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AUDIT SAYS HILL, OTHER DEPOTS LOST BIG BUCKS

SHARE AUDIT SAYS HILL, OTHER DEPOTS LOST BIG BUCKS

Congressional auditors say that because Hill Air Force Base and its four fellow major repair depots are not as productive as planned, they lost $459 million from 1988 to 1991.

By law, they should break even over the long term through charges to customer military agencies for major repairs and overhauls.The Air Force says most of the problems have been solved and that the depots are now making a "profit." But investigators say that is only an illusion caused by budget games and expect real losses to continue unless changes are made.

The U.S. General Accounting Office was asked by Rep. Earl Hutto, D-Fla., the chairman of the House Armed Forces Subcommittee on Readiness, to study why the Air Force's major depots lost so much money.

It concluded a main reason was that the Air Force's five depots - including the Ogden Air Logistics Center at Hill - "did not achieve productivity goals." The base is Utah's single largest employer.

The GAO - an investigative arm of Congress - said that depots set prices annually based on the expected workload, how many people are needed to do the work and the cost of supplies.

The bases never achieved the projected productivity, the GAO said. It said part of the problem was that the depots have varying amounts of work, but have a relatively constant number of mostly civilian employees. So when orders drop, as they did in 1988, the depots have more workers than needed.

In 1991, the Air Force determined the depots' "workload would be declining faster than the work force could be reduced through normal attrition" so they laid off "their temporary and on-call employees, allowed employees to retire early and released 1,211 permanent employees."

Even after that reduction of "overhead," the depots still have not been able to meet productivity goals.

The GAO said that isn't necessarily because depot workers are lazy, but because military budgeters are using unrealistic projections - possibly to allow ordering more repairs with money given to customer agencies by Congress than otherwise possible.

The GAO said that for 1992 and 1993, base managers it interviewed "do not believe they can achieve the improved productivity and lower cost projections that Air Force Materiel Command Headquarters and the office of the secretary of defense directed them to incorporate into their budget estimates for these years."

Investigators added that the secretary of defense "made questionable reductions" to their cost estimates during the review of budget submissions.

Investigators also said that from 1988-91, the depots were told by Air Force Materiel Command not to bill customers for $42.7 million worth of work, even though all work is supposed to be charged. "This decision also had the same effect as a transfer of funds from (the depots) to the Air Force Operation and Maintenance appropriation."

The Air Force said most of the depot problems are now solved and that they began achieving a profit in 1991 and 1992. But the GAO said that happened only because the depots did such things as not return money for work that was ordered but later canceled or reduced.

Much of the profit also came from a 12 percent surcharge added to help defray losses from prior years. The GAO said that surcharge may "significantly distort (the depots') operating results for the current period."

It added, "These questionable or improper practices demonstrate that there is not always a businesslike relationship between (the depots) and (their) customers."

It said more realistic estimates of true costs must be used and more flexibility in the hiring and laying off of the work force must be allowed, or real losses are likely to continue.