June 20, 2018 —
We determined whether Department of the Navy (DON) budget officials adequately supported and justified the civilian full-time equivalents (FTEs) and pay requirements in the Navy and Marine Corps FY 2017 Budget Estimate Submissions. Budget estimates relating to personnel requirements are determined in terms of FTE employment. FTEs are the total number of regular straight-time hours worked, or to be worked, divided by the total number of hours that agencies can pay employees in a fiscal year, which are called compensable hours.
This is the third in a series of audits in response to the explanatory statement accompanying Public Law 114-113, “Consolidated Appropriations Act, 2016,” December 18, 2015. The statement directs the DoD Office of Inspector General to report on the Military Services’ civilian compensation program and civilian FTE levels. Specifically, the Senate Committee on Appropriations, Subcommittee on Defense and House Committee on Appropriations, Subcommittee on Defense expressed concern that the Military Services consistently overestimate the number of civilians that will be employed during a fiscal year, while underestimating the civilian personnel funding requirements.
The DON has a decentralized budget process that involves 19 Budget Submitting Offices (BSOs), one of which is the Marine Corps. The DON requested civilian pay in its FY 2017 Budget Estimate Submission for its Operation and Maintenance appropriations. We focused our audit on direct‑funded FTEs in the Operation and Maintenance, Navy (OMN) and Operation and Maintenance, Marine Corps (OMMC) appropriations.
Although Navy budget officials could justify and explain the process used to develop the FY 2017 civilian pay budget, officials could not fully support how they developed the civilian pay requirements in the FY 2017 OMN Budget Estimate Submission. Navy BSOs used FTEs from the FY 2016 President’s Budget as the starting point to develop their FY 2017 civilian pay budgets. Navy BSOs prepared initial budget estimates based on historical execution data, and they made adjustments to reflect expected future outcomes, such as approved program changes and anticipated pay raises. BSOs submitted issue papers in the Program Budget Information System to document these adjustments to their budgets. Budget officials from the Office of the Deputy Assistant Secretary of the Navy for Budget (FMB) reviewed the BSO budget submissions and made additional pricing and FTE adjustments using issue papers. However, budget officials did not maintain sufficient documentation to support how they developed the FY 2017 civilian pay budget. Specifically, BSO and FMB budget officials did not ensure that issue papers included information about the source data, calculations, and assumptions used for the budget adjustments.
When compared to FY 2017 execution, the Navy’s budget request represented the funding needed to pay its civilian personnel. However, maintaining more detailed documentation of budget calculations and assumptions would provide for retention of institutional knowledge and benefit budget officials building future budgets. Understanding the rationale and assumptions used in developing the budget each fiscal year would allow officials to compare budget realities with events that transpired during execution and allow decision makers to better understand budget changes across fiscal years.
The Marine Corps could not justify or support how it determined the civilian pay requirements in its FY 2017 OMMC Budget Estimate Submission. Specifically, Marine Corps budget officials could not fully explain the rationale for their civilian pay budget adjustments and did not maintain documentation to support these adjustments.
In addition, the Marine Corps budget officials did not determine civilian pay funding levels using FTEs calculated from projected hours to be worked, as required by Office of Management and Budget Circular No. A-11. This occurred because Marine Corps budget officials calculated FTEs by dividing total dollars by a historic average cost per FTE. As a result, the Marine Corps under-budgeted its FTEs even though the requested amount represented what was spent to pay civilian personnel for FY 2017. By not accurately budgeting FTEs that aligned with projected hours to be worked, the Marine Corps inaccurately represented its budgeted average cost of an FTE. The average cost per FTE is a ratio that provides context for comparing civilian pay across fiscal years.
We recommend that the Assistant Secretary of the Navy (Financial Management and Comptroller) establish and implement controls for the civilian pay budget process to ensure that budget officials document the calculations and assumptions used to support each Program Budget Information System adjustment made to civilian pay requirements. We also recommend that the Deputy Commandant of the Marine Corps, Programs and Resources, determine budgeted civilian pay funding levels using FTEs calculated based on projected hours to be worked, as required by Office of Management and Budget Circular No. A-11.
Management Comments and Our Response:
The Director, Civilian Personnel and Business Operations Division, responding for the Assistant Secretary of the Navy (Financial Management and Comptroller), agreed with the recommendation to establish and implement controls for the civilian pay budget process. The Director stated that the Department of the Navy has reviewed its FY 2020 President’s Budget guidance to clearly articulate the need for substantiating data and source information. Additionally, the Department of the Navy is reviewing its civilian pay budget adjustments to ensure a transparent and fully verifiable budget from creation to completion.
The comments addressed the recommendation; therefore, the recommendation is resolved but will remain open. We will close the recommendation once we verify that the Department of the Navy’s FY 2020 President’s Budget guidance includes requirements for budget officials to fully document the calculations and assumptions used to support their budget adjustments.
The Deputy Commandant of the Marine Corps, Programs and Resources, did not respond to the recommendation to determine budgeted civilian pay funding levels using FTEs calculated based on projected hours to be worked; therefore, the recommendation is unresolved. We request that the Deputy Commandant provide comments on the final report.
This report is a result of Project No. D2017-D000AG-0092.000.