Congress appropriates operations and maintenance funds for DOD, in part, for the purchase of spare and repair parts. DOD distributes operations and maintenance funding to major commands and military units. The latter use operations and maintenance funding to buy spare parts from the Department’s central supply system. By the end of fiscal year 2001, DOD reported in its supply system inventory report that it had an inventory of spare parts valued at about $63.3 billion. Prior GAO reports have identified major risks associated with DOD’s ability to manage spare parts inventories and prompted a need for reporting on spare parts spending and the impact of spare parts shortages on military weapon systems’ readiness. In recent years, Congress has provided increased funding for DOD’s spare parts budget to enable military units to purchase spare parts from the supply system as needed. In addition, beginning with fiscal year 1999, Congress provided supplemental funding totaling $1.5 billion, in part, to address spare parts shortages that were adversely affecting readiness. However, in making supplemental appropriations for fiscal year 2001, the Senate Committee on Appropriations voiced concerns about the Department’s inability to articulate funding levels for spare parts needed to support the training and deployment requirements of the armed services and provide any meaningful history of funds spent for spare parts. In June 2001, we reported that DOD lacked the detailed information needed to document how much the military units were spending to purchase new and repaired spare parts from the central supply system. To increase accountability and visibility over spare parts funding, we recommended that DOD provide Congress with detailed reports on its past and planned spending for spare parts. In making the recommendation, we anticipated that such information, when developed through reliable and consistent data collection methods, would help Congress oversee DOD’s progress in addressing spare parts shortages. In response to our recommendation, in June 2001 and February 2002, DOD provided Congress with Exhibit OP-31 reports as an integral part of the fiscal year 2002 and 2003 budget requests for operations and maintenance funding. These reports, which the services had previously submitted to DOD for internal use only, were to summarize the amounts each military service and reserve component planned to spend on spare parts in the future and the actual amount spent the previous fiscal year. Figure 1 shows the Exhibit OP-31 template as it appears in DOD’s Financial Management Regulation. The regulation requires the military services to report the quantity and dollar values of actual and programmed spending for spare parts in total and by specific commodity groups, such as ships, aircraft engines, and combat vehicles and explain any changes from year to year as well as between actual and programmed amounts. (See apps. I through VI for each service’s June 2001 and February 2002 exhibits.) DOD’s June 2001 and February 2002 reports did not provide Congress with an actual and complete picture of spare parts spending. The actual amounts reported as spent by the Army in total on spare parts and by all services for most of the commodities were estimates. The services’ budget offices had computed these estimates using various methods because they do not have a reliable system to account for and track such information.In addition, all the services did not include information on the supplemental operations and maintenance funding they received in their totals, include the quantities of parts purchased, or explain deviations between planned and actual spending as required on the template. These deficiencies limit the potential value of DOD’s reports to Congress and other decision makers. Some of DOD’s purported actual spending data were estimates. All of the Army’s spending amounts and most of the other services’ commodity amounts for prior years were estimates derived from various service methods—not actual obligations to purchase spare parts. The services’ headquarters budget offices provided these estimates because they did not have a process for tracking and accumulating information on actual spending by commodity in their accounting and logistics data systems. The services’ budget offices were to develop the Exhibit OP-31 data using the guidance shown on the template as published in DOD’s Financial Management Regulation. The Department did not provide the services with any other guidance on how to develop information required for Exhibit OP-31 reports. The guidance directed the services to prepare reports showing planned and actual funding and quantities of repairable and consumable spare parts purchases by commodity for multiple fiscal years. Each service employed its own methodology to estimate the amount of money spent for spare parts as described below: The Army used estimates to report its total spending for spare parts and the breakout of spare parts spending for all commodity groups. The Army based its estimates on computer-generated forecasts of the spare parts needed to support the current and planned operations. Information from cost data files, logistics files, and the Operating and Support Management Information System was used to develop a consumption rate for spare parts on the basis of anticipated usage, considering such factors as miles driven and hours flown. The consumption factor was entered in the Army’s Training Resources Model, which contains force structure, planned training events, and the projected operating tempo. The model used the consumption factor to estimate the total cost and quantities of spare parts that would be consumed. The model also provided the estimated spending for each of the commodities cited in the exhibit. The Navy Department used unaudited actual obligation data from the major commands as its basis for reporting total spending for spare parts and for some commodity groups. However, the breakout of actual spending data for the aircraft engine and airframe commodities were estimates. The Navy Department’s headquarters budget office developed its reports on the basis of information contained in price and program change reports submitted by the major commands. The Navy Department’s accounting system tracked obligations and developed pricing information for spare parts purchased under numerous subactivity groupings, some of which were tied to the categories listed on the OP-31 Exhibit. For example, codes have been established to track obligations for consumable and repairable spare parts purchased to support ship operations. The budget office prepared summary schedules accumulating these obligations from each command and transferred this information to the appropriate line of the OP-31 Exhibit. While the system provided accounting codes to summarize spare parts spending to support air operations and air training exercises, separate codes had not been established to distinguish spare parts purchased for aircraft engines and airframes—two separate and distinct commodity groupings on the exhibit. Lacking a separate breakout for aircraft engines and airframes, the budget office estimated the amounts for each commodity from historical trends. The Air Force used unaudited actual obligation data from its accounting system to identify and report its total spending, but its breakout of spending for the commodity groupings used estimates. The Air Force calculated estimates for each commodity by applying budget factors to the total actual obligation data shown in its accounting system. The accounting system provided these data by expense code, which designated depot-level repairables and consumables by “fly” and “non-fly” obligations. The Air Force allocated all “fly” obligations to airframes and left the engine commodity blank, even though some of the obligations were for engines. The Air Force selected this approach because spare parts for airframes and engines are budgeted together. To estimate the amount spent on the missiles, communications equipment, and other miscellaneous commodities, the Air Force allocated the total “non-fly” obligations on the basis of ratios derived from the amounts previously budgeted for these categories. While DOD had no reliable system to account for and track all of the needed information on actual spending, some of the services’ major commands have data that can be compiled for this purpose. Our visits to selected major operating commands for each military service revealed that they maintain automated accounting and logistics support data systems that could be used to provide unaudited data on spare parts funding allocations and actual obligations to purchase repairable and consumable spare parts in significant detail. For example, at the Army’s Training and Doctrine Command, we found that the Integrated Logistics Analysis Program provided information to monitor and track obligation authority by individual stock number and federal supply class. Personnel at that location used these data to develop a sample report documenting spending in the format requested by Exhibit OP-31. The Air Force’s Air Combat Command and the Navy’s Commander in Chief Atlantic Fleet each had systems that also could be used to provide information on spending. We discussed these reporting deficiencies with Office of the Secretary of Defense comptroller officials, who concurred that some figures on the service’s Exhibit OP-31 reports were estimates and that DOD did not have a comprehensive financial management system that would routinely provide actual spending information. They said that estimates are all they have access to, given the absence of a comprehensive financial management system that reports accurate cost-accounting information. Furthermore, they stated that even though detailed information on such spending is available at the major commands, developing better estimates would entail an expensive and potentially difficult reporting requirement that should be considered in deciding whether the current information is acceptable. DOD’s exhibits were also not complete in that they did not show all of the key information required by the template. DOD’s guidance directed the services to report total operations and maintenance spare parts funding, the spare parts quantities bought, and the reasons for deviations between actual and programmed funding. However, two of the services did not provide information on the quantities of spare parts they had purchased, and none of the services explained variances between actual and initially programmed funding. Service officials commented that these reporting omissions were generally due to DOD’s vague data collection guidance on the template and uncertainties about how to comply. The Army was the only service that reported spare parts quantity purchases each fiscal year. However, the Army’s quantities were estimates that were based on applying historical usage rates to such factors as miles driven and hours flown, even when actual quantities were required. The Navy and Air Force did not report quantities because, according to service officials, such information was not readily available to them. Furthermore, they said that DOD’s data collection guidance did not adequately explain how this information was to be developed. None of the services explained changes between actual and programmed spending in the exhibits as required.