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DoD Civilian Pay Budgeting Process DODIG-2019-041

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Objective

 

We determined whether the Office of the Under Secretary of Defense (Comptroller)’s (OUSD[C]) management and oversight of the Military Services’ civilian pay (CIVPAY) budget process assured that the Services’ budgets represented the actual cost of their civilian workforce.

 

Background

 

This is the last of four audits in response to congressional direction that accompanied Public Law 114-113, “Consolidated Appropriations Act, 2016,” December 18, 2015. The direction requires the DoD Office of Inspector General to report on the Military Services’ civilian compensation program and civilian Full-Time Equivalents (FTE) levels. Budget estimates relating to personnel requirements are determined in terms of FTEs. 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. The Senate Appropriations Committee, Subcommittee on Defense, and the House Appropriations Committee, Subcommittee on Defense, were concerned that the Military Services consistently overestimate the number of civilians that would be employed during a fiscal year, while underestimating the civilian personnel funding requirements. The congressional committees requested that the DoD Office of Inspector General issue a report with recommendations that would improve the management of the Services’ CIVPAY program and identify best practices.

 

The OUSD(C) is the principal advisor to the Secretary of Defense for budgetary and fiscal matters, which includes budget formulation and execution. The OUSD(C) oversees and manages the DoD’s budget development processes.

 

The Services submit their budget requests to the OUSD(C) for review and approval. The OUSD(C) assigns budget analysts who review and analyze the budgets to verify compliance with Office of Management and Budget (OMB) Circular No. A-11, “Preparation, Submission, and Execution of the Budget,” and DoD policy.

 

Finding

 

The OUSD(C) provided guidance for developing budgets and reviewed and analyzed the Services’ CIVPAY budget submissions for compliance with OMB Circular No. A-11 and DoD policy. However, as reported in our previous audits, the Services deviated from OMB and DoD policy when preparing their CIVPAY budgets. This deviation occurred because the OUSD(C) has not fully implemented its internal controls or best practices to reduce the risk of noncompliance and improve the DoD’s budget development procedures. Specifically, the OUSD(C) has not:

 

  • updated the DoD Financial Management Regulation (DoD FMR) budget development sections to provide a single source of clear and consistent guidance to the DoD. For example, OUSD(C) has not updated the DoD FMR to include the repetitive supplemental guidance published annually by the OUSD(C), a guide on how to use pay codes to populate the budget exhibits, clarification of straight-time hours worked and the calculation of FTEs, and a requirement to accurately and completely budget for variable costs, such as overtime and holiday pay;

 

  • developed a CIVPAY budget analyst career path or required CIVPAY budget development training;

 

  • documented its budget review procedures to include its lessons learned and standard lists of reports for analysis, retain corporate knowledge and competencies, and ensure consistency and repeatability of the OUSD(C) budget reviews and oversight;

 

  • required the Services and Defense agencies to document their procedures to ensure continuity if budget analysts in key positions leave their positions; or

 

  • created and required the use of a budget development checklist to function as a reminder of important tasks that the Services and Defense agencies should complete during the budget development process.

 

As a result, the Services’ budget requests did not always accurately represent the actual cost of their workforce. Specifically, the Services’ CIVPAY budgeted cost per FTE did not represent the actual cost of their workforce, as the Services’ actual costs fluctuated from their budgets.

 

Recommendations

 

We recommend that the Under Secretary of Defense (Comptroller) update the CIVPAY budget development sections of the DoD FMR, develop and require CIVPAY budget development training as part of the Defense Financial Management Certification program, require the OUSD(C) analysts and the Services to document their procedures and lessons learned, and develop and require a budget submission checklist.

 

Management Comments and Our Response

 

The Director of the OUSD(C) Operations Directorate, responding for the Under Secretary of Defense (Comptroller), agreed with the recommendations to require the OUSD(C) analysts to document their procedures and to develop a budget development checklist. Therefore, these recommendations are resolved but will remain open. We will close the recommendations once we verify that the OUSD(C) officials documented their procedures, and developed and required a budget development checklist.

 

The Director partially agreed with the recommendation to update the DoD FMR, but the Director’s comments did not address the specifics of the recommendation; therefore, the recommendation is unresolved.

 

The Director partially agreed with the recommendation to develop a career path and CIVPAY budget development training. Although the Director stated that the Under Secretary of Defense (Comptroller) started developing CIVPAY budget development training, the Director did not address the development of a CIVPAY budget analyst career path. However, the intent of the recommendation was to develop a formal training program for CIVPAY budget analysts since the OUSD(C) budget analysts explained that CIVPAY budget development is mostly learned on-the-job. Creating CIVPAY budget development training meets the intent of the recommendation. Therefore, this recommendation is resolved but remains open. We will close the recommendation once we verify that CIVPAY budget development training was developed and required.

 

The Director agreed with the recommendation to require the Services and Defense agencies to document their budget development procedures. The Director stated that OUSD(C) officials would share their standard operating procedures with the Components and facilitate the sharing of best practices for CIVPAY budget development. However, these actions will not assure that the Services and Defense agencies document their procedures, in accordance with GAO’s internal control guidance. Therefore, the Director did not address the specifics of the recommendation and the recommendation is unresolved.

 

This report is a result of Project No. D2018-D000AG-0089.000.