GAO

United States General Accounting Office

Report to the Chairman, Committee on 

Armed Services, House of 

Representatives

January 2001 NATIONAL DEFENSE 

STOCKPILE

Improved Financial 

Plan Needed to 

Enhance 

Decision-making

GAO-01-17

Page 1 GAO-01-17 National Defense Stockpile

United States General Accounting Office

Washington, D.C. 20548

Letr

January 26, 2001

The Honorable Bob Stump

Chairman, Committee on Armed Services 

House of Representatives

Dear Mr. Chairman:

The National Defense Stockpile is composed of strategic and critical 

materials that can be used in times of national emergency. The stockpile 

was established to minimize dependence on foreign sources of these 

materials. Because of changes in mobilization planning and modernization 

of weapon systems, stockpiling requirements for numerous materials have 

been reduced dramatically in the past two decades, with only a few 

materials still being required. The reported value of stockpile inventories 

on hand has also decreased through annually authorized sales of excess 

stockpile materials, from about $10.1 billion in fiscal year 1987 to about 

$3.4 billion as of September 30, 1999.

The Defense Logistics Agency’s Defense National Stockpile Center 

manages the stockpile program and is responsible for the sale of materials 

that exceed stockpile requirements. The Center deposits collections from 

gross sales of stockpile materials to a U.S. Treasury transaction fund. The 

transaction fund is used for various purposes, including outlays to pay for 

stockpile operations. The Congress has also mandated transfers from the 

fund to Defense and other federal programs.

The late Chairman, Subcommittee on Military Readiness, Representative 

Herbert H. Bateman, noting that collections from sales of stockpile 

materials can be transferred to other programs, expressed concern about 

whether sufficient funds will likely be available in the future for effective 

management of the stockpile. Our August 20, 1999, report1

 provided initial 

information on projected stockpile gross sales from fiscal year 1999 

through 2010 as well as on corresponding projections for remaining 

inventory.

1

National Defense Stockpile: Sales Revenue and Inventory Data (GAO/NSIAD-99-201R,

Aug. 20, 1999).
Page 2 GAO-01-17 National Defense Stockpile

As agreed with your office, this report addresses whether existing cash 

balances and projected collections from stockpile gross sales will be 

sufficient to meet all expected stockpile transaction fund outlays for fiscal 

years 2000-2010.

Results in Brief The National Defense Stockpile transaction fund’s projected long-term 

outlays exceed projected collections from gross sales. Projections do not 

include all likely outlays, so the timing and size of a gap between available 

funds and outlays is unclear. The Center has a long-range financial plan in 

which projected collections through fiscal year 2003 may reasonably be 

expected to meet its projected outlays, including costs of operations and 

currently projected transfers to other federal programs. After that, the 

fund’s cash balance will offset shortfalls during fiscal years 2004-2009, but 

the plan projects a negative cash balance of $48 million in fiscal year 2010. 

The cash may run out sooner because the Center’s financial plans do not 

include all environmental costs to dispose of hazardous materials or clean 

up storage sites.2

 For example, the Center is reasonably certain it will have 

to pay an additional $80 million in disposal costs that are not included in 

the current plan. The cash projections in the financial plans may also be 

affected if (1) commodity prices increase or decrease or (2) the fund is 

required to pay for additional probable3

 environmental cleanup costs that 

may be identified through ongoing or future studies.

Complete information is essential for decision-making regarding the use of 

funds in the stockpile transaction fund. Consequently, we recommend that 

the Administrator of the Defense National Stockpile Center revise the 

Center’s long-range plan to reflect all probable and measurable outlays to 

aid decision-making and oversight of stockpile operations. The Department 

of Defense agreed with our recommendation, stating that the long-range 

plan will be revised as recommended.

2

Department of Defense 7000.14-R, Department of Defense Financial Management 

Regulation, Volume 6B, Form and Content of the Department of Defense Audited Financial 

Statements, December 1998, requires the Defense Logistics Agency to report estimated 

environmental cleanup and disposal costs.

3

 Statement of Federal Financial Accounting Standards No. 5, Accounting for Liabilities of 

the Federal Government, defines “probable” as that which can reasonably be expected or is 

believed to be more likely than not on the basis of available evidence or logic.
Page 3 GAO-01-17 National Defense Stockpile

Background The stockpile program was established under the Strategic and Critical 

Materials Stock Piling Act4

 to maintain and manage strategic and critical 

materials for use during a national emergency.5 The stockpile’s operating 

funding limits and transaction fund transfers have been authorized 

annually in national defense authorization acts.6

The stockpiling act established a separate fund in the Treasury called the 

National Defense Stockpile Transaction Fund.7

 The transaction fund is 

available, subject to limitations in the appropriation acts, to fund expenses 

associated with the operation of the stockpile, including payroll, storage, 

disposal of hazardous materials, and environmental restoration. The fund is 

also used for congressionally mandated transfers to other government 

departments, such as the general fund of the Department of the Treasury, 

the Department of Health and Human Services, and the military services 

within the Department of Defense.

4

50 U.S.C. §98 et seq.

5

 The reported value of these requirements has decreased from about $16 billion in the 1980s 

to about $6 million in fiscal year 1999. Most of the current requirements value is for 

beryllium, a metal used in nuclear reactors and various defense weapons.

6

The authorization covering fiscal year 2000 was the National Defense Authorization Act for 

Fiscal Year 2000 (P.L. 106-65).

7

50 U.S.C. §98h.
Page 4 GAO-01-17 National Defense Stockpile

The President has delegated authority for management of the operational 

aspects of the National Defense Stockpile to the Secretary of Defense.8

 The 

Defense Logistics Agency assigned responsibility to its Defense National 

Stockpile Center. As of September 30, 1999, the Center managed 69 sites 

(10 staffed and 59 unstaffed satellite stockpile sites). Some sites are located 

on property owned by the military services or the General Services 

Administration and some are leased from the private sector. As of 

September 30, 1999, the Center stored 77 types of materials with a reported 

market value of about $3.4 billion.9

In 1997, the Department of Defense declared 99 percent of the National 

Defense Stockpile’s reported material value as excess material. The Center 

established a long-range plan to vacate 66 sites, reduce staffing, sell most of 

the excess materials, and transfer Center functions to another as yet 

unidentified entity.

The Gap Between 

Projected Collections 

and Outlays Is Greater 

Than Reported

Defense National Stockpile Center projections indicate that collections 

from gross sales during fiscal years 2000-2003 will generally meet or exceed 

planned Center expenditures, including operating costs and planned 

transfers. However, as shown in figure 1, total expected outlays will exceed 

collections beginning in fiscal year 2004.

8

Executive Order 12626 (Feb. 25, 1988).

9

According to the Defense National Stockpile Center, this value is based on September 30, 

1999, prices at which comparable materials were being traded. In the absence of current 

trading data, market values are estimated. Unaudited stockpile financial statements for 

fiscal year 1999 reported inventory and related property of about $2.8 billion on a historical 

cost basis (acquisition plus fees) and $3.5 billion at market value. According to stockpile 

staff, the difference in estimated market values and the fiscal year 1999 financial statements 

occurred because the financial statement disclosure of market value was based on 

March 31, 1999, prices and the market value was based on September 30, 1999, data.
Page 5 GAO-01-17 National Defense Stockpile

Figure 1: Projected Collections and Outlays for Fiscal Years 2000-2010

Source: Defense National Stockpile Center.

The total outlays of $3.77 billion during fiscal years 2000-2010 include an 

estimated $670 million for stockpile operations and about $3.1 billion to be 

transferred to other agencies. Of the amount to be transferred to other 

agencies, $1.65 billion is for the military services and is authorized annually. 

Other transfers, such as transfers to the Department of Health and Human 

Services, have been mandated under law to occur over future years.10

These outlays of $3.77 billion exceed the sum of (1) the projected cash 

10 P.L.105-261 §3303.

0

50

100

150

200

250

300

350

400

450

500

Fiscal Year

Collections

Outlays

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

$465 467 427 419 371 340 218 91 71 57 45

$393 432 432 399 389 380 373 279 245 245 205

Collections

Outlays

Dollars in millions
Page 6 GAO-01-17 National Defense Stockpile

balance of $752 million in the transaction fund plus (2) the estimated 

collections ($2.97 billion), thus resulting in a $48-million shortfall in fiscal 

year 2010.

Figure 2 shows an expected significant drop in the transaction fund 

balance after fiscal year 2004 and, by fiscal year 2010, the Center projects a 

shortfall of about $48 million.

Figure 2: Projected Ending Balances of the Stockpile Transaction Fund for Fiscal 

Years 1999-2010

Source: Defense National Stockpile Center.

Appendix I provides details on projected sales revenues, inventory values, 

cash collections, outlays, and remaining cash balances.

Environmental outlays will further reduce transaction fund balances. 

Outlays for stockpile operations in the Center’s projections include some 

outlays related to compliance with environmental laws and cleanup of 

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

-200

0

200

400

600

800

1000

752

823

858 854 874 856

816

661

473

299

111

-48

Fiscal Year

Dollars in millions
Page 7 GAO-01-17 National Defense Stockpile

contamination resulting from past operations. These outlays have been a 

relatively small part of the stockpile’s annual operating budget: $3.6 million 

out of the $74.2 million budgeted in fiscal year 2000. However, the Center’s 

projected environmental compliance outlays for fiscal years 2001-2010 do 

not include $80 million of estimated disposal outlays that the Center is 

likely to incur. Specifically, the Center estimated disposal outlays of 

$40 million to convert its inventory of thorium nitrate to thorium oxide and 

another $20 million for disposal of the thorium oxide (if it cannot be sold). 

It also estimated $20 million to repackage and store mercury. However, 

according to Center officials, these compliance outlays have not been 

included in the Center’s transaction fund cash flow projections because of 

uncertainty about the value and the timing of these actions.

The Department of Defense Financial Management Regulation11 requires 

that the Defense Logistics Agency estimate and report the cost to clean up 

and dispose of hazardous material resulting from its prior and current 

operations. The Department of Defense criteria cite the requirements 

contained in the Statements of Federal Accounting Standards. Specifically 

the Federal Financial Accounting Standards12 require the estimated costs of 

environmental cleanup and disposal to be reported if it is probable and 

measurable. These costs would also be useful in the Center’s long-range 

financial plan.

In addition, the transaction fund’s outlays for environmental cleanup could 

increase further because the Department has not yet fully assessed 

environmental damage at some or all of the 47 active stockpile sites that 

have stored hazardous material. Consequently, the Department has only 

partially estimated the likely environmental cleanup costs and has not 

determined the share of these costs that will be paid by the transaction 

fund. The Department identified some environmental cleanup costs in its 

annual cleanup report to the Congress for fiscal year 1999, which contained 

cleanup costs of $83.5 million for 15 of the sites. However, assessments at 

these sites are preliminary and could change, and they must be 

supplemented by assessments at the other 32 active stockpile sites that 

have stored hazardous materials. Figure 3, which is based on the Center’s 

11 DOD 7000.14-R.

12 Statement of Federal Financial Accounting Standards No.5, Accounting for Liabilities of 

the Federal Government, Feb. 28, 1997, and No.6, Accounting for Property, Plant, and 

Equipment, Feb. 28, 1997.
Page 8 GAO-01-17 National Defense Stockpile

most recent data, shows the 69 current active stockpile locations, including 

the 47 that have stored hazardous materials.

Figure 3: Active Stockpile Locations (69) as of September 30, 1999, That Have Nonhazardous and Hazardous Materials

Source: Defense National Stockpile Center.

According to Center officials, it is probable that the Center will have to 

fund at least some of these environmental cleanup costs. The Department 

has an environmental restoration account for each service and the Defense 

Logistics Agency that may be used for cleanup of old contamination from 

hazardous materials (including studies) at its facilities, including 

Department of Defense stockpile sites. Center officials expect that the 

environmental restoration accounts will fund some cleanup at stockpile 

sites. However, according to Center officials, many costs cannot be funded 

by the environmental restoration accounts because legislation and 

Depots that have stored hazardous materials (47)

Depots with preliminary assessments made

Deports without known hazardous materials (22)
Page 9 GAO-01-17 National Defense Stockpile

implementing policy limit types of activities that can be funded. Examples 

of potential costs that may not be covered by the accounts include

• tearing down buildings, such as at Curtis Bay, Maryland, when thorium 

is disposed of;

• cleaning up contaminated soil under current stockpiles of hazardous 

materials when the sites are closed;

• drilling monitoring wells and maintaining such wells to ensure 

compliance with the Clean Water Act; and 

• disposing of hazardous materials found during a closure of a site (as 

occurred when lead-contaminated soils were found during 

investigations of a stockpile in Louisiana).

The stockpile fund may have to fund some of these types of activities, but 

these costs are not included in the Center’s transaction cash flow 

projections.

Conclusions The Center’s projections show that stockpile fund outlays will exceed 

expected collections from sales revenues beginning in fiscal year 2004, and 

its cash reserves are estimated to be depleted in fiscal year 2010. In 

addition, the Center’s financial projections do not include a likely 

$80 million in environmental liabilities, and additional funding may be 

needed for future stockpile closure and cleanup activities. Consequently, 

decision-makers do not have a clear financial picture of potential stockpile 

operations costs and of funds that might be available for other purposes.

Recommendation for 

Executive Action

In order to assist decision-making regarding the use of funds in the 

transaction fund, we recommend that the Administrator of the Defense 

National Stockpile Center prepare a revised long-range financial plan that 

reflects all probable and reasonably measurable stockpile outlays for the 

disposal of hazardous materials and environmental cleanup. This plan 

should include the currently known probable costs and include goals and 

milestones for finalizing studies to determine probable costs for all other 

stockpile sites.

Agency Comments and 

Our Evaluation

In written comments on a draft of this report, the Department of Defense 

concurred with our recommendation, stating that the long-range plan will 

be revised as recommended. The Department’s comments are reprinted in 
Page 10 GAO-01-17 National Defense Stockpile

appendix II. The Department also provided technical comments on our 

report, which we have incorporated as appropriate.

Scope and 

Methodology

To determine whether stockpile collections from sales will meet all 

expected outlays, we obtained and analyzed information on projected 

stockpile gross sales, cash collections, outlays (including payments for 

operations and transfers), and remaining cash balances from Center 

officials. We also examined documents such as inventory records and 

environmental reports. We interviewed appropriate officials at the Defense 

National Stockpile Center.

We used the Center’s projections for gross sales, collections, and inventory 

balances for fiscal years 1999-2010. The basis of these projections were 

inventory balances as of September 30, 1999, as reported in the Center’s 

fiscal year 1999 stockpile report to the Congress. Actual data for later 

periods was not available at the time of our review. The Center will 

recompute the projections when actual data becomes available.

We did work at 13 active stockpile sites at Curtis Bay, Maryland; Clearfield, 

Utah; Arco, Idaho; Denver Federal Center, Colorado; Northgate, Colorado; 

Pueblo Army Depot, Colorado; Granite City, Illinois; Hammond, Indiana; 

Marietta, Pennsylvania; Warren, Ohio; Scotia, New York; Ravenna, Ohio; 

and Somerville, New Jersey. We observed the physical stockpiles and 

obtained information on the nature of related activities at these locations.

The Center’s estimates for fiscal years 2000 through 2010 are in current 

September 30, 1999, dollars. The Center’s projected sales of commodities 

were calculated using the past 3-year average unit price. For stockpile 

items that have not been sold by the Center in the past 3 years, the Center 

used the current market price. We did not evaluate the methodology used 

by the Center to make projections. Also, the Department of Defense’s 

Inspector General did not audit the stockpile transaction fund financial 

statements for fiscal year 1999 because the stockpile funds are not 

considered material.13

13The Department of Defense’s consolidated financial statements are prepared under the 

requirements of the Chief Financial Officers Act of 1990 (P.L.101-576), as amended by the 

Government Management Reform Act of 1994 (P.L.103-356).
Page 11 GAO-01-17 National Defense Stockpile

We conducted our review from September 1999 through November 2000 in 

accordance with generally accepted government auditing standards.

As arranged with your office, we plan no further distribution of this report 

until 30 days from its issue date, unless you publicly announce the its 

contents earlier. We will send copies to the Honorable Donald Rumsfeld, 

Secretary of Defense; the Honorable Mitch Daniels, Director, Office of 

Management and Budget; Lieutenant General Henry T. Glisson, Director, 

Defense Logistics Agency; and other interested parties.

Please contact me on (202) 512-8412 if you have any questions about this 

report. Major contributors to this report were Uldis Adamsons, Fred 

Lundgren, Leo Clarke III, Dianne Guensberg, and David Merrill.

Sincerely yours,

Charles I. Patton, Jr., Director

Defense Capabilities and Management 
Page 12 GAO-01-17 National Defense Stockpile

Appendix I

National Defense Stockpile Projected Cash 

Collections, Inventory, Uses of Funds, and 

Remaining Cash Balances ApendxiI

The Defense National Stockpile Center provided background information 

on the National Defense Stockpile, including its establishment, purpose, 

and authorization. The Center also provided data on the projected 

stockpile inventory through fiscal year 2010, which shows the inventory 

declining from about $3.4 billion to about $0.5 billion by fiscal year 2010. 

The Center projects that for fiscal years 2000-2010 about $3.77 billion will 

be needed for outlays, of which about 82 percent will be for transfers to 

other programs, including transfers to the military services, Health and 

Human Services, and the Treasury. About 18 percent will be needed for 

stockpile operations. The Center projects that the stockpile transaction 

fund will show a shortfall of $48 million in fiscal year 2010.

Background on the 

Stockpile Program

The stockpile program was established under the Strategic and Critical 

Materials Stock Piling Act to maintain and manage strategic and critical 

materials for use during a period of national emergency. The stockpile’s 

operating funding limits and transaction fund transfers are authorized each 

year by the national defense authorization acts.1

The stockpiling act established a separate fund in the Treasury called the 

National Defense Stockpile Transaction Fund. The transaction fund is 

available, subject to limitations in the appropriation acts, for the operation 

of the stockpile, including payroll, storage, disposal of hazardous materials, 

and environmental restoration.

In 1997, the Department of Defense declared 99 percent of the National 

Defense Stockpile excess. The Center established a long-range plan to 

vacate 66 sites, reduce depot staffing, sell most of the excess materials, and 

transfer Center functions to another Defense entity.

The Center makes annual long-term estimates of its sales, cash collections, 

outlays, and inventory status. The current long-range estimate, used as a 

source of information for this report, was made in the spring of 2000. 

Factors that could have a significant impact on the Center’s projections 

include changes in commodity prices, changes to or new mandated 

transfers, and changes to sales plans due to recommendations by the 

stockpile advisory committee (Market Impact Committee), which advises 

1

The authorization for fiscal year 2000 was the National Defense Authorization Act for Fiscal 

Year 2000 (P.L.106-65).
Appendix I

National Defense Stockpile Projected Cash 

Collections, Inventory, Uses of Funds, and 

Remaining Cash Balances

Page 13 GAO-01-17 National Defense Stockpile

the stockpile manager on projected domestic and foreign economic effects 

of acquisitions and disposals.

Projected Stockpile 

Inventory

Figure 4 shows the Center’s projections of remaining stockpile inventory 

through fiscal year 2010.2

2

National Defense Stockpile: Sales Revenue and Inventory Data (GAO/NSIAD-99-201R, 

Aug. 20, 1999).
Appendix I

National Defense Stockpile Projected Cash 

Collections, Inventory, Uses of Funds, and 

Remaining Cash Balances

Page 14 GAO-01-17 National Defense Stockpile

Figure 4: Value of the Stockpile Inventory for Fiscal Years 1999 (Reported) and 2000-

2010 (Projected)

Source: Defense National Stockpile Center.

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0

0.5

1

1.5

2

2.5

3

3.5 3.4

2.9

2.4

2.0

1.6

1.2

0.9

0.7 0.7

0.6

0.5 0.5

Fiscal Year

Dollars in billions
Appendix I

National Defense Stockpile Projected Cash 

Collections, Inventory, Uses of Funds, and 

Remaining Cash Balances

Page 15 GAO-01-17 National Defense Stockpile

In August 1999, we reported that the Center projected a remaining 

inventory market value of $1.36 billion at the end of fiscal year 2010. The 

Center now projects that about $489.4 million will remain in inventory as of 

the end of fiscal year 2010. Of this amount, about $6 million is not 

authorized for sale because it represents stockpile goals needed in a 

national emergency, including 50 tons of beryllium; 15,520 pounds of 

quartz; and 300 pounds of mica. The Center projects that the remaining 

material, about $483 million, is authorized materials not yet sold or which 

cannot be sold due to either the market being unable to absorb the material 

or restrictions imposed by the Annual Materials Plan.3

Fiscal Year 2000-2010 

Activity

During fiscal years 2000-2010, the Center projects that about $3.77 billion 

will be needed for estimated outlays, including stockpile operations and 

transfers. Figure 5 shows that most of the outlays from the stockpile 

transaction fund are for transfers with only a small amount used for 

stockpile operations.

3

 The plan lists the proposed maximum quantity of each commodity that may be sold and/or 

bought in a given fiscal year. Before any transactions, the Congress must enact specific 

enabling legislation. After receiving congressional authority, the Department of Defense 

develops the plan. The plan is coordinated with the Market Impact Committee, an 

interagency committee that advises the Department on the projected domestic and foreign 

economic effects of the proposed stockpile transactions. The plan is submitted to the 

Congress by February 15 of each year and, unless disapproved, becomes effective on 

October 1.
Appendix I

National Defense Stockpile Projected Cash 

Collections, Inventory, Uses of Funds, and 

Remaining Cash Balances

Page 16 GAO-01-17 National Defense Stockpile

Figure 5: Allocation of the $3.77 Billion of Projected Outlays for the Stockpile 

Transaction Fund for Fiscal Years 2000-2010

Source: Defense National Stockpile Center.

Stockpile Operations The Center projects that about $670 million in total will be needed to fund 

stockpile operations for the 11-year period over fiscal years 2000-2010. The 

Center or another activity to which operations are transferred at a later 

date would incur these costs. The Center projects that outlays for stockpile 

operation peak at $74.2 million in fiscal year 2000 and level off at about 

$54.7 million in fiscal years 2007 through 2010. Center officials stated that 

although the stockpile program will be downsized in the future, the Center 

has adopted a conservative approach to estimating operating outlays and 

projects the outlays to remain at $54.7 million for the fiscal years 2007 

through 2010.

Transfers to other

programs $3.100 billion

Stockpile operations

$671 million

82%

18%
Appendix I

National Defense Stockpile Projected Cash 

Collections, Inventory, Uses of Funds, and 

Remaining Cash Balances

Page 17 GAO-01-17 National Defense Stockpile

Transfers From the 

Transaction Fund to Other 

Government Programs

Over fiscal years 2000-2010, the Center projects that $3.10 billion will be 

transferred from the transaction fund to other government activities, 

including other agencies and to the general fund of the Treasury. There are 

several major transfer programs:4

• transfers to the services,

• transfers to the Health and Human Services program, and

• transfers to the general fund of the Treasury.

Transfers to the services are authorized annually. Transfers under the other 

programs have been mandated under law and are to occur over many years 

in the future. Each is discussed below.

 Transfers to the Services About $150 million in total has been transferred annually from the 

transaction fund to the military services. The Army, the Navy, and the Air 

Force each receive $50 million annually under various public laws.5

 There 

are no specific materials that must be sold for this transfer program. The 

Center projects that transfers to the services remain constant at $150 

million for fiscal years 2000-2010.6

 A total of $1.65 billion will be transferred 

over this period.

 Health and Human Services 

Program

The Health and Human Services Program consists of the sale of specific 

materials whose revenues are deposited in the transaction fund and 

subsequently transferred to both the program and to the general fund of the 

Treasury over a 7-year period for fiscal years 1999-2005. Funds transferred 

to the program (not the Treasury) are to be credited in the manner 

determined by the Secretary of the Department of Health and Human 

4

 In addition to these programs that affect the transaction fund there is a Titanium Sponge 

Transfer Program. This program consists of the transfer of titanium to the Army without 

charge. In each of the fiscal years 1996 through 2003, up to 250 tons of titanium sponge are 

to be transferred to the Army for use in the weight reduction portion of the main battle tank 

upgrade program. The Army pays transportation and related costs incurred in connection 

with the transfer. The Center estimates that the total value of the Titanium Program transfer 

is about $7 million.

5

 Transfers to the services are authorized under annual authorization legislation. All the 

transfers to other government departments, for example, the transfers to the Departments 

of the Treasury and Health and Human Services, are authorized by legislation and cover 

more than 1 fiscal year.

6

 According to Center officials, since this transfer requires an annual authorization and 

appropriation, there is no guarantee that transfers will be made beyond fiscal year 2002.
Appendix I

National Defense Stockpile Projected Cash 

Collections, Inventory, Uses of Funds, and 

Remaining Cash Balances

Page 18 GAO-01-17 National Defense Stockpile

Services to the Federal Hospital Insurance Trust Fund and the Federal 

Supplementary Medical Insurance Trust Fund. The Center projects that a 

total of $89 million will be transferred to the program during fiscal years 

2000-2003.

 Transfers to the Treasury The Center projects that under four mandated transfer programs, about 

$1.36 billion will be collected from sales of stockpile materials and 

subsequently transferred to the general fund of the Treasury during fiscal 

years 2000-2010. These multiyear mandated transfer programs and the 

amounts to be transferred are as follows:

• The Health and Human Services transfer program requires the sale of 

specific materials and transfers to the Treasury totaling $396 million.

• The Foreign Military Sales program7

 requires the sale of specific 

stockpile materials and the transfer of $430 million to the Treasury, 

which is to be used to offset the revenues lost as a result of an 

amendment to the program (P.L. 104-106 §4303(a)).8

• The Cobalt−Post Foreign Military Sales Program9 requires the sale of 

cobalt in fiscal years 2003-2007, with total projected collections of $235 

million that are to be transferred to the general fund of the Treasury.

• The Spectrum Program requires the sale of any materials not restricted 

by use in the other transfer programs. Total projected collections of 

$300 million are to be transferred to the general fund of the Treasury.10

The program started in fiscal year 2000 and ends September 30, 2009. 

Remaining Cash 

Balances

Table 1 shows the projected activity and beginning and ending balances for 

the transaction fund for fiscal years 2000-2010. The transaction fund is 

projected to peak at $874 million at the end of fiscal year 2003. Starting in 

7

National Defense Authorization Act for Fiscal Year 1997 (P.L. 104-201, Sept. 23, 1996, as 

amended in P.L. 105-65, Oct. 5, 1999).

8

The program started in fiscal year 1997 and requires total receipts of $720 million during the 

10-fiscal year period ending September 30, 2006.

9

National Defense Authorization Act for Fiscal Year 1998 (P.L. 105-85, §3305, as amended by 

P.L. 106-65). It is called the Cobalt-Post Foreign Military Sales program because cobalt is to 

be sold under the Foreign Military Sales program before being sold under this program.

10National Defense Authorization Act for Fiscal Year 2000 (P.L. 106-65, § 3402).
Appendix I

National Defense Stockpile Projected Cash 

Collections, Inventory, Uses of Funds, and 

Remaining Cash Balances

Page 19 GAO-01-17 National Defense Stockpile

fiscal year 2004, the projected transaction fund balance declines until it is 

depleted in fiscal year 2010 and shows a projected shortfall of $48 million.

Table 1: Projected Beginning Balances, Collections, Outlays, and Ending Balances for the Transaction Fund for Fiscal Years 

2000-2010

Note: The sum of the columns and rows may not agree with the totals due to rounding.

a

Because of subsequent adjustments, the actual beginning balance as of October 1, 1999, was

$743.9 million.

Source: Defense National Stockpile Center.

Any significant changes in commodity prices could have an effect on 

collections from sales and deposits to the transaction fund.11 Because the 

transfers are in fixed dollar amounts, increases in commodity prices would 

increase available transaction funds, while decreases in prices would cause 

a decline in the funds.

Current estimates of outlays for stockpile operations do not include 

potential outlays for stockpile site cleanup. Although the Center has 

undertaken efforts to determine the extent of the environmental cleanup 

effort, the Center has not projected the costs to clean up stockpile 

locations with hazardous materials.12

Dollars in millions

FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

Beginning cash

balancea

$752 $823 $858 $854 $874 $856 $816 $661 $473 $299 $111

Collections 465 467 427 419 371 340 218 91 71 57 45

Outlays -393 -432 -432 -399 -389 -380 -373 -279 -245 -245 -205

Ending cash 

balance

$823 $858 $854 $874 $856 $816 $661 $473 $299 $111 $-48

11 In its comments in our prior report, the Department of Defense stated that future 

collections from sales are contingent on the fluctuating value of the marketable inventory.

12 In its comments to our prior report, the Department of Defense stated that future 

environmental costs would substantially decrease the funds available for other projects.
Page 20 GAO-01-17 National Defense Stockpile

Appendix II

Comments From the Department of Defense ApendxiI
Appendix II

Comments From the Department of Defense

(709419) Letr Page 21 GAO-01-17 National Defense Stockpile

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