The funds that DOD managers need for their research and development programs first must be considered by DOD for inclusion in the President’s Budget. If the President includes the funds in the budget he transmits to Congress, then Congress considers the request. If Congress approves the request, it appropriates funds for the programs in the annual DOD appropriations act that is signed into law by the President. Three years can lapse from the time a program manager begins formulating a research and development program budget request to the time that funds are included in an appropriations act that is signed into law and designated for the program in the accompanying conference report. Figure 1 shows a typical scenario for the research and development program budgeting process. The resulting appropriations act typically specifies a lump sum for several different accounts, including the research, development, test and evaluation appropriation account of each of the military departments as well as separately for DOD-wide research and development activities. The account for research, development, test, and evaluation (referred to in this report as research and development) is further broken down into budget activities, such as basic research and advanced technology development. Each budget activity is then subdivided into program elements, which we refer to as programs in this report. The conference report that accompanies the appropriations act lists the amounts Congress designated for each activity and program. An individual program can be further subdivided by DOD into projects or other activities. Following the annual enactment of the appropriations act, the Office of Management and Budget apportions the funds and DOD allots the funds and—except for those being withheld—makes the money available or releases it to managers for executing programs. Managers generally have 2 years to obligate research and development funds before the funds expire. By the time the budget approval process is complete and the funds are made available, several things can be said about the appropriated amounts for the individual program: (1) they represent decisions by Congress to approve programs as requested, create new programs, and adjust the requested amounts for others; (2) because of the elapsed time from the point the program manager began formulating the budget request until enactment of the appropriations act, situations may have changed that cause a misalignment between the approved funds and the actual status of the program; (3) the inherent unknowns in research and development will result in some programs not being executed as contemplated by the budget; and (4) unanticipated events will develop during the execution year that were not anticipated in the budget. It is for these and other reasons that Congress recognizes that DOD needs some flexibility to adjust research and development funds after they are appropriated. A primary vehicle for exercising this flexibility is reprogramming. DOD can also withhold funds from programs prior to reprogramming or releasing the funds. The Air Force and MDA restrict the authority to reprogram or withhold funds to their headquarters staffs, while the Army and Navy grant their subordinate commands and program executive offices this authority. This report defines withheld funds—or a withhold—as appropriated DOD research and development funds that are not released by DOD to a designated program for part of the 2-year period of availability of those funds. Prior to being released for execution, funds may be withheld by the Office of the Secretary of Defense and the headquarters for the military departments and MDA. DOD withholds funds for a variety reasons and does not seek prior congressional approval for these transactions. While funds are withheld, the funds are still designated for the program but not yet released to that program. In contrast, reprogramming of appropriated funds is a mechanism for which DOD has established a formal process for internal review and approval and, when necessary, congressional notification and approval. For fiscal year 2003, to implement congressional guidelines, DOD’s reprogramming policy required prior written approval from congressional defense committees for any research and development reprogramming increase of at least $10 million to an existing program and for any decrease of at least $10 million or 20 percent of the program’s appropriation, whichever was greater. In fiscal year 2002, the threshold for increases was $4 million, and, for decreases, $4 million or 20 percent of the appropriated amount, whichever was greater. These thresholds are applied at the program level of the budget. According to DOD’s Financial Management Regulation and congressional guidelines, DOD generally does not have to seek prior congressional approval for reprogrammings that do not exceed the threshold; hence, these are BTRs. The threshold applies to both individual BTRs and the cumulative amount of BTRs in each program element. Thus, multiple BTRs for the same program must not exceed the threshold in total. If congressional committees have denied a reprogramming request above the threshold, DOD policy prohibits the use of a series of BTRs to achieve the denied request. DOD submits a number of reports to Congress each year to convey appropriations-related information for each research and development program. One of these reports, the DD 1416, is intended to capture all changes made to the amount designated by Congress for a program, including BTRs. The DD 1416 is Congress’s primary vehicle for information about BTR changes by DOD to the amount designated for a program. The annual DD 1416 report for Congress covers the entire fiscal year ending September 30. A DOD regulation requires that the annual report for Congress be sent by DOD components to the DOD Comptroller within 30 working days after September 30 for review prior to submission to Congress. However, the DOD regulation does not specify a date by which the report must be sent to Congress. DOD’s primary vehicle for reporting BTRs to Congress, the DD 1416 report, has several limitations that reduce the report’s quality as a source of information. DOD provided the DD 1416s for fiscal years 2002 and 2003 to Congress several months after Congress began considering the new budget. Because the reports contained classified information, their distribution was limited. We found a number of discrepancies between the BTR data in the DD 1416s and the information on actual BTRs in DOD organizations’ data collection systems. Further, the reports did not include detailed information about BTR activity on a program-by-program level, such as whether programs gained or lost funding, and provided no withhold data. Data on actual BTRs in DOD are not centralized but rather are contained in the individual data collection systems maintained by the military departments, MDA, and the Office of the Secretary of Defense. These systems range widely in their level of automation, detail, and accessibility. The data needed to determine the amount and volume of BTRs for fiscal years 2002 and 2003 were not readily available from some of the systems and some manual data collection was necessary. Information on actual BTRs did not always reconcile with the data contained in the DD 1416 report to Congress. For fiscal years 2002 and 2003, DOD delivered the DD 1416s to Congress several months after Congress began deliberations on the new budget year. Each report was dated in April the year following the end of the fiscal year, and was not delivered to Congress until May, according to a DOD official. Thus, the report covering the fiscal year ending September 30, 2002, was sent to Congress in May 2003, and the report for the fiscal year ending September 30, 2003, was sent to Congress in May 2004. It appears that until the reports were received, congressional committees were less informed about the funds that were moved from one research and development program to another when considering program budgets for the following year. In addition, the reports were classified because of the sensitive nature of some of the DOD programs. Classification restricts the ease with which reports can be accessed by and circulated among congressional staff. The data contained in the DD 1416s to Congress for both years had several limitations. The reports listed a net amount intended to represent all BTRs for each program—after all BTR increases and decreases were calculated—that occurred in the fiscal year. We found that, except for the Air Force, the net amounts were not based on actual BTR transactions. Rather, the net amounts in the DD 1416s were derived by subtracting all adjustments from the balance of programs’ funds, whether the adjustments were BTRs or not. In addition, when we compared BTR information in the DD 1416s with the BTR data provided to us by the DOD organizations, we found that, except for MDA, the information did not match. The military departments were not able to reconcile the data. In addition, the reports did not contain detailed, continuous data on BTRs. For example, the DD 1416s did not contain the total number of BTRs for each program, whether funds were added or reduced, reasons for BTRs, or the donor or recipient programs. Thus, the reports could not be used to understand what changes occurred in an individual program during the year of execution. Information about funds withheld from programs for some portion of their availability period was not reported to Congress. DOD does not have a single, centralized, integrated data collection system to record, manage, and report on funds that have been reprogrammed through BTRs or withheld. Rather, such information is maintained by the individual organizations with responsibility for managing the funds appropriated for each program. To satisfy the requirements of the mandate, we developed a single database that contains information on research and development funds reprogrammed and withheld in fiscal years 2002 and 2003 from the three military departments and MDA. These organizations employ different systems to track and monitor BTRs. Most but not all systems are centralized, and some organizations have separate systems for recording funds withheld from programs. The quality of BTR and withhold data varied across the three military departments and MDA. We found several features of data collection systems that appeared to be important to generating quality information.