Under the DOD Financial Management Regulation (FMR), all major new systems are to be identified with a unique PE code. PE codes have 10 positions. In general, each position conveys information, as seen in figure 1. The first and second positions of the PE code illustrated above define the Major Force Program (MFP), which contain the resources necessary to achieve a broad objective or plan. In figure 1, for example, the “06” in the first positions indicate this is a research and development effort. Because it is a research and development effort beginning with “06,” under the FMR, the third and fourth positions must define the budget activity. In general, the budget activity codes that fill positions three and four are intended to describe the current nature of the research and development effort for each PE code. For example, budget activities 1 through 3 cover initial development efforts and should describe activities that take place in what is often called the science and technology realm. Research and development efforts in these first three budget activities may produce scientific studies and experimentation, develop paper studies of alternative concepts, or test integration of subsystems and components. Budget activities 4 and 5 cover efforts used to fully develop and acquire integrated weapon systems respectively. Programs in these budget activities may perform efforts necessary to further mature a technology or conduct engineering and manufacturing development tasks. Budget activity 6 funds efforts to sustain or modernize the installations or operations required for general RDT&E. Test ranges, military construction, maintenance support of laboratories, studies and analysis, and operations and maintenance of test aircraft and ships are funded with this budget activity. Budget activity 7 is used to designate R&D efforts for systems that have already been approved for production or those that have already been fielded. Unlike budget activities 1 through 6, budget activity 7 is not indicated in a PE code. This information is seen in the accompanying budget exhibits. Despite the fact that these are research and development efforts, their program element code does not contain any indication that they are for research and development. The FMR also requires that DOD justify the annual RDT&E budgets requests in budget exhibit documents. These accompanying budget exhibits are the primary information source for Congress and analysts throughout the government. Generally, there are six sections in each budget exhibit that are used to justify each funding request made using an RDT&E PE code. These include a mission description and budget item justification section; an accomplishments and planned program section; a program change summary section showing total funding, schedule, and technical changes to the program element that have occurred since the previous budget submission; a performance measures section to justify 100 percent of resources requested; a section that shows connections and dependencies among projects, which should also include information such as the appropriation, budget activity, line item, and program element number of the related efforts; and, a section providing a schematic display of major program milestones that reflect engineering milestones, acquisition approvals, test and evaluation events, and other key milestones for the program events. The program element code structure and budget exhibits do not consistently provide accurate, clear, and complete information regarding RDT&E budget requests. The PE codes given for many programs do not indicate that they are for an R&D effort at all or do not accurately reflect the reported nature of the development. Budget exhibits sometimes omit required information about programs and their links to other programs, and may provide only minimal information. Programs that were requested in budget activity 7—RDT&E efforts for fielded systems and programs approved for production—presented the greatest visibility problem. Under DOD’s current regulation, programs in this budget activity are not required to report in the code itself that the funds are for research and development, nor are they required to report the nature of the development effort. This budget activity was used to request $23.5 billion in fiscal year 2007, or about a third of DOD’s entire RDT&E funding request. Instead, the information available about these funding requests is contained in their budget exhibits. Programs classified as budget activity 7 do not begin their PE code with 06, which would identify them as RDT&E requests. Instead, budget activity 7 RDT&E efforts use PE codes that begin with the major force program code established for the system being modified. For example, PE 0102419A, the Joint Land Attack Cruise Missiles Defense Elevated Netted Sensor System (JLENS) program, provides no indication that the effort uses RDT&E funds, nor does it identify the nature of the development. It begins with 01, indicating it is for strategic forces and ends with A, indicating that it is an Army request. In addition, we found that nature of the efforts funded in budget activity 7 overlap with the nature of the efforts undertaken in other budget activities, making it difficult to determine the amounts requested for the different stages of development across the entire RDT&E budget. While the definition for budget activity 7 describes efforts that are fielded or approved for production, several defense acquisition efforts covered under budget activity 7 are involved in phases ranging from technology development to production, as shown in figure 2. The JLENS program, for example, is currently developing an aerostat for cruise missile defense, but its code does not indicate that it is in system development and demonstration. There is a separate code, budget activity 5, which also funds efforts in system development and demonstration. We found that 65 percent of the RDT&E PE codes for budget activities 1 through 6 misidentified the nature or stage of the development in fiscal year 2007. While the early development efforts described by budget activities 1 through 3 generally properly identified the nature of the effort in their codes, budget activities 4 through 6 generally did not, as seen in figure 3. Programs reported in budget activities 4 through 6 requested more than half of the total RDT&E funding. The challenge of clearly identifying the nature of the development efforts is actually much worse when the budget activity 7 programs are considered along with the misidentified programs in budget activities 1 through 6. As a result of these combined problems, the PE code provides only limited visibility into 85 percent of the requested funding, as seen in figure 4. While reviewing a set of 47 RDT&E budget exhibits from fiscal years 2006 and 2007, we observed that some of the exhibits omitted key information. While DOD presents some valuable information in these exhibits, we found in many cases that the justification narratives were not clear or provided little or no additional information from the previous year’s justification. In a number of cases the narratives appeared to be “copy and paste” descriptions of activities from prior years, making it difficult to determine recent changes or program progress. We also observed that information on accomplishments from the past year was provided for few programs. In addition, few programs provided detailed narratives of planned activities for the current budget year. For the few exhibits that did contain narratives on planned activities, the level of detail was minimal. For example, the Air Force Global Positioning System (GPS) Block III program requested $315 million for fiscal year 2007 and had requested $119 million combined in the previous 2 fiscal years. In this section, the accomplishments were described as “Continue Program Support and Modernization Development for GPS III,” and the planned program was described as “Begin Modernization Segment.” Furthermore, funding changes from year to year were inconsistently reported. In some cases they were provided at the PE code level and in other cases at the project level, when the PE code involved multiple projects. These funding change summaries also routinely provide limited detail on the reasons for the changes. For example, the Navy’s EA-18G and DD(X) programs had funding changes of millions of dollars to their previous and current budgets but failed to provide details of why these changes had occurred. Additionally, the budget exhibits did not always identify the connections and dependencies among related projects consistently as required by the FMR. In general, these connections can be vital to the successful development of some programs. In some instances, key components to a system under development are being developed in other programs. A delay or failure in one program can mean delay and failure in the related program. For example: C-130 Avionics Modernization Program (AMP) exhibit did not identify all of the required information for related programs in the Navy and Special Forces nor did it identify C-130 Talon II procurement, which included C-130 AMP upgrades. DDG-1000 (formerly the DD(X)) destroyer program is developing dual- band radar that will be used on the CVN-21 aircraft carrier. No reference is made to this link/dependency in the exhibit. Expeditionary Fire Support System is being developed to be transported by the V-22 aircraft, but makes no reference to the V-22 program. Warrior UAV (unmanned aerial vehicle) is being developed in two PEs—one for the system and one to weaponize. Only one program references the other. Our review found the schedule profiles in the budget exhibits were generally provided but sometimes did not provide a detailed display of major program milestones such as engineering milestones, acquisition approvals, or test and evaluation events. Also, we could not find the standard program milestones in a number of the schedule profiles we reviewed. In some cases we found it difficult to determine the program’s phase of development. For example, in two cases the development schedule showed “continue development” across all fiscal years displayed. In another example, a program simply reported “S/W Development” with a bar covering all fiscal years. We found the RDT&E program element code and the budget exhibits are not always accurate, clear, consistent, and complete for two major reasons. First, DOD’s own regulation for constructing program element codes does not require a large part of the RDT&E effort to be reflected in program element codes. Second, the regulation governing the structuring of the coding and the content of the exhibits is vague.