The primary mission of NWS is to help protect life and property by providing weather and flood warnings, public forecasts, and advisories for all of the United States, adjacent waters, and ocean areas. NWS operations also support other agencies’ missions and the nation’s commercial interests. For example, NWS provides weather forecasts and warnings to support aviation and marine safety. To fulfill its mission, NWS uses a variety of systems and manual processes in collecting, processing, and disseminating weather data to and among its network of field offices and regional and national centers. Many of these systems and processes are outdated. NWS began a nationwide modernization program in the 1980s to upgrade observing systems, such as satellites and radars, and design and develop advanced computer workstations for weather forecasters. The goals of the modernization are to achieve more uniform weather services across the nation, improve forecasts, provide better detection and prediction of severe weather and flooding, permit more cost-effective operations through staff and office reductions, and achieve higher productivity. In conjunction with its modernization, NWS plans to restructure its field offices, reducing their number from 256 to 119. However, delays in implementing the Advanced Weather Interactive Processing System have slowed progress in office restructuring. NWS now expects the modernization to be completed before the end of fiscal year 1999. In the past, we and others have identified several weaknesses in NWS’ actions to modernize its operations and manage its information technology resources. In February 1995, we designated the NWS modernization as an area of high risk due to its cost, complexity, past problems, and criticality to the NWS mission. Because of continuing concerns over cost increases and schedule delays associated with the modernization, it remains in the high-risk category today. NOAA has also been plagued by financial management problems. For example, Commerce’s Office of the Inspector General noted in February 1997 that NOAA could not provide all the financial information required by the Chief Financial Officers Act of 1990, as expanded by the Government Management Reform Act of 1994, or ensure the accuracy of certain components of financial information in its consolidated financial statements. The independent certified public accounting firm auditing NOAA’s fiscal year 1996 financial statements was unable to express an opinion on these statements due to inadequacies in NOAA’s accounting records and internal controls. The auditors identified 11 material weaknesses in NOAA’s internal controls, including budgetary execution transactions that were not supported or reconciled. The auditors recommended that NOAA focus on communicating the importance of financial management and fiscal responsibility to its program offices. To describe key events related to the formulation and execution of NWS’ fiscal year 1997 budget, we examined guidance developed by OMB, including the communication of budget requests and apportionments, as well as congressional guidance provided in appropriation acts and accompanying congressional committee reports on the execution of NWS’ budget. We also obtained and reviewed relevant budget documents for NWS, including its budget request and its requests for the reprogramming of funds. To identify key events regarding NWS’ fiscal year 1997 budget “shortfall” and efforts to address it, we examined records of communication among NWS, NOAA, and Commerce, as well as communications to the Congress. This included memoranda, briefings, electronic messages, and statements to the Congress. We interviewed Commerce, NOAA, and NWS budget and program officials to identify key events related to the NWS budget for fiscal year 1997. We also examined relevant reports, such as An Assessment of the Fiscal Requirements to Operate the Modernized National Weather Service During Fiscal Years 1998 and 1999. We also reviewed the audit report prepared by the Department of Commerce’s Office of Inspector General and an independent certified public accounting firm on NOAA’s fiscal year 1996 financial statements, dated February 26, 1997. We performed our work at NOAA headquarters in Washington, D.C., and at NWS headquarters in Silver Spring, Maryland, from July 1997 through January 1998. Our work was performed in accordance with generally accepted government auditing standards. We requested comments on a draft of this report from the Secretary of Commerce or his designee. The Secretary provided written comments, which are discussed in the “Agency Comments” section and are reprinted in appendix I. In developing their internal budget preparation instructions and formulating budget requests, executive agencies follow guidance contained in OMB Circular A-11, Preparation and Submission of Budget Estimates. This circular provides detailed guidance on the form and content of budget requests and the basis for making budget estimates. At NOAA, this guidance is supplemented by a budget handbook that reinforces many of the circular’s principles. According to the NOAA handbook, the NOAA Comptroller with input from the NOAA components—the National Weather Service; National Ocean Service; National Marine Fisheries Service; Oceanic and Atmospheric Research; and National Environmental Satellite, Data, and Information Service—prepares a draft budget request for departmental review and approval. NOAA’s fiscal year 1997 budget request contained several appropriation accounts, including operations, research and facilities; construction; and fleet modernization, shipbuilding and conversion. The operations, research and facilities account, the largest appropriation, includes separate estimates for each of NOAA’s components and provides the majority of their funding. This account contains no-year funding authority—that is, its appropriation remains available for obligation for an indefinite period of time. There is no appropriation account specific to NWS. Table 1 provides a snapshot of the development of the NWS fiscal year 1997 budget. This process began when the department submitted a fiscal year 1997 budget request of nearly $2 billion to OMB for NOAA operations, research, and facilities, including a request of $693 million for NWS. OMB reviews each department and agency budget request based on presidential priorities and other factors and makes an initial proposal on how resources will be allocated. Departments and agencies are notified of OMB’s initial resource allocation decisions about 2 months after making their initial budget submissions. This notification is commonly referred to as a “passback.” Agencies may appeal their passbacks. The OMB passback to the Department of Commerce resulted in overall reductions for NOAA as well as a specific reduction of about $22 million for NWS’ portion of NOAA’s operations, research, and facilities request. As required by OMB Circular A-11, NOAA revised its budget request to bring it into accord with these decisions. Both OMB and NOAA budget preparation guidance instruct staff to support the ultimate request in the President’s budget. In response to the passback, NWS revised its fiscal year 1997 budget to about $671 million, the amount contained in the President’s budget request to the Congress. The final step in the budget formulation process is congressional review of the agency’s budget and the enactment of appropriations. After holding hearings and deliberating on NOAA’s budget request, the Congress reduced the amount for NOAA’s operations, research, and facilities request by about $117 million and specified that NWS absorb about $33 million of the cut, resulting in a fiscal year 1997 budget for NWS of $638 million. After an agency’s appropriation is enacted, the agency receives an apportionment from OMB. Apportionment and subsequent allotmentswithin the agency are established, often by calendar quarter and by program or major activity, to prevent obligations in a manner or at a pace that would result in the agency exceeding appropriated levels. As an agency executes its budget, it may feel changes from planned spending levels are needed. To allow for efficient and effective execution of agency budgets while still maintaining appropriate oversight of executive actions, the Congress has provided reprogramming guidelines that define when changes from planned spending levels require congressional notification. Reprogramming is the shifting of funds within an appropriation for purposes other than those contemplated at the time of appropriation. For example, to help address its budget “shortfall,” NWS requested a $7.9 million reprogramming of NOAA funds in April 1997. There are no governmentwide reprogramming guidelines; guidance varies among appropriation subcommittees. For example, the annual Commerce, Justice, State, the Judiciary and Related Agencies Appropriations Act typically provides that no funds are available for a reprogramming which results in, among other things, the creation of a new program; elimination of a program, project, or activity; or relocation of an office or employees unless the Appropriations Committees of both Houses of Congress are notified 15 days in advance of the reprogramming. Appendix II contains a chronology describing the key events related to the formulation and execution of the NWS fiscal year 1997 budget. Due to the reductions that OMB and, subsequently, the Congress made to NWS’ fiscal year 1997 budget request, as well as inflation and other cost increases, NWS believed it had a budget “shortfall.” NWS officials felt that NWS’ fiscal year 1997 budget was not sufficient to provide desired levels of services. NWS appeared to define its “shortfall” generally as the gap between its final 1997 budget (less a one-time program increase of $14 million for modernization and associated restructuring demonstration and implementation) and its 1996 budget adjusted for inflationary and other increased costs, such as pay raises. NOAA and NWS reported varying amounts to the Congress about the size of NWS’ estimated budget “shortfall.” For example, after receiving its fiscal year 1997 appropriations, NOAA and NWS officials noted spending reductions of $27.5 million in a February 14, 1997, briefing to congressional staff. Two months later, in an April 4, 1997, briefing to congressional staff, NOAA noted spending reductions of $42.2 million. By May 1997, the reported “shortfall” had increased to $47.4 million.