In September 2011, we reported on DOD’s approach to examining itself for efficiencies, including the parameters used to guide the Secretary of Defense’s efficiency initiative. The initiative targeted both shorter and longer-term improvements in a wide range of areas across the department, including its organizational structure, business practices, and modernization programs, and instituted reductions to its personnel levels. As part of its fiscal year 2012 budget request, DOD projected savings of $178 billion to be realized over a 5-year period beginning in fiscal year 2012, as shown in table 1. Of the $178 billion in projected savings proposed by the department, $100 billion identified by the military departments and Special Operations Command was reinvested in high-priority needs and the remaining $78 billion was reduced from DOD’s budget from fiscal years 2012 through 2016. This reflects a 2.6 percent reduction from DOD’s fiscal year 2011 budget submission over the same period. Some of these savings and reductions were from headquarters-related resources, such as personnel and operating costs. DOD Instruction 5100.73 establishes a system to identify and manage the number and size of major DOD headquarters activities. As previously stated, the instruction defines major DOD headquarters activities as those headquarters whose primary mission is to manage or command the programs and operations of DOD and its components and their major military units, organizations, or agencies. Since the mid-1980s, Congress has enacted statutory limits on the number of major DOD headquarters activity personnel, to include those in the Office of the Secretary of Defense; the headquarters of the combatant commands; the Office of the Secretary of the Army and the Army Staff; the Office of the Secretary of the Air Force and the Air Staff; the Office of the Secretary of the Navy, the Office of the Chief of Naval Operations, and the Headquarters, Marine Corps; and the headquarters of the defense agencies and DOD field activities. In addition, Congress has enacted various reporting requirements related to major DOD headquarters activity personnel. As previously stated, our prior work has shown that DOD has encountered challenges both in identifying major DOD headquarters activity personnel and in reporting this information to Congress. DOD has taken some steps to examine its headquarters resources for efficiencies, but additional opportunities for cost savings may exist by further consolidating organizations and centralizing functions. For the purposes of the Secretary of Defense’s efficiency initiative, DOD components, including the military departments, were asked to focus in particular on headquarters and administrative functions, support activities, and other overhead in their portfolios. DOD’s fiscal year 2012 budget request, describing its planned efficiency initiatives for fiscal years 2012 to 2016, included several initiatives related to headquarters organizations or personnel. Two organizations, Joint Forces Command and the Business Transformation Agency, were disestablished and some of their functions were absorbed in other organizations. DOD estimated that closing these two organizations would save approximately $2.2 billion through fiscal year 2016. Table 2 provides other examples of headquarters-related efficiency initiatives DOD is implementing in the military departments and in other DOD components that we reviewed. See appendix II for a further description of these headquarters-related efficiency initiatives. In compiling and comparing the headquarters-related efficiency initiatives from across the department, we found that the approach that was taken and level of detail differed markedly across the various DOD components. For instance, some DOD components focused on specific organizations and provided detail about planned actions, while others promised significant reductions but provided only broad descriptions of what is planned to achieve them. For example, the Navy provided detailed information on the number of positions that will be eliminated and estimated cost savings for the Navy’s merger of U.S. Fleet Forces Command and U.S. 2nd Fleet staff. In contrast, the Army planned more than $1 billion in savings by streamlining its installation management services and programs but did not specify how this will be achieved. In reviewing these headquarters-related efficiency initiatives, however, we found that they generally fell into two categories: (1) consolidating or eliminating organizations based on geographic proximity or span of control, and (2) centralizing overlapping functions and services (see figs. 2 and 3). The DOD efficiencies that GAO reviewed to reduce headquarters resources are expected by DOD to save about $2.9 billion through fiscal year 2016, less than 2 percent of the $178 billion in savings DOD projected departmentwide. Our work indicates that DOD may be able to find additional efficiencies by further examining opportunities to consolidate organizations or centralize functions at headquarters. In its January 2012 strategic guidance, DOD recognized that it would need to find further efficiencies in headquarters and other overhead in order to meet the demands of the new strategy. To achieve these efficiencies, DOD could consider a number of different options, including reducing organizational layers, consolidating administrative offices, and simplifying management processes. However, the department does not have a definition of what constitutes overhead or standards for assessing headquarters resources. Given the size and complexity of the department, setting common standards would be difficult. Nonetheless, DOD officials we spoke with recognized that additional efficiencies could be achieved by further examination of headquarters resources. The following are examples of areas that officials said DOD was considering for potential efficiencies. According to Navy officials, the Deputy Under Secretary of the Navy is having ongoing discussions with Navy components and conducting analysis to identify potential future efficiencies, such as consolidating or streamlining facilities management services and functions provided at various Navy installations. Officials commented that these issues are complicated and that as of December 2011, the estimates of the savings had not been determined. The Army is, among other things, implementing and integrating previous efforts approved by the Secretary of Army, such as planning to optimize materiel development and sustainment by eliminating overlapping or redundant responsibilities between the Army’s program executive offices and the Army Materiel Command. The Army expects this effort to include reductions in personnel for an estimated annual savings of $3 billion by the end of fiscal year 2015. The Air Force is currently examining opportunities to provide better command and control over air and space operations centers. As of December 2011, Air Force officials could not provide further details regarding this effort because decisions were still pending. Defense Finance and Accounting Service officials are examining travel and supplies, postage and printing, and other areas to identify additional savings, which it estimates at $63 million by fiscal year 2017. DOD may not have identified all areas where reductions in headquarters personnel and operating costs could be achieved because, according to DOD officials, the department was working quickly to identify savings in the fiscal year 2012 budget. To accomplish this quickly, DOD used a top- down approach that identified several targets of opportunity to reduce costs, including headquarters organizations, but left limited time for a detailed data-driven analysis. In February 2012, in DOD’s fiscal year 2013 budget request, the department proposed an additional $61 billion in savings from fiscal years 2013 to 2017 through reductions in overhead and support requirements, and improved business practices. However, it provided limited information as to what portions of these savings were specific to headquarters and how they would be achieved. Without systematic efforts to reexamine its headquarters resources on a more comprehensive basis, DOD may miss opportunities to shift resources away from overhead. DOD does not have complete and reliable major DOD headquarters activity data available for use in making efficiency assessments and decisions because the department continues to have challenges in identifying and tracking personnel and other resources devoted to headquarters. According to our internal control standards, an agency must have relevant, reliable, and timely information in order to run and control its operations. In reviewing DOD’s guiding instruction we found that it does not identify all current major DOD headquarters activity organizations or address the tracking of contractors that perform headquarters functions. DOD officials stated that they have delayed updating the instruction to allow time for components to adjust to the statutory changes enacted by Congress in 2009 that created new reporting requirements for major DOD headquarters activity personnel. According to DOD officials, the ever-changing statutory reporting requirements have contributed to DOD’s failure to report to Congress about the numbers of headquarters personnel. As the department did not have reliable major DOD headquarters activity data, DOD gathered information from multiple sources to compile headquarters-related information for the Secretary of Defense’s 2010 efficiency initiative. Some of the information DOD compiled to identify headquarters-related efficiency initiatives was inaccurate, and as a result, some adjustments will need to be made during implementation to achieve planned savings. Without a proper accounting of headquarters personnel and operating costs, to include contractors, DOD will not have complete and reliable information on the universe of headquarters resources. Complete and reliable headquarters information will be even more important in supporting an examination of DOD resources in light of changes in DOD’s strategic priorities for the next decade. According to our internal control standards, an agency must have relevant, reliable, and timely information in order to run and control its operations. This information is required to develop external reporting and to make operating decisions, monitor performance, and allocate resources. Moreover, we have reported that accurate, timely, and useful financial management information is essential for sound management analysis, decision making, and reporting within DOD. DOD Instruction 5100.73, Major DOD Headquarters Activities, establishes a system to identify and manage the number and size of major DOD headquarters activities. The Director of Administration and Management, within the Office of the Secretary of Defense, is responsible for issuing guidance, as required, and maintaining the list of major DOD headquarters activity organizations. However, significant revisions to the instruction have not been made since 2007 and the instruction does not identify all current major DOD headquarters activity organizations. For example, Navy officials noted several Marine Corps components, which are parallel to Navy components in the major DOD headquarters activity functions they perform, are not included in the instruction.