In addition to the 50-50 requirement in 10 U.S.C. § 2466, the following provisions directly affect the reporting of workload funding allocations to the public and private sectors. Section 2460 defines depot maintenance to include material maintenance or repair requiring the overhauling, upgrading, or rebuilding of parts, assemblies, or subassemblies and the testing and reclamation of equipment, regardless of the source of funds or where maintenance or repair is performed. Depot maintenance also encompasses software maintenance, interim contractor support, and contractor logistics support to the extent that work performed in these categories is for depot maintenance. The statute excludes from depot maintenance the nuclear refueling of an aircraft carrier; the procurement of major modifications or upgrades of weapon systems that are designed to improve program performance; and the procurement of parts for safety modifications, although the term does include the installation of parts for safety modifications. Section 2474 directs DOD to designate public depots as Centers of Industrial and Technical Excellence and to improve their operations to serve as recognized leaders in their core competencies. Section 342 of the National Defense Authorization Act for Fiscal Year 2002 (Pub. L. No. 107-107, Dec. 28, 2001) amended this statute to exclude qualifying public-private partnerships, referred to as private exempt, from the 50 percent funding limitation on contracting in section 2466. Specifically, section 342 provides that the funds expended for the performance of depot-level maintenance by nonfederal government personnel located at the Centers of Industrial and Technical Excellence shall not be counted when applying the 50 percent limitation if the personnel are provided pursuant to a public-private partnership. This exclusion initially applied to depot maintenance funding for fiscal years 2002 through 2005. The exclusion later was extended to fiscal year 2006, and recently to fiscal year 2009. Section 2466 allows the Secretary of Defense to waive the 50 percent limitation if he determines the waiver is necessary for national security. The Secretary submits the notification of waiver together with the reasons for the waiver to Congress. Waivers were previously submitted for the Air Force for fiscal years 2000 and 2001. The Office of the Secretary of Defense (OSD) issues guidance to the military departments for reporting public-private workload funding allocations. The guidance is consistent with the definition of “depot-level maintenance and repair” in 10 U.S.C. § 2460. The military services have also issued internal instructions to manage the data collection and reporting process, tailored to their individual organizations and operating environments. Figure 1 summarizes DOD’s April 2005 report to Congress on public- and private-sector funding allocations for depot maintenance. All three departments reported that their private-sector depot maintenance allocation fell below the 50 percent funding limitation for fiscal year 2004 and will remain below the 50 percent limitation for fiscal years 2005 and 2006. The amounts shown are from DOD’s record of actual obligations incurred for depot maintenance work in fiscal year 2004 and projected obligations for fiscal years 2005 and 2006. The percentages show the department’s record of the relative allocations between the public and private sectors and the exempted workload funding. DOD’s 50-50 data, with our adjustments, only provide a rough approximation of the allocation of depot maintenance funding between the public and private sectors. Our prior reports on depot maintenance workload funding allocations have recognized systemic weaknesses in DOD’s financial systems, operations, and internal controls that impede the department’s ability to provide useful, reliable, and timely financial information for day-to-day management and decision making. In the financial management systems area, DOD continues to struggle in its efforts to implement systems to support managerial decision making. To date, none of the military services have passed the test of an independent financial audit. Nonetheless, the data used to develop the 50-50 report are the only data available and are accepted by DOD and used as input to Congress for its congressional oversight. As in previous years, management control weaknesses in DOD’s financial systems and persistent deficiencies in 50-50 data reporting processes continue to prevent us from determining whether the military departments complied with the 50-50 requirement for public- and private-sector depot maintenance funding allocations for fiscal year 2004. DOD’s April 1, 2005, report to Congress contained data errors, omissions, and inconsistencies due to persistent deficiencies, such as inadequate management attention and review to ensure accurate and complete reporting, limited independent review and validation of 50-50 data by audit services or other third parties, and inadequate training for those responsible for data gathering and reporting. As a result, the data reported for the prior year cannot be relied on to provide an accurate measure of the balance of funding between the public and private sectors or to determine if the military departments complied with the statutory limitation set by Congress for private-sector depot-level maintenance funding allocations. The recurring nature of these deficiencies indicates a management control weakness in DOD’s 50-50 data reporting processes significant enough to be reported in DOD’s annual performance and accountability report. This weakness has not been disclosed in DOD’s annual accountability reports to Congress, even though the issues have been identified in prior audits. DOD’s April 1, 2005, report to Congress contained errors, omissions, and inconsistencies in the depot maintenance funding allocation data for fiscal year 2004. The net effects of correcting the data inaccuracies we identified would increase the Army’s and Navy’s percentages of funding allocations going to the private sector, causing both military departments to come very close to the 50 percent private-sector limitation. Although we also found inaccuracies in the Air Force data, adjusting for them does not change the funding allocation distribution percentages. Table 1 summarizes the amounts and effects of our adjustments to DOD’s reported depot funding allocation data for fiscal year 2004. Adjusting the Army’s data on the basis of the specific inaccuracies we identified would reduce its total depot maintenance funding by $347.1 million for fiscal year 2004. The net effect of correcting for these inaccuracies would increase the private-sector percentage allocation by about 4.2 percentage points for an overall allocation of 49.2 percent. (See table 3 in app. II for a detailed breakout of these adjustments.) The Army’s most significant data inaccuracies generally were due to overreported public depot funding and underreported or unreported private depot funding. Adjustments to the Army’s reported public work amounted to a $397 million decrease. The most significant of the errors in public-sector depot maintenance reporting, $399.4 million, was due to a transcription error. The Army also overreported an additional $9.6 million due to double-counting and $7.8 million for misclassifying private-sector workload as public. Additionally, the Army underreported $18.4 million in public-sector depot maintenance funding at the Aviation and Missile Command and the Communications and Electronics Command and did not report nearly $0.9 million in depot maintenance funding for the FOX vehicle. Adjustments to the Army’s private sector workload resulted in a net increase of $49.6 million mostly due to unreporting or underreporting. The Army did not report private depot work for onetime repairs at a nondepot aviation location in the amount of $20.7 million. The Army also failed to report $2.2 million in private depot work at Anniston Army Depot and $6.2 million in private depot work at a National Guard aviation classification and repair depot. It also did not report $6.9 million in private depot work for the Stryker vehicle and $5.9 million for the FOX vehicle. For fiscal year 2004, the Army included amounts for its National Maintenance Program, one of the two areas the Army previously estimated made up the majority of its unreported depot-level maintenance work performed at nondepot facilities; however, $5.7 million was underreported because planned funding was reported instead of the amounts actually obligated. Finally, the Army underreported $7.8 million through a misclassification of private work as public work. Adjusting the Navy’s and Marine Corps’ data on the basis of the specific inaccuracies we identified would reduce their total depot maintenance funding by $251.7 million for fiscal year 2004, the net effect of correcting for these inaccuracies would increase the private-sector percentage allocation by 2.4 percentage points for an overall allocation of 48.5 percent. (See table 4 in app. II for a detailed breakout of these adjustments.) The Navy’s most significant data inaccuracies generally were due to unreported private depot funding and overreported public depot funding. For example, as we reported in past years, the Navy did not report $80.3 million in depot maintenance funding for work accomplished during the nuclear refueling of aircraft carriers, citing the exclusion of nuclear refueling from the 10 U.S.C. § 2460 definition of “depot maintenance.” We continue to believe that depot maintenance repairs not directly associated with the task of nuclear refueling should be reported because these types of repair actions are reported by other organizations and it is possible to identify the funding for these tasks in Navy contracts and financial systems. The Navy also, as in prior years, inconsistently reported on inactivation activities related to the servicing and preservation of systems and equipment prior to their placement in storage or on inactive status. Specifically, the Navy did not report $14.4 million of private-sector allocations for inactivation work on non-nuclear ships, even though it reported private-sector funding for the inactivation for nuclear ships. The Navy contends that the work for nuclear ship inactivation is complex while the work for non-nuclear ships is not. We maintain that all such depot-level work should be reported, since the statute and implementing guidance do not make a distinction based on complexity.