In 1972, after receiving inconsistent data on DOD headquarters from the military services, the House Appropriations Committee directed DOD to define headquarters functions, list headquarters activities, and develop a common method of accounting for headquarters personnel and costs. In response, in 1973 the Deputy Secretary of Defense issued DOD Directive 5100.73. Over the years, the directive has been revised and is now titled “Department of Defense Management Headquarters and Headquarters Support Activities.” The directive defines management as exercising oversight, direction, and control of subordinate organizations or units by (1) developing and issuing policies and providing policy guidance; (2) reviewing and evaluating program performance; (3) allocating and distributing resources; or (4) conducting mid- and long-range planning, programming, and budgeting. It defines headquarters support as professional, technical, administrative, or logistic support that is performed in, or provided directly to, a management headquarters. The definition includes both staff support and operating support (such as secretarial or computer support). It excludes specific products or technical and operating-type services that are provided on a DOD- or componentwide basis (such as payroll services) and base operating support functions provided by a host to all tenants. The directive includes a list of organizations that DOD classifies as management headquarters and headquarters support activities. This list includes the Office of the Secretary of Defense (OSD); the Joint Staff; defense agency headquarters; unified command headquarters; international military headquarters; and military department headquarters, including the headquarters of acquisition centers, major commands, and similar Navy organizations. In addition to the listed entities, the directive establishes criteria for DOD components to use in identifying other personnel and organizations that perform management headquarters and headquarters support functions. The directive, as implemented in DOD, requires that DOD annually report to Congress all military and civilian personnel and all budgeted funds for organizations identified under the directive. OSD and the military departments report this data to Congress on four separate budget documents, called PB-22 exhibits. Many DOD management headquarters listed in the directive have numerous subordinate noncombat organizations that perform a wide variety of functions, from direct staff support to their parent headquarters to operating military academies. In the Army and Air Force, these types of organizations are called field operating agencies/activities, staff support agencies, or direct reporting units. The Navy has no specific term for these noncombat support activities—at the Department of the Navy level, they are a subset of “Echelon 2” organizations, a generic term for Navy organizations that report to the Secretary of the Navy or the Chief of Naval Operations (OPNAV). In the past, we reported that DOD had an incentive to respond to pressures to reduce its management headquarters by transferring personnel to nonmanagement headquarters organizations. We also reported that past efforts to reduce headquarters personnel in OSD and military department headquarters were achieved primarily through transfers of functions and personnel to other organizations. Concerned that DOD’s efforts to reduce its infrastructure, including headquarters, have lagged behind the cuts made in operational forces, Congress has taken several actions to reduce headquarters personnel. For example, in 1990, Congress ordered DOD to reduce total personnel assigned to DOD management headquarters and headquarters support activities by 20 percent over 5 years in order to bring the size of headquarters “into line with” legislated force structure and budgetary reductions. Also, in the National Defense Authorization Act for Fiscal Year 1997, Congress directed DOD to reduce OSD, its DOD support activities, and the Washington Headquarters Services (WHS) by 25 percent over 5 years. The total number of personnel associated with DOD’s management headquarters and headquarters support activities are significantly higher than DOD has reported to Congress. DOD reported steady decreases in its management headquarters and headquarters support personnel from about 77,000 to 53,000 during fiscal years 1985-96, a 31-percent decrease. However, DOD does not report personnel at most of its noncombat organizations that are directly subordinate to management headquarters. In our review of selected subordinate noncombat organizations, we found that almost three-fourths of the organizations were primarily performing management or management support functions and should have been reported to Congress by DOD, using the criteria in DOD Directive 5100.73. Some personnel in these subordinate organizations had been part of headquarters, but they were transferred out of headquarters, or reclassified as nonheadquarters, during periods when Congress mandated that DOD reduce its management headquarters personnel. For example, in 1992 the Air Force removed about 2,000 personnel in its numbered air forces headquarters from reporting under DOD’s management headquarters program. We also found situations in which the military services use unusual accounting devices that distort the true size of organizations; in addition, the size of OSD is unclear because of definitional issues. DOD reported steady decreases in its management headquarters and headquarters support personnel from about 77,000 to 53,000 during fiscal years 1985-96, a 31-percent decrease. These reported decreases were, to some extent, in response to reductions directed by Congress. This rate of decrease is somewhat less than the 36-percent decrease in combat forces over the same time period. Figure 1 shows reported personnel levels for management headquarters and headquarters support for past and future fiscal years. Although DOD showed a steady decline in management headquarters and headquarters support personnel overall, the Defense-wide category increased 34 percent, from 7,089 in fiscal year 1985 to 9,533 in fiscal year 1996. The increase in OSD alone was 23 percent—from 1,691 to 2,078 during this time. (See app. I for a discussion of OSD personnel.) The increase in Defense-wide personnel was especially high from fiscal year 1988 to 1990—from 7,599 to 10,347, an increase of 36 percent. During that time, an additional 1,500 personnel in the Defense Logistics Agency’s management support activities (now called DOD support activities) were included in DOD’s report, according to agency officials. Also, in fiscal year 1990, DOD’s report included for the first time headquarters personnel from the U.S. Special Operations Command. DOD projects smaller annual decreases in management headquarters and headquarters support personnel for fiscal years 1997-99 than those reportedly made during the last 10 years. Beyond 1999, DOD’s estimates for these personnel are contained only in the Future Years Defense Program (FYDP), which shows a slight decrease, from 49,699 to 49,270 during fiscal years 2000-03. However, these projections do not include any changes that may occur as a result of implementing recommendations based on the Quadrennial Defense Review (QDR). Based on our review of 40 noncombat organizations subordinate to the 10 management headquarters we audited, we concluded that DOD had not included 29 organizations and 2,853 personnel in its reports to Congress on management headquarters and headquarters support (see table 1). We selected organizations to review based on a variety of factors, including conditions that OSD/DA&M officials agreed may indicate that an organization is providing management support. These indicators, also called “red flags” by OSD/DA&M, are headquarters officials serving additional duty as senior officials in the subordinate organization (called “dual hatting”), transfer of personnel from headquarters to create or augment subordinate organizations, diverse functions that mirror headquarters functions, and collocation of the subordinate organization with its headquarters. Although the presence of one or more of these indicators is not conclusive, it led us to perform the analysis called for in DOD Directive 5100.73. Many different types of organizations should have been reported to Congress because they perform management or management support functions covered by DOD’s directive: The Army’s Congressional Inquiry Division, a field operating activity with 41 personnel, augments 46 personnel that are designated as headquarters personnel. The division is one of seven in the Office of the Chief of Legislative Liaison in the Pentagon. The Navy’s International Programs Office, an Echelon 2 command with 169 personnel, manages foreign assistance programs for the Navy and reports to the Assistant Secretary of the Navy (Research, Development, and Acquisition). The Air Intelligence Agency’s 497th Intelligence Group, a direct reporting unit with 305 personnel located in Washington, D.C., primarily supports the Air Staff. The U.S. Army’s Forces Command’s Field Support Activity, with 293 personnel, is merely an accounting device for personnel integrated throughout Forces Command headquarters. The U.S. Atlantic Command’s Information Systems Support Group, a support activity with 117 personnel that was previously considered part of headquarters, provides computer support to the Command’s headquarters. The Air Combat Command’s Studies and Analyses Squadron, a field operating activity with 71 personnel, studies issues for its headquarters. Appendix II contains details on these and other noncombat organizations we reviewed. In addition to these organizations that we found, OSD/DA&M agreed that other organizations should have been reported in DOD’s annual PB-22 exhibits. For example, OSD’s fiscal year 1998 PB-22 exhibit on Defense-wide activities omitted the management headquarters personnel and costs for five defense agencies—the Ballistic Missile Defense Organization, the Defense Advanced Research Projects Agency, the Defense Commissary Agency, the Defense Finance and Accounting Service, and the Defense Security Assistance Agency. In total, these agencies had about 1,300 management headquarters personnel and $150 million in related operations and maintenance costs for fiscal year 1997. The fiscal year 1998 PB-22 exhibit did include, however, the management headquarters personnel and costs of the National Security Agency, a defense agency explicitly covered by DOD Directive 5100.73 that had not been reported on the exhibit since fiscal year 1993. An unknown portion of DOD’s reported personnel decreases in management headquarters and headquarters support activities were due to transferring personnel to nonheadquarters organizations or to reclassifying personnel and their functions as nonheadquarters, rather than actually reducing DOD personnel.