GAO

United States General Accounting Office

Report to the Director, Office of 

Management and Budget

June 2001 BUDGET ISSUES

Agency Data 

Supporting Capital 

Project Funding 

Requests Could Be 

Improved

GAO-01-770

Page 1 GAO-01-770 Agency Capital Project Data

June 8, 2001

The Honorable Mitchell E. Daniels, Jr.

Director

Office of Management and Budget

Dear Mr. Daniels:

On February 26, 2001, at the request of the Chairman, Senate Committee

on the Budget, we issued a letter on incremental funding of capital asset

acquisitions.1

 During the course of the work for that letter, we found that

the information provided to appropriations committees in support of

agency capital project requests was often incomplete and/or unclear.

There were instances in which some capital project requests did not

include the projects’ total estimated costs and instances in which project

descriptions were vague and/or very brief, making it difficult to determine

future costs or whether the funding provided would produce usable assets.

Since there is value in providing both executive and legislative

decisionmakers with the best and most complete information possible, we

are providing you a few examples of agency capital project funding

request information that could be improved.

For the incremental funding study, we reviewed fiscal year 2001 budget

justifications and agency documentation for 18 agencies involving

approximately 700 individual projects. We identified and reviewed projects

that had received funding through fiscal year 2000 and were still in

progress. We conducted the incremental funding study from August

through December 2000 in accordance with generally accepted

government auditing standards.

We have previously reported2

 that full funding of capital projects is an

important tool for maintaining governmentwide fiscal control. It helps to

ensure that the Congress considers the full costs of proposed

commitments and makes trade-offs based on the full costs. Failure to

 1

Budget Issues: Incremental Funding of Capital Asset Acquisitions (GAO-01-432R,

February 26, 2001).

2

Accrual Budgeting: Experiences of Other Nations and Implications for the United States

(GAO/AIMD-00-57, February 18, 2000) and Budget Issues: Budgeting for Federal Capital

(GAO/AIMD-97-5, November 12, 1996).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-770 Agency Capital Project Data

recognize the full costs of proposed commitments when budget decisions

are made could lead to distortions in the allocation of resources. It can

also force future Congresses and administrations to choose between

having unusable assets and continuing project funding for years, even after

priorities may have changed. The Office of Management and Budget

(OMB) and others in the budget community have supported and endorsed

this concept. OMB requires agencies to prepare capital asset plans that are

required to contain full cost estimates for capital projects. OMB also

encourages long-term agency capital plans and suggests that they contain

full cost estimates.

In our February report, we grouped capital projects into three categories

based on the extent of funding they receive for stand-alone or useful

segments: full funding, incremental funding, and high technology. Fully

funded capital projects are those for which budget authority is, or appears

to be, provided for the full estimated cost of a capital project or a standalone stage if the project can be divided into stages. Fully funded projects

also include the survey and design of a capital project and any major

upgrade or renovation that results in a usable asset. Incrementally funded

capital projects are projects for which budget authority is, or appears to

be, provided for only part of the estimated cost of a capital acquisition or a

part of a usable asset—a part that would not be usable if no further

funding were provided. High technology capital projects are incrementally

funded projects for which budget authority is, or appears to be, provided

for only part of the estimated cost of information technology acquisitions

or projects that are highly dependent on research and development and for

which the outcome is highly uncertain. Space exploration equipment

would be an example of such a project. Incremental funding can be

justified for high technology capital projects because such projects are

often closer in nature to research and development, and funding provided

on an incremental basis can provide useful knowledge even if no

additional funding is provided.

During our review of agency budget justifications, we found a number of

capital project funding requests that lacked total project cost information

and for which it was not always clear whether requested funding would

provide a useful, stand-alone asset. Without this information, the Congress

cannot consider the full costs of proposed commitments or determine if it

is funding an asset that will be useful without additional funding. The

examples illustrating these problems are ones that lent themselves to

relatively easy description. Other agencies and examples could have been

included, but these illustrated the problems most clearly. We are

Results in Brief
Page 3 GAO-01-770 Agency Capital Project Data

recommending that you direct certain improvements in agency budget

justifications. In commenting on the report, OMB officials agreed with the

report’s conclusion and said they would take action to implement the

recommendation.

We found a significant number of ongoing capital projects for which total

estimated project costs were not provided and could not be computed

accurately because future funding requirements data also were not

provided. For example, the Federal Aviation Administration’s fiscal year

2001 budget justifications included many capital projects that had received

funding through fiscal year 2000 and for which current funding was being

requested. However, for 15 of those projects, the only information on any

future funding required was the statement “future requirements are under

review.” One project, titled “Air Traffic Management,” had received a total

of $490.1 million prior to the fiscal year 2001 request of $25.9 million.

Another project, titled “Airport Movement Area Safety System,” had

received a total of $92.4 million prior to the 2001 request of an additional

$20.7 million. A third project, titled “Operational Data Management

System,” had received a total of $26.9 million prior to the 2001 request of

an additional $1 million. Although project descriptions for all three

projects implied a definite need for additional funding beyond the fiscal

year 2001 budget request, the descriptions did not provide an estimate of

funding necessary to complete the projects. We judged all three projects to

be incrementally funded.

The U.S. Coast Guard’s fiscal year 2001 budget justifications had “To Be

Determined” under the Estimated Future Cost Requirement caption for

several ongoing capital projects. One of these projects, titled “Alex Haley

Conversion Project-Phase II,” had received $20 million through fiscal year

2000, and an additional $3.2 million was requested for 2001. This project

received its initial funding in fiscal year 1998, and the project description

suggests that the Coast Guard is planning to request additional funding for

fiscal years 2002 through 2005. However, no estimate of the dollar

amounts was provided. Another Coast Guard project, titled “Deepwater

Capability Replacement Project,” received a total of $73.9 million during

fiscal years 1998 through 2000. Additional funding of $42.3 million was

requested for fiscal year 2001. The Coast Guard plans to request additional

funding of about $500 million annually (in 1998 dollars) for the next 20 to

Lack of Total Project

Cost Information
Page 4 GAO-01-770 Agency Capital Project Data

30 years to complete this project.3 We judged both the Alex Haley and

Deepwater projects to be incrementally funded.

During our review we also found that some agency budget justifications

lacked sufficient information to determine whether funding provided in a

given year would result in usable assets. The State Department’s fiscal

year 2001 budget justifications included a number of funding requests for

embassy facility rehabilitation and replacement of support systems.

However, the information provided was not always sufficient to determine

exactly what the fiscal year 2001 requested funding would provide in terms

of usable assets.

For example, the department requested $2.75 million in fiscal year 2001 to

initiate construction of the Brasilia, Brazil chancery rehabilitation—a

project that is estimated to cost a total of $9.2 million and has an estimated

construction cycle of 3 years. Funding of $875 thousand for the project’s

design was provided in fiscal year 2000. The project description and scope

describe what facility structures and systems will be renovated over the

course of the entire project. However, there is no sense, either from the

project description or schedule of project phases, of exactly what the

fiscal year 2001 funding will provide and, particularly, whether it would

result in a useful asset absent further funding. The description includes

statements such as “increased capacity is needed in the two-story sections

of the building” and “the electrical system will be upgraded.” What the

description does not provide is information such as whether the initial

construction funding will completely finance an expansion of one building

section with the next year’s funding request providing for expansion of a

second section. The description could also mean that the fiscal year 2001

funding would upgrade the electrical system only, with the building

expansion to commence in future years. We judged this capital project to

be incrementally funded primarily because of the 3-year construction cycle

and the project funding schedule, which showed that future funding of

$5.6 million would be needed to complete this project. However, it is

possible that fiscal year 2001 and subsequent annual appropriation

requests have been structured to provide funding sufficient to produce a

 3

Coast Guard: Progress Being Made on Deepwater Project, but Risks Remain (GAO-01-564,

May 2, 2001).

Incomplete and

Unclear Project Data
Page 5 GAO-01-770 Agency Capital Project Data

usable asset each year without further funding. This could not be

determined from the available information.4

The State Department was not the only agency providing insufficient detail

to determine if requested funding would result in a usable asset. For

example, the National Aeronautics and Space Administration’s fiscal year

2001 budget justifications discusses a $4 million request to begin the third

of five phases of a major repair of the central steam distribution system at

the Goddard Space Flight Center. The scope of the project includes

replacing system headers and other related piping and insulation. This

project is estimated to cost a total of $18.2 million—$7.2 million of which

had been provided prior to fiscal year 2001. The project justification data

described the serious effect of delaying this project, stating that the

original system installed in the early 1960s was “at the end of its useful

life” and “a major failure could occur.” The justification data also included

a list of subsystems that will be replaced during this phase of the project.

However, the information gives no indication of whether the replacement

of these subsystems would make the overall system functional for its

intended purpose and/or improve its operational efficiency—even if the

remaining project phases were to be postponed. The justification data

would have been more useful had they included the operational status and

functionality of the overall system at each phase of the project—clearly

describing what each level of funding would provide. We judged this

capital project to be incrementally funded primarily because the work is

being conducted in phases and the project justification for the fiscal year

2001 funding request did not discuss how the previous funding was used

and whether each phase provided stand-alone improvements.

To make well-informed decisions, decisionmakers must have complete,

comprehensive, and clear information for all proposed capital projects

whether fully or incrementally funded. Data on total project costs are

critical for incrementally funded projects. When the Congress is being

asked to support only a portion of a project, it should have information on

 4

The Senate Appropriations Committee has expressed concern about the State

Department’s unfunded construction requirements. In its September 2000 report, the

committee expressed concerns that the department was accumulating large, unfunded

construction requirements and recommended that the Congress limit the number of new

construction starts, and, where possible, only fully fund ongoing projects to prevent the

unfunded requirements from growing. See S. Rep. No. 106-404 at, 145-147 (2000). See also

Embassy Construction: Better Long-Term Planning Will Enhance Program Decision-making

(GAO-01-11, January 22, 2001).

Conclusion
Page 6 GAO-01-770 Agency Capital Project Data

the total cost; the period when completion can be expected; and whether

the segment being funded will be a useful, stand-alone project.

Capital asset plans, which are required by OMB for major capital

acquisitions, and long-term agency capital plans could be useful in

reviewing capital project requests but are not routinely provided to the

Congress. Budget justifications are meant to provide the relevant

information to the Congress but often do not include the data and

information needed to determine if full funding is being requested.

We recommend that you ensure that agencies are directed to improve the

information the Congress receives for making funding decisions. The

budget justifications provided by agencies each fiscal year should contain

the following for each capital project: a total project cost estimate (except

when not possible for high technology projects), details of all prior

funding, a description of how the funding was used and is planned to be

used for each fiscal year, and the estimated time frame for completion.

The description of how requested funding will be used should be in

sufficient detail so that it is clear whether full funding for stand-alone

assets is being requested. Capital asset plans, which are required by OMB

for major acquisitions, and long-term agency capital plans, which are

encouraged by OMB, could also be required as supplemental information

to the agency budget justifications.

We obtained comments from OMB officials. They agreed with the report’s

conclusion and recommendation. They further stated that OMB plans to

include language in OMB Circular A-11, Preparing and Submitting Budget

Estimates, encouraging agencies to provide the Congress the information

it needs for its review of capital projects that are included in the

President’s Budget.

We are sending copies of this report to the Chairmen and Ranking

Minority Members of the Senate and House Committees on the Budget and

on Appropriations and the Senate Committee on Governmental Affairs and

the House Committee on Government Reform. Copies will be made

available to others on request. If you or your staff have any questions

regarding this report, please contact me at (202) 512-9573 or Christine

Bonham, Assistant Director, at (202) 512-9576. Key contributors to the

Recommendation

Agency Comments
Page 7 GAO-01-770 Agency Capital Project Data

incremental funding study were Trina Lewis, Jennifer Eichberger, and

David Best.

Sincerely yours,

Paul L. Posner

Managing Director, Federal Budget

Strategic Issues

(450030)

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