Summary: The Air Force's Depot Maintenance Industrial Fund, which provided about $3.6 billion worth of maintenance services to its customers during fiscal year 1991, was supposed to break even on these sales. The fund, however, has suffered losses and has experienced a steady increase in its backlog of work mainly because managers repeatedly based the fund's prices and the size of its work force on productivity estimates that were not attained. To eliminate the losses and achieve profits, the fund has resorted to improper or questionable practices, such as charging customers for work that was not done. These practices (1) cause financial reports and budget documents to provide a misleading picture of the fund's performance and (2) make it hard for the Defense Department and Congress to oversee the fund and the appropriation requests of fund customers. GAO's analysis of the fund's projected work loads and capabilities for fiscal years 1992 and 1993 shows that customers' fiscal year 1993 budget requests include at least $365 million for work that is unlikely to be started before fiscal year 1994. Its analysis of the Air Force's plan for reducing the fund's fiscal year 1991-95 costs by $1.1 billion shows that the Air Force is unlikely to succeed mainly because (1) fund managers lack the information needed to manage effectively and (2) the Air Force's plan makes unrealistic assumptions about the savings that can be achieved through competition.
