. As shown in figure 1, from fiscal years 

2004 through 2011, DMAG budgeted to receive about $2.1 billion in new 

orders, but as shown in figure 2, subsequent DMAG records showed that 

it actually received about $4.3 billion in new orders. As a result, DMAG’s 

budget underestimated new orders received from customers by a 

cumulative total of about $2.2 billion over the 8-year period we reviewed. 

Furthermore, DMAG records showed that actual new orders received 

from customers exceeded budgeted orders ranging from 51 percent in 

fiscal year 2010 to 175 percent in fiscal year 2006 over the 8-year period. 

Table 3 shows a comparison between budgeted and actual new orders 

for fiscal years 2004 through 2011 based on DMAG budget 

documentation.
 

Page 11 GAO-12-539 Marine Corps Depot Maintenance

Table 3: DMAG Budgeted New Orders Compared to Actual New Orders (Fiscal 

Years 2004–2011)

Dollars in millions

Fiscal year New orders budget New orders actual Percent increase

2004 $180 $364 102%

2005 213 583 174

2006 187 515 175

2007 190 462 143

2008 259 607 134

2009 361 551 53

2010 404 612 51

2011 295 609 106

Source: GAO analysis of DMAG budgets.

According to MCLC (Programs and Resources Department) officials, the 

Marine Corps formulates its budgets for new orders based on 

documented customer requirements—that is, for which the customers 

provide DMAG with letters of intent. Letters of intent documents the dollar 

amount of work the customers intend to provide to DMAG for various 

weapon systems and equipment repair and overhaul. These estimated 

amounts are used by the Marine Corps for forecasting DMAG workload 

as well as for budgeting.

In September 2009, the Marine Corps DMAG budget analyst from the 

Office of the Under Secretary of Defense (Comptroller) stated that DMAG 

needed more reliable information on budgeted new orders. In information 

exchanges between the office’s budget analyst and the Marine Corps, the 

analyst suggested that the Marine Corps increase fiscal year 2011 

budgeted new orders to approximate the fiscal year 2009 levels assuming 

the new orders are still expected to be near the fiscal year 2009 level, 

even if DMAG did not have letters of intent to support this workload. 

However, the Marine Corps did not increase the budgeted new order 

amount because it was not documented in letters of intent. As shown in 

table 3, DMAG’s actual new orders for fiscal year 2011 exceeded 

budgeted new orders by $314 million or 106 percent.

In developing the DMAG budgets for fiscal years 2004 through 2011, the 

Marine Corps did not consider recent years’ trends and consistently 

underestimated (1) the amounts of carryover that would exceed the 

allowable amounts and (2) the amounts of new orders to be received from 

customers. Specifically, the Marine Corps did not compare budgeted to 
 

Page 12 GAO-12-539 Marine Corps Depot Maintenance

actual data and consider this data in determining whether adjustments 

should be made to the estimated amounts of DMAG carryover and order 

data in its future budgets. Until the Marine Corps considers all future work 

(including work for which DMAG has not yet received letters of intent) in 

developing its budgets, its (1) budgeted amounts of carryover that are 

over or under the allowable amounts and (2) budgeted new orders will

continue to be of limited value for managerial decision making.

Our analysis of documents and interviews with Marine Corps officials 

disclosed that DMAG carryover significantly increased from $49 million in 

fiscal year 2002 to $271 million in fiscal year 2005. We determined this 

increase was primarily because new orders from DMAG customers more 

than tripled from $188 million in fiscal year 2002 to $583 million in fiscal 

year 2005. Available Marine Corps documentation, including DMAG’s 

budgets, showed that new orders increased to facilitate higher depot 

maintenance requirements in support of OIF/OEF operations. Since fiscal 

year 2005, available records show carryover remained at about the fiscal 

year 2005 level—averaging 6.4 months of workload. To assess the extent 

of growth in carryover due to OIF/OEF, we analyzed data for the period 

before and during the period of OIF/OEF operations.5

 

5

For the purposes of this report, peacetime levels are defined as the average new orders, 

revenue, and carryover reported by DMAG for fiscal years 1998 through 2002. The fiscal 

year 2005 DMAG budget that contains fiscal year 2003 actual data was the first year the 

DMAG reported increased workload in response to OIF/OEF. 

Figure 3 depicts 

DMAG actual new orders, revenue, carryover, and months of carryover 

beginning in fiscal year 1998 for a 14-year period based on available 

Marine Corps documentation.

DMAG Carryover 

Grew Significantly as 

a Result of OIF/OEF
 

Page 13 GAO-12-539 Marine Corps Depot Maintenance

Figure 3: DMAG Reported Actual New Orders, Revenue, Carryover, and Months of Carryover (Fiscal Years 1998–2011)

To illustrate the impact that changes in new orders and revenue had on 

carryover during the 14-year period, table 4 summarizes the data into 

three segments aligned with workload supporting peacetime operations 

(fiscal years 1998 through 2002), workload supporting the initial years of 

OIF/OEF (fiscal years 2003 through 2005), and workload supporting 

continuing elevated military operations under OIF/OEF (fiscal years 2006 

through 2011).
 

Page 14 GAO-12-539 Marine Corps Depot Maintenance

Table 4: Comparison of DMAG Financial Management Information during Pre-, Early 

Buildup, and Continuing OIF/OEF

Dollars in millions

 

Pre-OIF/OEF

Fiscal years

1998-2002

Early OIF/OEF

Fiscal years

2003-2005

Continuing 

OIF/OEF

Fiscal years 

2006-2011

Cumulative new orders $983 $1,261 $3,356 

Cumulative revenue $1,022 $1,038 $3,337 

Cumulative difference ($38) $223 $19 

Average dollar amount of carryover $63 $191 $296 

Average months of carryover 3.7 6.6 6.4

Source: GAO analysis of DMAG budget data.

Note: Dollar amounts do not always add due to rounding. 

For fiscal years 1998 through 2002, DMAG was operating at levels to 

support peacetime workload. Specifically, during the 5-year period, the 

amount of workload received (new orders) from DMAG customers ($983 

million) roughly equaled the amount of work performed (revenue) by 

DMAG ($1,022 million). DMAG carryover remained under $75 million and 

represented on average about 3.7 months of workload.

Beginning in fiscal year 2003, depot maintenance workload increased in 

response to the buildup in deployed weapon systems and equipment and 

their associated increase in equipment wear and tear in support of 

OIF/OEF. While revenue generated from depot maintenance operations 

more than doubled, from $212 million in fiscal year 2002 to $480 million in 

fiscal year 2005, reported new orders more than tripled, from $188 million 

in fiscal year 2002 to $583 million in fiscal year 2005. Over the period, 

reported new orders exceeded revenue by about $223 million and 

carryover increased from $49 million at the end of fiscal year 2002 to 

$271 million at the end of fiscal year 2005—representing about 6.6 

months of workload. The maintenance centers, according to MCLC 

(Programs and Resources Department) officials, experienced personnel 

and parts shortages during the early years of the buildup in OIF/OEF 

military operations overseas because (1) in some cases, the centers did 

not have sufficient numbers of personnel with the required skill sets 

needed to address the rapidly increasing workload and (2) the DOD 

supply system and supporting private sector commercial production did 

not keep pace with the increased spare parts and raw material 

requirements that were needed by the maintenance centers, such as 
 

Page 15 GAO-12-539 Marine Corps Depot Maintenance

obtaining steel needed to satisfy an emerging requirement to armor 

critical warfighting equipment.

MCLC (Programs and Resources Department) officials informed us that 

by fiscal year 2007, the maintenance centers resolved much of their 

personnel and parts shortages that resulted from the increased new 

orders supporting OIF/OEF. To resolve personnel and supply shortages, 

these officials told us that the centers employed multiple strategies such 

as (1) working with local colleges to obtain skilled employees and 

implementing personnel strategies that allowed DMAG the flexibility to 

expand or contract personnel within 48 to 72 hours using a combination 

of full-time, temporary, and contractor personnel and (2) working with the 

Defense Logistics Agency to eliminate or significantly reduce spare parts 

shortages. Our review confirmed that personnel and parts shortages, 

including raw materials issues, are no longer a major contributing factor to 

increased carryover amounts.

According to MCLC (Programs and Resources Department) officials, 

DMAG resolved much of its personnel and spare parts shortages. 

However, our analysis showed that, since fiscal year 2005, DMAG had 

not further reduced the carryover resulting from the increases in new 

orders between fiscal years 2003 through 2005. As shown in table 4, the 

DMAG carryover averaged $296 million and represented about 6.4 

months of workload since fiscal year 2005. Further, for fiscal years 2006 

through 2011, the amount of revenue generated by the centers’ 

operations ($3,337 million) have roughly equaled the new orders 

accepted by the centers ($3,356 million)—a difference over the 6-year 

period of only $19 million.

Our analysis of 60 orders (and related amendments) with the largest 

amounts of carryover for fiscal years 2010 and 2011 (the most recent 

data available) identified three primary reasons for carryover: (1) 

unanticipated increases in quantities or workload requirements to 

customer orders, (2) starting work on new orders later in the fiscal year 

because the centers had not yet completed work on other existing orders 

from the current and prior fiscal year, and (3) accepting amendments to 

existing orders in the last quarter of the fiscal year that increased order 

quantities or the scope of work. Table 5 provides summary information on 

the primary reasons for DMAG carryover based on our review of 60 largedollar carryover orders for the most recent 2-year period—30 each year.

Primary Reasons for 

Carryover at the End 

of Fiscal Years 2010 

and 2011
 

Page 16 GAO-12-539 Marine Corps Depot Maintenance

Table 5: Summary of Primary Reasons for DMAG Carryover by Number of Orders in Each Category (Fiscal Years 2010–2011)

Number of orders impacted

Carryover reason Fiscal year 2010 Fiscal year 2011 Total

Unanticipated increases in quantities or workload requirements to customer orders 22 23 45

Work on new orders began later in fiscal year to allow time for maintenance 

centers to perform work on other current and prior year orders

15 12 27

Amendments accepted in the last quarter of fiscal year that increased order 

quantities or expanded the scope of work on existing quantities ordered

18 7 25

Source: GAO analysis of DMAG fiscal years 2010 and 2011 orders and amendments with fiscal year-end carryover and interviews with 

Marine Corps maintenance center Albany and Barstow officials.

Note: The table does not add to 30 each year or 60 in total because many orders fell in multiple 

categories. 

Accurately forecasting the scope of work on orders is essential for 

ensuring that the maintenance centers operate efficiently and complete 

work on orders as scheduled. However, we found that for 45 of the 60 

orders for fiscal years 2010 and 2011 that we reviewed, customers 

increased quantities or added unanticipated workload requirements 

throughout the fiscal year that delayed completing work on existing 

orders. MCLC (Programs and Resources Department) officials cited 

unplanned workload requirements as a primary driver for carryover. 

These officials stated that (1) while the maintenance centers do not drive 

workload requirements, the maintenance centers must respond to the 

customers’ bona fide needs for the repair of the warfighters’ equipment to 

support emergent requirements in the field, and (2) since OIF/OEF 

operations began, DMAG began to accept all orders (and related 

amendments) associated with those operations where viable alternative 

sources of repair could not be found, even though accepting such orders 

may contribute to “over the allowable” carryover. For example, the DMAG 

fiscal year 2010 budget cited the acceptance of unplanned workload by 

the maintenance centers to repair war-ravaged equipment and weapon 

systems returning from overseas contingency operations as the reason 

for the maintenance centers exceeding the allowable carryover in fiscal 

year 2008. Below are two examples in which unplanned workload 

requirements affected carryover. 

• In November 2009, MCLC accepted an order totaling $2.1 million that 

was financed with fiscal year 2010 operation and maintenance, 

Marine Corps appropriated funds to perform depot maintenance work 

on five Light Armored Vehicles (LAV) at the Barstow maintenance 

center. The order was amended three times in fiscal year 2010 to 

Unanticipated Increases in 

Quantities or Workload 

Requirements to Customer 

Orders
 

Page 17 GAO-12-539 Marine Corps Depot Maintenance

increase quantities to 28 vehicles, increase funding to $11.7 million, 

and extend the work completion date into fiscal year 2011. The center 

carried over $7.9 million of the $11.7 million order principally because 

many of the vehicles had excessive corrosion in the hull floor plate 

and side board areas that were much greater than anticipated and 

which required additional welding and plate replacement. Barstow 

officials said that the additional welding, plate replacement, and 

extensive corrosion repair caused the repair cycle time to be extended 

beyond the timelines originally anticipated to complete the work and 

caused work delays on other variants of LAVs concurrently being 

worked on at the center. The center completed work on the order in 

September 2011.

• In December 2010, MCLC accepted an order totaling $1.4 million that 

was financed with fiscal year 2011 operation and maintenance, 

Marine Corps appropriated funds to perform depot maintenance work 

(inspect and repair only as necessary) on 18 rough terrain forklifts at 

the Albany maintenance center. The order was amended nine times in 

fiscal year 2011 to increase the quantity to 118 forklifts, increase the 

total amount of the order to $9.4 million, and extend the work 

completion date into fiscal year 2012. According to center officials, the 

vehicles required more repair work than was initially planned in terms 

of cost and repair cycle time, which necessitated a change in the 

scope of the work. This change was reflected in one of the 

amendments showing that the statement of work changed from an 

“inspect and repair only as necessary” requirement to a “rebuild” 

requirement, which required a more comprehensive type and scope of 

depot maintenance work to be performed and required additional 

funds to finance the work. Because of the change to increase 

workload requirements, the center carried over $4.4 million of the $9.4 

million into fiscal year 2012.

Completing work on prior-year orders and beginning work on new orders 

for the current year early in the fiscal year is critical to maintaining low 

carryover balances. Our review of 60 orders and amendments for fiscal 

years 2010 and 2011 found that, for 27 orders reviewed, work was 

delayed on new orders because the maintenance centers had not yet 

completed work on other current- and prior-year orders. Below are two 

examples of orders that we reviewed. 

• In November 2009, MCLC accepted an order totaling $2.4 million that 

was financed with fiscal year 2010 funds appropriated for Marine 

Corps operation and maintenance to perform depot maintenance work 

Work on New Orders 

Began Later in Fiscal Year 

because Work on Existing 

Orders Was Not Completed
 

Page 18 GAO-12-539 Marine Corps Depot Maintenance

on 27 High Mobility Multi-purpose Wheeled Vehicles (HMMWV) at the 

Albany maintenance center. The order was amended four times from 

March 2010 to September 2010 to increase quantities to 45 

HMMWVs, increase funding to $4.7 million, and extend the work 

completion date into fiscal year 2011. The center carried over almost 

the entire amount of the $4.7 million order because the center was 

working on other fiscal year 2010 HMMWVs. Due to customer 

requirements, as well as capability, utilization, and production 

constraints, the center could not begin work on this order until the 

center completed work on the other orders. The center did not begin 

work on this order until September 17, 2010—10 months after the 

initial order was accepted, and did not complete work on the order 

until August 2011—near the end of fiscal year 2011.

• In November 2010, MCLC accepted an order totaling $1.5 million that 

was financed with fiscal year 2011 funds appropriated for Marine 

Corps operation and maintenance to perform depot maintenance work 

on three LAVs at the Barstow maintenance center. Because the 

Barstow maintenance center was still performing depot maintenance 

work on a fiscal year 2010 LAV order for the same vehicle 

configuration, the Marine Corps Supply Management Center (SMC) 

(customer) issued an amendment in February 2011 to reduce

quantities to zero and deobligate the entire amount on the fiscal year 

2011 order. Our analysis of order documentation showed that the 

customer deobligated the funds because the Barstow maintenance 

center did not require the funds at that time, as the center was still 

performing work on the fiscal year 2010 LAV order. Beginning in 

March 2011, the MCLC accepted amendments to increase quantities 

on the fiscal year 2011 order to 20, increase funding to $10.5 million, 

and changed the scope of the work to include the replacement of 

missing communications equipment. Barstow maintenance center 

began performing depot maintenance work on this fiscal year 2011 

order in April 2011—7 months into the fiscal year and 5 months after 

the order was originally placed. Because the Barstow center was 

working the fiscal year 2010 order, work was delayed on the fiscal 

year 2011 LAV order causing the center to carry over $3.8 million into 

fiscal year 2012.
 

Page 19 GAO-12-539 Marine Corps Depot Maintenance

The timing of the receipt and acceptance of orders from customers affect 

the amount of carryover at year-end. Our examination of 60 orders for 

fiscal years 2010 and 2011 determined that, in 25 cases we reviewed, 

amendments to orders accepted in the last quarter of the fiscal year 

contributed to carryover. These amendments either increased order 

quantities or expanded the scope of work on existing orders with the 

maintenance centers. DOD Financial Management Regulation6

In June 2006, we reported that carryover is greatly affected by orders 

received late in the fiscal year.

provides 

that depots cannot perform work until they receive and accept orders from 

customers. According to MCLC (Programs and Resources Department) 

officials, since some of these orders or amendments to these orders were 

planned and funded in the fourth quarter, DMAG could not start work until 

it received and accepted amended orders as specified in the DOD 

regulation.

7

 

6

See DOD Financial Management Regulation 7000.14-R, vol.11B, ch.11, 

Reimbursements and Revenue Recognition, § 110103 (Oct. 2002).

As a result, almost all orders accepted 

late in the fiscal year increase the amount of carryover. Further, we 

reported that the most frequent reason DOD activity groups accepted 

orders at the end of the fiscal year was because funds were provided to 

the customers late in the fiscal year to finance existing requirements. 

DOD customers stated that it is common for military services to provide 

funds to them late in the fiscal year after the military services review their 

programs to identify funds that will not be obligated by year-end. When 

these funds are identified, the military services realign the funds to 

programs that can use them. These funds are then used to finance orders 

placed with working capital fund activities at year-end. Our discussion 

with SMC officials—the largest DMAG customer—confirmed that the 

information reported in June 2006 was also applicable for fiscal years 

2010 and 2011. The officials stated that there is a significant advantage to 

using unobligated funds at fiscal year-end that are set to expire on 

September 30 because the maintenance centers can perform more work 

to satisfy its customers’ unfunded requirements. Two examples we 

identified of amended orders received late in the fiscal year that increased 

carryover are presented below.

7

GAO, Defense Working Capital Fund: Military Services Did Not Calculate and Report 

Carryover Amounts Correctly, GAO-06-530 (Washington D.C.: June 27, 2006).

Amendments Accepted in 

the Last Quarter of the 

Fiscal Year
 

Page 20 GAO-12-539 Marine Corps Depot Maintenance

• In fiscal year 2010, MCLC accepted an order and amendments to the 

order totaling $31.2 million that was financed with fiscal year 2010 

operation and maintenance, Marine Corps appropriated funds to 

inspect and repair only as necessary 389 HMMWVs at the Albany 

maintenance center. The order was amended eight times in fiscal 

year 2010 to increase quantities from 25 vehicles to 389 vehicles, 

increase funding from $2.0 million to $31.2 million, and extend the 

work completion date into fiscal year 2011. During the fiscal year, the 

Albany center completed about 90 percent of the work on the order 

through the seventh amendment. However, on September 30, 2010—

the last day of the fiscal year—MCLC received and accepted an 

amendment to the order increasing funding by $4.9 million and the 

quantity by 61 vehicles. The funding cited on this order was set to 

expire that same day. The entire amount of this amendment carried 

over into fiscal year 2011. According to a SMC official, the 

amendment was issued to the Albany maintenance center on 

September 30, 2010, because funding on a HMMWV order with the 

Barstow maintenance center was identified by the center as excess to 

requirements 2 days before the end of the fiscal year. The funding 

was set to expire at the end of the fiscal year and, if not obligated on 

another order by September 30, 2010, could not be used for new 

requirements. As a result, the funding from the Barstow maintenance 

center that was to expire on September 30, 2010, was applied to the 

Albany order. The center carried over $7.6 million into fiscal year 2011 

on this order and completed work on the order in March 2011.

• In planning the fiscal year 2011 workload, SMC expected to issue 

orders to MCLC for the Albany and Barstow maintenance centers to 

perform depot maintenance on 179 Logistics Vehicle Systems’ front 

power units. In order to repair the vehicles, MCLC issued a 

commercial subcontract to the original equipment manufacturer to 

purchase cabs and other operating material and supplies needed to 

support work at the Albany and Barstow maintenance centers for the 

179 vehicles. Subsequent to the subcontract being awarded, the 

Marine Corps maintenance strategy changed on the Logistics Vehicle 

Systems to reduce the need for the cabs purchased on the contract. 

In return, SMC (the customer) decided to decrease the scope of work 

from a planned 179 vehicles to 47 vehicles. Through May 2011, the 

MCLC accepted orders with amendments totaling $8.9 million to 

support work on the 47 vehicles. Because costs associated with 

terminating the contract with the original equipment manufacturer for 

the excess cabs and other operating material and supplies would be 

nearly as much as having the contractor complete the order, the 

Marine Corps decided to have the contractor complete the order and 
 

Page 21 GAO-12-539 Marine Corps Depot Maintenance

transfer ownership of the excess cabs and other operating material 

and supplies to MCLC headquarters. In June 2011, MCLC informed 

SMC that $9.8 million, in addition to the $8.9 million provided earlier, 

would need to be returned in order to pay for the cost of the 

contracted cabs and other operating material and supplies ordered 

from the contractor and to complete work on the remaining 47 

vehicles. On September 15 and 29, 2011, SMC issued amendments 

to fund the additional $9.8 million using fiscal year 2011 Marine Corps 

operation and maintenance funds that became available when other 

programs indentified excess funds that would expire on September 

30, 2011. Because funding was provided late in the fiscal year, the 

centers carried over $9.4 million of the $18.7 million in orders on this 

program into fiscal year 2012. The orders are to be closed in fiscal 

year 2012 when deliveries from the contractor are complete and 

ownership of the excess cabs and other operating material and 

supplies are transferred to MCLC headquarters.

Reliable carryover information is essential for Congress and DOD to 

effectively perform their oversight responsibilities, including reviewing and 

making well-informed decisions on the Marine Corps’ DMAG budget. 

However, our review found that for the 8-year period from 2004 through 

2011, the Marine Corps budgets show it underestimated the amount of 

new orders to be received from DMAG customers. As a result, while the 

Marine Corps budgets showed that DMAG’s carryover would be under 

the allowable amount, subsequent Marine Corps financial records 

showed the actual reported carryover exceeded the allowable amount for 

the most recent 6 years. The carryover information can be a management 

tool for (1) controlling the amount of work that can carry over from one 

fiscal year to the next, and (2) identifying problems in other areas such as 

developing budgets on the amount of new orders for depot maintenance 

work. However, because the Marine Corps has underestimated the 

amount of new orders in its budgets, current reported data on carryover is 

of limited utility for decision-making purposes.

Conclusions
 

Page 22 GAO-12-539 Marine Corps Depot Maintenance

We recommend that the Secretary of Defense direct the Secretary of the 

Navy and Commandant of the Marine Corps to take the following two 

actions to improve the budgeting and management of Marine Corps’ 

DMAG carryover:

• Augment DMAG budget development and review procedures to 

require a comparison of recent years’ trends in budgeted carryover 

amounts that are over or under the allowable amounts to the actual 

carryover amounts to identify any differences, reasons for any such 

differences, and make any appropriate adjustments to budget 

estimates on carryover.

• Augment DMAG budget development and review procedures to 

require a comparison of recent years’ trends in budgeted orders to 

actual orders to identify any differences, reasons for any such 

differences (including work for which DMAG had not received letters 

of intent), and make any appropriate adjustments to budget estimates 

on new orders to be received from customers.

DOD provided written comments on a draft of this report. In its comments, 

DOD concurred with both of our recommendations and cited actions 

planned to address them. Specifically, the Office of the Under Secretary 

of Defense (Comptroller) stated that it will evaluate if actual year end 

carryover trends were included as a factor for the carryover estimates in 

the fiscal year 2014 budget. It stated that a review of the fiscal year 2012 

actual carryover to the budgeted carryover will be part of the budget 

analysis including an evaluation of deviations from the allowable amount 

of carryover. Further, the Office of the Under Secretary of Defense 

(Comptroller) stated it will evaluate if customer order trends were included 

as a factor in developing customer order estimates in the fiscal year 2014 

budget. It stated that a review of the fiscal year 2012 actual customer 

orders to the fiscal year 2012 budgeted customer orders will be part of the 

analysis.

While DOD concurred with the two recommendations in our draft report 

and commented on its plans to perform additional carryover and customer 

order trend analyses as part of the fiscal year 2014 budget process, 

DOD’s comments did not clearly provide that it will augment its budgeting 

process to incorporate carryover and customer order trend analyses 

beyond the fiscal year 2014 budget process as we recommended. In 

discussing DOD’s comments with Office of the Under Secretary of 

Defense (Comptroller) officials, they clarified that, in accord with the intent 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 23 GAO-12-539 Marine Corps Depot Maintenance

of our recommendations, they intended to take the cited corrective 

actions to improve the DMAG budgeting for carryover and customer 

orders for all fiscal years beginning in fiscal year 2014. Specifically, they 

stated that DOD intended to ascertain how prior year DMAG carryover 

and new order trends were incorporated into the carryover estimates and 

use the data in evaluating Marine Corps DMAG budgets in not only the 

fiscal year 2014 budget, but in all future budgets.

We are sending copies of this report to the appropriate congressional 

committees. We are also sending copies to the Secretary of Defense; the 

Secretary of the Navy; and the Commandant of the Marine Corps. The 

report also is available at no charge on the GAO Web site at 

http://www.gao.gov. 

Should you or your staff have any questions concerning this report, 

please contact me at (202) 512-9869 or khana@gao.gov. Contact points 

for our Offices of Congressional Relations and Public Affairs may be 

found on the last page of this report. Key contributors to this report are 

listed in appendix III.

Sincerely yours,

Asif A. Khan

Director, Financial Management 

and Assurance
Appendix I: Scope and Methodology

Page 24 GAO-12-539 Marine Corps Depot Maintenance

To determine if (1) the depot maintenance activity group (DMAG) 

reported actual carryover exceeded the allowable amount of carryover 

from fiscal years 2004 through 2011 and any actions the Marine Corps is 

taking to reduce carryover, and (2) budget information on DMAG 

carryover from fiscal years 2004 through 2011 approximated reported 

actual results, we obtained and analyzed DMAG reports that contained 

information on budgeted and reported actual carryover and the allowable 

amount of carryover for fiscal years 2004 through 2011. We analyzed 

carryover since fiscal year 2004 because prior to fiscal year 2004, DOD 

had a different policy for determining the allowable amount of carryover. 

We met with responsible officials from Navy and Marine Corps 

headquarters and the Marine Corps Logistics Command (MCLC) 

(Programs and Resources Department) to determine the reasons for 

significant variances between (1) reported actual carryover and the 

allowable amount or (2) budgeted and reported actual carryover. We also 

met with these officials to discuss the actions the Marine Corps has and is 

taking to reduce the amount of carryover.

To determine if there was growth in DMAG carryover during the period of 

Operation Iraqi Freedom/Operation Enduring Freedom (OIF/OEF) and the 

reasons for any such growth, we analyzed reported order, revenue, and 

carryover amounts and months of carryover from fiscal years 1998 

through 2011 to determine the extent to which OIF/OEF impacted DMAG 

workload and carryover. We selected the period from fiscal years 1998 

through 2011 to highlight any changes in reported actual carryover 

information from the period before and during OIF/OEF. We reviewed and 

analyzed Marine Corps documentation including the DMAG budgets to 

determine the reasons for the growth in carryover. Further, we met with 

responsible officials from MCLC (Programs and Resources Department) 

to discuss reasons for variances between reported actual carryover from 

one year to the next.

To determine the reasons for fiscal years 2010 and 2011 carryover, we 

met with responsible officials from the Navy and Marine Corps 

headquarters and MCLC (Programs and Resources Department) to 

identify contributing factors that led to the carryover. We also performed

walkthroughs of the Albany and Barstow maintenance centers’ operations 

and discussed with officials reasons for workload carrying over from one 

fiscal year to the next for fiscal years 2010 and 2011. Further, in order to 

more fully understand the reasons for carryover at the maintenance 

centers, we obtained and analyzed 60 orders (30 orders for fiscal year 

2010 and 30 orders for fiscal year 2011) that had the largest dollar 

amount of carryover. Carryover amounts associated with these orders 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 25 GAO-12-539 Marine Corps Depot Maintenance

represented 49 percent and 68 percent of DMAG’s total carryover for 

fiscal years 2010 and 2011, respectively. We selected 60 orders because 

they were the largest and most recent orders at the time of our audit. We 

reviewed the orders with amendments for each of the orders and 

discussed the information in these documents with MCLC (Programs and 

Resources Department) and maintenance center Albany and Barstow 

officials to determine the reasons for the carryover. We summarized and 

categorized the results.

Financial information in this report was obtained from official Navy and 

Marine Corps budget documents and accounting reports. To assess the 

reliability of the data, we (1) reviewed and analyzed the factors used in 

calculating carryover for the completeness of the elements included in the 

calculation, (2) interviewed Navy and Marine Corps officials 

knowledgeable about the carryover data, (3) reviewed GAO reports on 

depot maintenance activities, and (4) reviewed fiscal years 2010 and 

2011 customer orders submitted to DMAG to determine whether they 

were adequately supported by documentation. In reviewing these orders, 

we obtained the status of the carryover at the end of the fiscal year. On 

the basis of procedures performed, we have concluded that these data 

were sufficiently reliable for the purposes of this report. We performed our 

work at the Headquarters of the Office of the Under Secretary of Defense 

(Comptroller), the Office of the Assistant Secretary of the Navy (Financial 

Management and Comptroller), and Marine Corps Deputy Commandant 

(Programs and Resources), Washington, D.C.; Marine Corps Logistics 

Command, Albany, Georgia; the maintenance center at Albany, Georgia 

and the maintenance center at Barstow, California. We conducted this 

performance audit from July 2011 through June 2012 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 objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on 

our audit objectives.
Appendix II: Comments from the Department 

of Defense

Page 26 GAO-12-539 Marine Corps Depot Maintenance

Appendix II: Comments from the Department 

of Defense
Appendix II: Comments from the Department 

of Defense

Page 27 GAO-12-539 Marine Corps Depot Maintenance
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 28 GAO-12-539 Marine Corps Depot Maintenance

Asif A. Khan, (202) 512-9869 or khana@gao.gov

In addition to the contact named above, Greg Pugnetti, Assistant Director; 

Steve Donahue; Keith McDaniel; and Hal Santarelli made key 

contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments

(197100)
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