The Army uses maintenance capabilities in both the public and private sectors to maintain, overhaul, and repair its military weapons systems, such as missiles, combat vehicles, tactical vehicles, aircraft, and communication and electronic equipment. The level at which maintenance work is performed depends largely on authorized capability, worker skills, and predefined work requirements. Legislative requirementswhich play an important role in managing the allocation of depot-level maintenance workmandate that DOD provide Congress with annual reports on the distribution of funding for depot-level maintenance workloads in the public and private sectors. The Army assigns maintenance work to four categories—unit support, direct support, general support, and depot-level support. Unit and direct support workloads, which are limited to routine or recurring requirements, such as oil changes and the removal and replacement of components, are performed at military units in field locations and funded by direct appropriations for operations and maintenance. General support, which consists of the repair and overhaul of parts and assemblies and some end items such as trucks, is generally performed at fixed (nonmobile) industrial facilities located on Army posts, camps, and stations, and it is funded by direct appropriations for operations and maintenance. Military personnel, government-employed civilians, or contractor employees may perform this maintenance. Depot-level support, which includes the overhaul; upgrading; and rebuilding of parts, assemblies, and subassemblies; and testing and reclamation of equipment, is the most intensive category of maintenance and requires the highest level of skilled workers and more sophisticated test and plant equipment. It traditionally has been performed by (1) government-employed civilians working at government-owned industrial facilities under the command and control of the Army Materiel Command (currently five public depots) or (2) contractor personnel working in contractor owned and operated facilities performing work specified by Army Materiel Command-managed maintenance contracts. The Army’s five government-operated maintenance depots are managed within the Army Working Capital Fund. Contract depot-level maintenance work is not managed under the working capital fund. The Army has two categories of depot-level maintenance activities: Activities that have been designated and organized by design and purpose to primarily perform depot-level maintenance and repair tasks. These activities would include the Army Materiel Command’s public depots; the Army’s forward deployed maintenance depots; and contractor depots, primarily located at both the national and installation levels. Activities below the depot level that have been granted approval to perform specific depot-level tasks through a special or one-time authorization or that have been designated as a source of repair. These activities include Army National Guard Readiness Sustainment Maintenance Sites and Aviation Classification Repair Activity Depots, Army Reserve Installation Materiel Maintenance Activities, and Army Forces Command Contract Maintenance Facilities. These activities are primarily located at the installation level, and the work may be done by either government or contractor personnel. Operations of the Army depots are guided by legislative requirements that divide the amount of depot work between the public and private sectors and add specificity to how such work is to be defined. For example, 10 U.S.C. 2464 provides for a government owned and operated core logistics capability that is sufficient to ensure an effective and timely response to a mobilization or other national emergency. Also, 10 U.S.C. 2466 generally prohibits the use of more than 50 percent of the funds made available in a fiscal year for depot-level maintenance and repair by nonfederal personnel. In addition, 10 U.S.C. 2460 defines depot-level maintenance to encompass material maintenance or repair requiring the overhaul, upgrading, or rebuilding of parts, assemblies, or subassemblies and the testing and reclamation of equipment, regardless of the source of funds for the maintenance or repair or the location where maintenance or repair work is performed. Depot-level maintenance also encompasses software maintenance, interim contractor support, and contractor logistics support to the extent that work performed in these areas is depot-level maintenance. The statute excludes from depot-level maintenance the nuclear refueling of an aircraft carrier, the procurement of major modifications or upgrades of weapons systems that are designed to improve program performance, and the procurement of parts for safety modifications, although the term “depot maintenance” does cover the installation of parts for safety modifications. Congress has made changes to various depot-level maintenance requirements over the years. For example, the 1998 Defense Authorization Act established a statutory definition of depot-level maintenance and repair and increased DOD’s authority to use its depot-level maintenance funds for the private sector’s performance of the work from 40 to 50 percent. On the basis of statutory language defining depot-level maintenance, the Office of the Secretary of Defense issues annual guidance to the military departments for reporting their public-private workload allocations. The military departments also issue internal instructions to manage the data collection and reporting process tailored to their individual organizations and operating environments. As we have reported in recent years in examining DOD’s compliance with its so-called “50-50 requirement” under 10 U.S.C. 2466, all of the military departments have continuing data errors and inconsistencies in reporting and problems in documenting and independently validating their annual reports. We also have recognized the limitations of their financial systems, operations, and controls, as well as their continuing inability to capture and report the full costs of depot-level maintenance programs. Some of our most recent reports on depot-level maintenance issues are listed in the Related GAO Products section of this report. We previously reported that the Army had not sufficiently identified the extent of depot-level maintenance work performed at nondepot facilities in its April 14, 1999, report to the House Committee on Armed Services on depot proliferation. While the Army’s report indicated that 40 staff years of depot-level maintenance work was performed outside of the formal depot system by nondepot maintenance providers operating under specialized repair authorities, it also recognized that the figure was likely understated for a variety of reasons to include limitations in systems and procedures to fully quantify such work. We agreed. We also noted that in July 1999 the Army designated its Army Materiel Command as its National Maintenance Manager with responsibility for overseeing the Army’s logistics and maintenance support programs and managing maintenance facilities. In doing so, we noted then that while the Army recognized that it needed to modify and standardize Army data systems to fully account for depot-level maintenance work at all locations, it had not established clear action plans, milestones, and funding requirements for doing so. Our September 2003 report on DOD’s compliance with the 50-50 requirement found that the Army’s latest reporting on depot-level workloads for fiscal years 2001 and 2002 had utilized a new, more centralized financial system to collect 50-50 data that corrected some of the transcription errors we had found the previous year but that we continued to find errors, omissions, and inconsistencies in its data. Moreover, we reported that, as in prior years, the Army underreported public- and private-sector depot-level maintenance work at field locations as it continues unfinished efforts to consolidate maintenance activities and better control the proliferation of depot-level tasks at nondepot facilities. Although the mandate directed the Army to identify the proliferation of depot-level maintenance performed outside the public depots, the Army’s report on depot-level maintenance proliferation did not fully identify the extent of depot-level maintenance work performed at nondepot facilities. Instead, the report estimated that depot-level maintenance work valued at $188.6 million for fiscal year 2001 was not included in the Army’s depot- level maintenance data and that further validation of this amount was needed. While this estimate may not be fully indicative of depot-level maintenance work being performed outside the public depots, it indicates underreporting in this area that is consistent with the observations we have made in our prior work. Although the report recognized that the Army has redundant capabilities and capacities, it did not provide any information on the extent of this redundancy or the extent of maintenance activities that could be consolidated. We also have previously reported the existence of this problem. While the Army’s report provided an estimate of depot-level maintenance work that was not appropriately identified as such in fiscal year 2001, it acknowledged that the amount was incomplete and needed further validation. The report listed seven specific areas where depot-level maintenance work performed by nondepot facilities was not identified and estimated this amounted to be $188.6 million. As illustrated by table 1, most of the unidentified amount occurred in field-level facilities that perform depot-level maintenance tasks. According to the report, two categories of work accounted for about 75 percent of the $188.6 million. These were facilities that performed field-level maintenance under the National Maintenance Program with embedded depot tasks and those under One-Time Repair authorizations. The report pointed out that some of the unidentified depot-level maintenance work resulted from a misunderstanding between the Army Materiel Command and its subordinate commands over which organization would report this type of work. The report’s identification of unidentified depot-level maintenance work performed by nondepot facilities is consistent with our prior reviews of the Army’s annual 50-50 data. For example, in our most recent report, we identified work categories such as unreported one-time repair actions and unreported work by commands that did not receive Army reporting guidance, which contributed to the Army’s inability to fully account for its depot-level maintenance work in 2002. We noted that, as in past years, the Army did not fully identify public- and private-sector depot-level maintenance work at field locations as it continued unfinished efforts to consolidate maintenance activities and better control the proliferation of depot-level tasks at nondepot locations.