DOD manages nearly 517,000 buildings and structures (replacement value of $650 billion) and over 46,000 square miles of real estate at its bases and installations worldwide. These facilities must be properly maintained or they are subject to premature deterioration. At these bases and installations, DOD prepares for and conducts combat and peacetime missions, including training and weapons systems maintenance. Doing so requires significant amounts of BOS services, such as information management; systems operations and maintenance; facilities engineering; transportation; utilities; environmental, safety, and health services; housing; food services; morale, welfare, and recreation services; security and fire services; and disaster preparedness. O&M funds finance the costs of operating and maintaining military operations for active and reserve components, including related support activities of DOD, but excluding military personnel costs. Included are pay for civilians, services for maintenance of equipment and facilities, fuel, supplies, and spare parts for weapons and equipment. Funding requirements are influenced by many factors, including force structure levels, such as the number of aircraft squadrons and Army and Marine Corps divisions; installations; military personnel strength and deployments; rates of operational activity; and the quantity and complexity of equipment such as aircraft, ships, missiles, and tanks in operation. For fiscal year 2004, Congress appropriated $114 billion for O&M activities. DOD uses distinct activities and accounting structures to manage O&M budgeting and funding for functional areas such as the following: BOS—a term that derives from the “base operations” program area (which includes installation transportation, supply, information management, food services, legal and accounting services, and so forth) to which the military services have added other program areas including family and quality of life programs, force protection, environmental compliance and conservation programs, communications services, and grounds maintenance, as well as other facilities services such as utilities, leases, and custodial services, which OSD has referred to as real property services. Thus, in practice BOS is not a single, well-defined program area but a collection of many diverse programs, activities, and services. The different BOS functions and activities used by the military services are shown in appendix II. S/RM—the maintenance and repairs needed to keep facilities in good working order and in up-to-date condition. Sustainment funds cover expenses for all recurring maintenance costs and contracts, as well as for major repairs of nonstructural facility components (for example, replacing the roof or repairing the air conditioning system) that are expected to occur during a facility’s life cycle. In addition to facilities sustainment, O&M funds are sometimes used for facilities restoration and modernization. Restoration includes repair and replacement work needed to restore facilities damaged by inadequate sustainment, excessive age, natural disaster, fire, accident, or other causes. Modernization includes altering or modernizing facilities to meet new or higher standards, accommodate new functions, or replace structural components. Mission support—the goods and services needed to prepare for and conduct combat and peacetime missions, including training and weapons systems maintenance. O&M funds are used by the armed forces and defense agencies to prepare for and conduct combat and peacetime missions. For example, DOD uses O&M funds to increase combat proficiency through flying and ground training operations; to acquire fuel, support equipment, and spare parts for training operations; to pay supporting civilian personnel; and to purchase supplies, equipment, and service contracts for the repair of weapons and weapons systems. According to historical data provided by the military services, fiscal year 2004 O&M funds designated for BOS services totaled $15.6 billion, about $1.6 billion more than data supporting the conference report showed as being designated for BOS at the beginning of the fiscal year. Service officials attributed the variance to their accounting for the BOS services provided at their respective installations—the number and names of which are different and expanded from the BOS subactivity groups used for the conference report—and to funding redesignations that occur during the year. Accordingly, this report uses the congressional designations as adjusted by the services’ accounting and redesignations of O&M funds for BOS and S/RM to depict funding trends. Further, to better project trend data consistently, the historical data provided by the services included in this report do not include congressional adjustments of a one-time nature or supplemental appropriations for O&M that Congress provided during a particular fiscal year for such things as hurricane damage cleanup and repairs or for the Global War on Terrorism. Until recent years, the military services had, for the most part, carried out installation management functions at the local level, where the installation commanders received O&M funding for various subactivities and set priorities among competing demands. They also had the flexibility to make trade-offs in the face of funding limitations, shifting funds among subactivities’ competing priorities, and to meet unanticipated demands. We have previously reported on the movement of funds from BOS to alleviate shortfalls in S/RM, and we have also reported instances where funds intended for maintaining facilities had to be used to support base operations or to cover other mission costs. However, such movements of funds often raised or aggravated concerns about the adequacy of funding for each of these areas or about how efficiently and effectively programs were executed during the year. The Army and the Navy have recently taken steps to reorganize and centralize their installation management activities. One of the expectations established in setting up these centralized activities was that they would curtail or prevent the movement of funds from facilities and base operations to other priorities and create greater stability in the execution of those activities. IMA was activated on October 1, 2002, providing consolidated management of Army installations worldwide. The services managed by IMA include engineering, information technology, resource management, and other installation support activities. The agency’s objective is to standardize installation management services, providing consistent and equitable facilities and services via common standards. IMA is made up of seven regional offices, four in the continental United States and three overseas. To establish IMA, the Department of the Army worked with its major commands to identify the activities, personnel, and resources that provided facilities and base operations support. These service activities and the associated workforce were then organizationally realigned from the major commands and their installation commanders to establish IMA. Under the reorganization, IMA headquarters assumed control of the BOS and S/RM budgets in fiscal year 2004 and determined the funding for these programs and activities. CNI was activated October 1, 2003, and is responsible for Navy-wide installation management. Its mission is to provide uniform program, policy, and funding management, along with oversight of shore installation support. Prior to the activation of CNI, management of its base operations support activities was conducted at regional levels. With the activation of CNI, shore installation management and the personnel associated with those functions were organizationally realigned under CNI’s control. CNI is made up of 16 regions, 10 in the continental United States and 6 overseas. Consolidation of the management of services provided at the regional and installation levels was intended to reduce base operating support costs through the elimination of unnecessary management layers, duplicative overhead and redundant functions. The Army and Navy reorganizational management structures are discussed further in appendix III. The Marine Corps, because it is small, has always been somewhat centrally managed, but it generally leaves to the individual base commanders the decisions about the level of BOS services required and issues regarding quality of life at an installation. The Air Force has integrated BOS and installations management into its mission programs and continues to manage in a decentralized manner, using Air Force-level guidance. In the Air Force, major commands are actively engaged with subordinate commanders in the funding and management of Air Force installations. We have cited the need for and DOD has in recent years developed a facilities strategic plan to guide future facilities efforts. Our February 2003 report noted that DOD’s strategic plan for facilities had weaknesses that included a lack of comprehensive information on specific actions, time frames, assigned responsibilities, and resources—the elements of a well-developed strategic plan—that are required to meet the plan’s vision. In September 2004, the Deputy Under Secretary of Defense for Installations and Environment released the department’s updated Defense Installations Strategic Plan, which outlines a set of initiatives with some milestones to sustain, restore, and modernize installation assets. The vision set forth in the plan is to have installation assets and services, including BOS, available when and where needed, with the joint capabilities and capacities necessary to support DOD missions effectively and efficiently. Since 1997, we have identified DOD support infrastructure as a high-risk area. We have completed a number of reviews in which we identified numerous examples of the services’ moving O&M funds out of accounts congressionally designated to support one functional area and into another to meet competing needs. We examined the impacts on areas such as facilities maintenance and BOS—areas that were already considered to be underfunded against projected needs. For example, our February 2000 report compared the funding amounts that Congress had designated for DOD’s O&M subactivities, including BOS and S/RM, with DOD’s obligations for those same subactivities, and we showed that DOD consistently obligated a different amount from what Congress had designated. In February 2003, we reported that O&M funds designated for facilities sustainment were reduced or held back at the service headquarters, major command, and installation levels to cover more pressing needs or emerging requirements. As a result of these holdbacks and movements, we concluded that the amounts of funds spent on facilities maintenance and repairs were not sufficient to reverse the trend of facility deterioration. Our February 2003 report also noted the shifting of funds from one O&M functional account to resolve funding shortfalls in another. For example, it noted the difficulty that redesignating facilities sustainment funds to other purposes makes for installations in implementing rational facilities sustainment plans.