Global War on Terrorism
DOD Should Consider All Funds Requested for the War When Determining Needs and Covering Expenses Gao ID: GAO-05-767 September 28, 2005To assist the Congress in its oversight role, GAO is undertaking a series of reviews on the costs of operations in support of the Global War on Terrorism (GWOT). In related work, GAO is raising concerns about the reliability of the Department of Defense's (DOD) reported cost data and therefore is unable to ensure that DOD's reported obligations for GWOT are complete, reliable, and accurate. In this report, GAO (1) identified funding for GWOT in fiscal years 2004 and 2005, (2) compared supplemental appropriations for GWOT in fiscal year 2004 to the military services' reported obligations, and (3) compared supplemental appropriations for GWOT in fiscal year 2005 to the military services' projected obligations.
In fiscal years 2004 and 2005, DOD received funding for GWOT through both funds included in its annual appropriation and supplemental appropriations. In fiscal years 2004 and 2005, the military services received about $52.4 billion and $62.1 billion, respectively, in supplemental appropriations for GWOT (1) military personnel and (2) operation and maintenance expenses. The Army, Air Force, and Navy also received in their annual appropriations a combined $7.9 billion in fiscal year 2004 and a combined $7.6 billion in fiscal year 2005, which DOD described as being intended to support GWOT. The military services absorbed the increase into their annual appropriations and allocated it based on their judgment of where the funds were most needed. DOD's accounting systems, however, do not separately identify these additional appropriations, and there are no reporting requirements for DOD to identify to which appropriation accounts the funds were allocated; consequently, the military services have lost visibility over these funds and do not know the extent to which they are being used to support GWOT. Despite having asked for the increase to support GWOT, DOD is not explicitly counting these additional funds when considering the amount of funding available to cover GWOT expenses. For fiscal year 2004, regarding supplemental appropriations for GWOT military personnel expenses, the Navy and Marine Corps reported more in obligations than they received in supplemental appropriations, while the Army and Air Force received more in supplemental appropriations than their reported obligations. Each of the services reported more in GWOT operation and maintenance obligations than it received in supplemental appropriations. To cover the differences (gaps), DOD and the services exercised a number of authorities provided them, including transferring funds and reducing or deferring planned spending for peacetime operations. However, in considering the amount of funding available to cover the gaps, DOD did not explicitly take into account the funds provided through its annual appropriation that as previously noted it described as for the support of GWOT. If DOD had considered these funds, it could have reduced the Army's GWOT gap and eliminated the GWOT gaps of the Air Force and Navy. For fiscal year 2005, the services' forecasts of GWOT obligations for the full fiscal year as of June 2005 suggest a potential gap of $500 million for military personnel for the Air Force and potential gaps of about $2.7 billion and about $1 billion, respectively, for operation and maintenance for the Army and Air Force. To cover expenses, DOD and the services again plan to take a variety of actions, including reprogramming funds and reducing or deferring planned spending. However, DOD is again not explicitly considering the funds provided through its annual appropriation, which it described as for the support of GWOT. If counted in fiscal year 2005, the amounts potentially could reduce the Army's and eliminate the Air Force's GWOT gaps and eliminate the need for reprogramming funds and reducing or deferring planned spending.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-05-767, Global War on Terrorism: DOD Should Consider All Funds Requested for the War When Determining Needs and Covering Expenses
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Report to Congressional Committees:
September 2005:
Global War on Terrorism:
DOD Should Consider All Funds Requested for the War When Determining
Needs and Covering Expenses:
GAO-05-767:
GAO Highlights:
Highlights of GAO-05-767, a report to congressional committees:
Why GAO Did This Study:
To assist the Congress in its oversight role, GAO is undertaking a
series of reviews on the costs of operations in support of the Global
War on Terrorism (GWOT). In related work, GAO is raising concerns about
the reliability of the Department of Defense‘s (DOD) reported cost data
and therefore is unable to ensure that DOD‘s reported obligations for
GWOT are complete, reliable, and accurate. In this report, GAO (1)
identified funding for GWOT in fiscal years 2004 and 2005, (2) compared
supplemental appropriations for GWOT in fiscal year 2004 to the
military services‘ reported obligations, and (3) compared supplemental
appropriations for GWOT in fiscal year 2005 to the military services‘
projected obligations.
What GAO Found:
In fiscal years 2004 and 2005, DOD received funding for GWOT through
both funds included in its annual appropriation and supplemental
appropriations. In fiscal years 2004 and 2005, the military services
received about $52.4 billion and $62.1 billion, respectively, in
supplemental appropriations for GWOT (1) military personnel and (2)
operation and maintenance expenses. The Army, Air Force, and Navy also
received in their annual appropriations a combined $7.9 billion in
fiscal year 2004 and a combined $7.6 billion in fiscal year 2005, which
DOD described as being intended to support GWOT. The military services
absorbed the increase into their annual appropriations and allocated it
based on their judgment of where the funds were most needed. DOD‘s
accounting systems, however, do not separately identify these
additional appropriations, and there are no reporting requirements for
DOD to identify to which appropriation accounts the funds were
allocated; consequently, the military services have lost visibility
over these funds and do not know the extent to which they are being
used to support GWOT. Despite having asked for the increase to support
GWOT, DOD is not explicitly counting these additional funds when
considering the amount of funding available to cover GWOT expenses.
For fiscal year 2004, regarding supplemental appropriations for GWOT
military personnel expenses, the Navy and Marine Corps reported more in
obligations than they received in supplemental appropriations, while
the Army and Air Force received more in supplemental appropriations
than their reported obligations. Each of the services reported more in
GWOT operation and maintenance obligations than it received in
supplemental appropriations. To cover the differences (gaps), DOD and
the services exercised a number of authorities provided them, including
transferring funds and reducing or deferring planned spending for
peacetime operations. However, in considering the amount of funding
available to cover the gaps, DOD did not explicitly take into account
the funds provided through its annual appropriation that as previously
noted it described as for the support of GWOT. If DOD had considered
these funds, it could have reduced the Army‘s GWOT gap and eliminated
the GWOT gaps of the Air Force and Navy.
For fiscal year 2005, the services‘ forecasts of GWOT obligations for
the full fiscal year as of June 2005 suggest a potential gap of $500
million for military personnel for the Air Force and potential gaps of
about $2.7 billion and about $1 billion, respectively, for operation
and maintenance for the Army and Air Force. To cover expenses, DOD and
the services again plan to take a variety of actions, including
reprogramming funds and reducing or deferring planned spending.
However, DOD is again not explicitly considering the funds provided
through its annual appropriation, which it described as for the support
of GWOT. If counted in fiscal year 2005, the amounts potentially could
reduce the Army‘s and eliminate the Air Force‘s GWOT gaps and eliminate
the need for reprogramming funds and reducing or deferring planned
spending.
What GAO Recommends:
GAO recommends the Secretary of Defense adjust future requests for
supplemental appropriations to reflect the additional funds DOD
received in its annual appropriations to support GWOT and consider
these additional funds when assessing how to cover its expenses for the
war. DOD disagreed with GAO‘s recommendations. Given that disagreement
and the amount of funds available”more than $10 billion annually”GAO
has added a matter for congressional consideration regarding directing
DOD to explain how additional GWOT related funding in its annual
appropriations supports GWOT.
www.gao.gov/cgi-bin/getrpt?GAO-05-767.
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[End of section]
Contents:
Letter:
Results in Brief:
Background:
Funding for GWOT in Fiscal Years 2004 and 2005 Was Provided in Annual
and Supplemental Appropriations:
Most Fiscal Year 2004 Supplemental Appropriations for GWOT Were Less
Than Reported Obligations; However, DOD Is Not Explicitly Counting
Additional Funds Requested for GWOT in Its Annual Appropriation:
Fiscal Year 2005 Reported Obligations for GWOT Could Exceed
Supplemental Appropriations, Requiring the Military Services to Use
Authorities Provided to Them to Cover the Differences:
Conclusions:
Recommendations for Executive Action:
Matter for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Tables:
Table 1: Supplemental Appropriations Available to the Military Services
for GWOT Military Personnel and Operation and Maintenance Expenses in
Fiscal Years 2004 and 2005:
Table 2: Annual Appropriations for the Military Services Included in
Program Budget Decision 736 to Support GWOT in Fiscal Years 2004 and
2005:
Table 3: Military Personnel Fiscal Year 2004 GWOT Supplemental
Appropriations and Reported Obligations:
Table 4: Operation and Maintenance Fiscal Year 2004 GWOT Supplemental
Appropriations and Reported Obligations:
Table 5: Comparison of the Military Services' Combined Supplemental and
Annual Appropriations for Military Personnel and Operation and
Maintenance for GWOT in Fiscal Year 2004 to Reported Obligations:
Figures:
Figure 1: Military Services' Fiscal Year 2005 Reported Obligations of
GWOT Military Personnel Supplemental Appropriations through May 2005:
Figure 2: Military Services' Fiscal Year 2005 Reported Obligations of
GWOT Operation and Maintenance Supplemental Appropriations through May
2005:
Abbreviations:
DOD: Department of Defense:
GWOT: Global War on Terrorism:
LOGCAP: Logistics Civil Augmentation Program:
Letter September 28, 2005:
Congressional Committees:
Since the September 11, 2001, terrorist attacks, the Congress has
provided the Department of Defense (DOD) with more than $265 billion,
as of August 2005, in supplemental appropriations to support military
operations to combat terrorism worldwide. The Congress has also
provided funds to combat terrorism in DOD's annual appropriation.
Military operations to defend the United States from terrorist attacks
are known as Operation Noble Eagle. Overseas military operations to
combat terrorism are known as Operation Iraqi Freedom, which takes
place in and around Iraq, and Operation Enduring Freedom, which takes
place principally in Afghanistan. These operations are known
collectively as the Global War on Terrorism (GWOT).
To assist the Congress in its oversight role, we have conducted under
the Comptroller General's statutory authority a series of reviews on
the reported obligations and funding for military operations in support
of GWOT[Footnote 1] and have addressed this report to the congressional
committees of jurisdiction. Obligations are incurred through actions
such as orders placed, contracts awarded, services received, or similar
transactions made by federal agencies during a given period that will
require payments during the same or a future period.[Footnote 2] In
July 2004, we issued a report that discussed fiscal year 2004
obligations and funding through April 2004.[Footnote 3] This report
completes our analysis of fiscal year 2004 and includes our assessment
of the outlook for fiscal year 2005 obligations and funding for the war
as of May 2005. In this report, we (1) identified funding for GWOT in
fiscal years 2004 and 2005; (2) compared supplemental appropriations
for GWOT in fiscal year 2004 to the military services' reported
obligations and, if differences occurred, determined the actions DOD
and the services took to cover them; and (3) compared supplemental
appropriations for GWOT in fiscal year 2005 to the services' projected
obligations. Where it appeared that obligations may exceed the
supplemental appropriations provided in fiscal year 2005, we sought to
identify the actions DOD and the services plan to take to cover the
gaps. For purposes of this report, the term "gap" refers to comparisons
between funds provided in supplemental appropriations and DOD's
reported GWOT obligations--specifically to instances where DOD's
reported GWOT obligations exceed the supplemental appropriations
provided to the department during the fiscal year. Because operational
conditions on the ground can vary substantially during the fiscal year,
DOD's actual funding needs may be more or less than the amount
initially estimated or received. As we discuss in this report, DOD may
address these differences (gaps) by using its annual appropriations.
There is no indication, however, that DOD incurred any Antideficiency
Act violations.
We limited our review to the obligation of funds appropriated for
military personnel and operation and maintenance, for both active and
reserve forces of the Army, Air Force, Navy, and Marine Corps, because
they represented the majority of the funds obligated in fiscal years
2004 and 2005, about 90 percent in each year. We did not review the
obligation of funds for investment, which are used for procurement;
military construction; and research, development, test, and evaluation.
To identify funding DOD describes as intended for GWOT, we reviewed
applicable annual and supplemental DOD appropriations in fiscal years
2004 and 2005. To compare supplemental appropriations provided to the
military services for GWOT to reported obligations in both fiscal years
2004 and 2005, we reviewed applicable supplemental appropriations and
compared them to the reported amounts obligated by each service. To
identify DOD's reported GWOT obligations,[Footnote 4] we used DOD's
Supplemental and Cost of War Execution Reports, which report DOD's
monthly and cumulative GWOT obligations, and analyzed these data. These
reports were called the Consolidated Department of Defense Terrorist
Response Cost Reports through December 2004, and renamed beginning in
January 2005. We excluded classified programs from our review, because
obligations for those programs are not reported in DOD's Supplemental
and Cost of War Execution Reports. To determine actions taken by DOD
and the services to cover any identified gaps between reported
obligations and supplemental appropriations for GWOT, we held
discussions with DOD representatives from the Office of the Under
Secretary of Defense (Comptroller) and the Army, Air Force, Navy, and
Marine Corps.
We have previously reported concerns regarding DOD's oversight and cost
reporting of funds appropriated for contingency operations. For
example, in May 2004 we reported that DOD's cost reporting for GWOT
included large amounts of funds that have been reported as obligated in
miscellaneous categories and thus provide little insight on how those
funds have been spent,[Footnote 5] and in April 2003 we reported that
DOD's ability to track the use of funds appropriated for GWOT has
varying limitations depending on the appropriation.[Footnote 6] In
response, DOD has taken a number of steps to improve its oversight and
cost reporting of funds appropriated for contingency operations. These
actions include revising the Department of Defense Financial Management
Regulation in January 2005 to include new cost reporting categories
that refine the reporting of obligations previously reported as
miscellaneous.
GWOT obligations provided in this report are DOD's claimed obligations
as reported in the Supplemental and Cost of War Execution Reports. In
related work,[Footnote 7] we have reported these data to be of
questionable reliability. For example, we found financial management
systems with acknowledged weaknesses, a lack of systematic processes to
ensure accurate data entry, failure to use actual data when it was
available, and improperly categorized costs. Therefore, we are unable
to ensure that DOD's reported obligations for GWOT are complete,
reliable, and accurate. Consequently, the gaps we identify between
supplemental appropriations and DOD's reported obligations may not
reliably reflect true differences between supplemental appropriations
and obligations and therefore should be considered approximations.
Despite the uncertainty about the obligation data, we are reporting the
information because it is the only data available on overall GWOT costs
and so the only way to approach an estimate of the costs of the war.
Also, despite the uncertainty surrounding the true dollar figure for
obligations, these data are used to advise the Congress on the cost of
the war. As such, obligation data provided in this report reflect DOD
reported obligations, however unreliable those reports may be.
We conducted our review from November 2004 through August 2005 in
accordance with generally accepted government auditing standards.
Results in Brief:
In fiscal years 2004 and 2005, DOD received funding to support GWOT in
both its annual appropriation and in supplemental appropriations
provided during those years. The military services received about $52.4
billion and about $62.1 billion in fiscal years 2004 and 2005,
respectively, in supplemental appropriations for GWOT military
personnel and operation and maintenance expenses. At the same time, DOD
requested that the Army, Air Force, and Navy receive a combined
increase of about $7.9 billion in fiscal year 2004 and a combined
increase of about $7.6 billion in fiscal year 2005 in their annual
appropriations, which DOD said would be for support of GWOT. The
military services absorbed the increase into their annual
appropriations and allocated it based on their judgment of where the
funds were most needed. DOD's accounting systems, however, do not
separately identify these additional appropriations and there are no
reporting requirements for DOD to identify to which appropriation
accounts the funds were allocated; consequently, the military services
have lost visibility over these funds and do not know the extent to
which they are being used to support GWOT. Despite having asked for the
increase to support GWOT, DOD is not explicitly counting these
additional funds when considering funding for GWOT.
In fiscal year 2004, the difference between supplemental appropriations
available to the military services for GWOT military personnel and
operation and maintenance expenses compared to reported obligations
varied by service. For military personnel, the Navy and Marine Corps
reported more in obligations than they had received in supplemental
appropriations, resulting in differences or gaps of about $40 million
and $30 million, respectively. Both the Army and Air Force received
supplemental appropriations that exceeded their reported obligations
for military personnel and the two services used these funds to cover
operation and maintenance expenses related to GWOT, transferring $801
million and $113 million, respectively. For operation and maintenance,
each of the military services reported more in obligations than it
received in supplemental appropriations. The Army reported the largest
gap, about $4.3 billion, while the Air Force and Navy reported gaps of
$579 million and about $618 million, respectively. The Marine Corps
reported the smallest gap, about $195 million. Some service
representatives noted that the gaps represented a small percentage of
their annual military personnel and operation and maintenance
appropriations. To cover the gaps, the Office of the Under Secretary of
Defense (Comptroller) and the services exercised a number of
authorities provided to them, including transferring funds and reducing
or deferring planned spending for peacetime operations. For example,
DOD covered about $3 billion of the gap though transfers from the
services' working capital funds, while the military services deferred a
portion of their equipment and depot maintenance activities; various
procurement actions; infrastructure projects; and other activities,
such as training, until fiscal year 2005 or later. However, DOD did not
explicitly take into account the funds provided through its annual
appropriation that it intended for support of GWOT. If counted in
fiscal year 2004, these amounts could have reduced the Army's GWOT gap,
allowing it to defer fewer activities, and eliminated the GWOT gaps of
the Air Force and Navy.
For fiscal year 2005, our analysis of reported obligations through May
2005 and the military services' forecasts for the full fiscal year as
of June 2005 suggest that in some appropriations accounts the military
services' reported obligations for the war could exceed their
supplemental appropriations. This could require them to again use other
authorities provided to them to cover the differences. Our projections
suggest the services should have sufficient supplemental appropriations
for military personnel expenses, but that there could be gaps for
operation and maintenance expenses for the Army and the Marine Corps.
The services' more detailed forecasts suggest a gap for military
personnel expenses for the Air Force of about $500 million, and gaps
for operation and maintenance expenses for the Army and Air Force of
about $2.7 billion and about $1 billion, respectively. Based on its
midyear budget review, the Marine Corps believes that its current
supplemental appropriations for the war will be sufficient to cover its
reported obligations. To cover any gaps, DOD and the services plan to
take a variety of actions, based on authorities provided to them,
including reprogramming funds and reducing or deferring planned
spending for peacetime operations. For example, in May 2005 more than
$800 million was reprogrammed from the military personnel accounts of
the Air Force, Navy, Marine Corps, and Army National Guard to meet the
Army's GWOT needs, while the Air Force has begun taking steps to
decrease its peacetime flying hours and reduce or defer current year
depot maintenance activities. However, DOD is again not explicitly
considering the funds provided in its annual appropriation, which it
described as having been requested to support GWOT. If counted in
fiscal year 2005, the amounts potentially could reduce the Army's and
eliminate the Air Force's GWOT gaps and eliminate the need for
reprogramming funds and reducing or deferring planned spending. As a
result, the services continue to take actions that affect peacetime
operations and run the risk of producing a large "bow wave" of higher
spending pressures into the future.
To improve the visibility and accountability of DOD's use of funds for
GWOT, we recommend that in future requests for supplemental
appropriations, the Secretary of Defense adjust such requests to
reflect the additional funding DOD requested and received in its annual
appropriations to support GWOT and provide the Congress with an
explanation of these adjustments. We further recommend that in
addressing any future GWOT funding needs the Secretary consider the
additional GWOT funding provided through the department's annual
appropriation when assessing how to cover expenses for the war and
document its decisions.
In written comments on a draft of this report, DOD did not concur with
our recommendations. Regarding our recommendation that the Secretary of
Defense adjust future supplemental appropriations requests to reflect
the additional funding DOD requested and received in its annual
appropriations to support GWOT and explain these adjustments to the
Congress, DOD stated that its supplemental appropriations request
accounts for all relevant adjustments to the annual appropriation bill.
In fact, as stated in our report, although the Office of the Under
Secretary of Defense (Comptroller) sought to adjust the department's
supplemental appropriations request for fiscal year 2005 to reflect the
additional funds DOD received in its annual appropriations that DOD
identified as supporting GWOT, none of the military services provided
the information requested. Instead, it was the Office of Management and
Budget that actually made the adjustment in preparing the President's
fiscal year 2005 supplemental appropriations request. We therefore
believe that our recommendation has merit and have retained it.
However, since DOD does not agree and the amount of funds available is
substantial--more than $10 billion annually--we have added a matter for
congressional consideration to consider directing DOD, when it submits
future supplemental appropriations requests, to provide an explanation
of how such requests reflect the additional funding DOD requested and
received in its annual appropriations to support GWOT. With respect to
our recommendation that the Secretary of Defense also consider the
additional GWOT funding provided through DOD's annual appropriations in
addressing any future GWOT funding needs, DOD commented that it
considers all funding provided through the department's annual
appropriation when addressing how to cover expenses for the war. We
recognize that DOD reviews all available funding authorities when
determining how to cover GWOT needs. However, since DOD has lost
visibility of the funds provided through its annual appropriation that
it requested to support GWOT, there is no documentation regarding how
the department took these funds into account or whether it was applying
the entire amount to cover its GWOT needs. We therefore continue to
believe our recommendation has merit and have retained it, including
expanding it to recommend that DOD also document its decisions. DOD's
comments and our evaluation are discussed in detail in a later section
of this report and the department's comments are reprinted in appendix
II.
Background:
About 90 percent of the costs associated with GWOT fall into two
accounts--military personnel and operation and maintenance. Military
personnel funds provided to support GWOT cover the pay and allowances
of mobilized reservists as well as special payments or allowances for
all qualifying military personnel, both active and reserve, such as
Imminent Danger Pay and Family Separation Allowance. Operation and
maintenance funds provided to support GWOT are used for a variety of
purposes, including transportation of personnel, goods, and equipment;
unit operating support costs; and intelligence, communications, and
logistics support.
We have reported on several occasions, including in 1999 and 2003, that
estimating the cost of ongoing military operations is
difficult.[Footnote 8] This is because operational requirements can
differ substantially during the fiscal year from what was assumed in
preparing budget estimates. The result can be that operations can cost
more or less than originally estimated. If operations cost more than
originally estimated, DOD may use a number of authorities provided to
it, including transferring and reprogramming funds and reducing or
deferring planned spending for peacetime operations, to meet its needs.
DOD uses "transfer authority" to shift funds between appropriation
accounts, for example, between military personnel and operation and
maintenance. Transfer authority is granted by the Congress to DOD
usually pursuant to specific provisions in authorization or
appropriation acts.[Footnote 9] The ability to shift funds within a
specific appropriation account, like operation and maintenance, is
referred to as "reprogramming." In general, DOD does not need statutory
authority to reprogram funds within an account as long as the funds to
be spent would be used for the same general purpose of the
appropriation and the reprogramming does not violate any other specific
statutory requirements or limitations. For example, DOD could reprogram
operation and maintenance funds originally appropriated for training to
cover increased fuel costs because both uses meet the general purpose
of the operation and maintenance account, as long as the shift does not
violate any other specific statutory prohibition or limitation.
Funding for GWOT in Fiscal Years 2004 and 2005 Was Provided in Annual
and Supplemental Appropriations:
In fiscal years 2004 and 2005, the military services received about
$52.4 billion and about $62.1 billion, respectively, in supplemental
appropriations for GWOT military personnel and operation and
maintenance expenses. The Army, Air Force, and Navy also received funds
for GWOT through their annual appropriations. However, DOD and the
military services have lost visibility over these funds provided
through annual appropriations, including knowing how much, if any, was
used to support GWOT in fiscal years 2004 and 2005.
Supplemental Appropriations for GWOT:
As shown in table 1, DOD received funding through supplemental
appropriations to support GWOT in both fiscal years 2004 and 2005.
Table 1: Supplemental Appropriations Available to the Military Services
for GWOT Military Personnel and Operation and Maintenance Expenses in
Fiscal Years 2004 and 2005:
Dollars in millions.
Supplemental appropriations:
Pub. L. No. 108-106;
Available in fiscal year 2004: $50,352;
Available in fiscal year 2005: --.
Pub. L. No. 108-287;
Available in fiscal year 2004: $120;
Available in fiscal year 2005: $17,251.
Pub. L. No. 109-13;
Available in fiscal year 2004: --;
Available in fiscal year 2005: $44,504.
Iraqi Freedom Fund transfers;
Available in fiscal year 2004: $1,941;
Available in fiscal year 2005: $348.
Total;
Available in fiscal year 2004: $52,413;
Available in fiscal year 2005: $62,103.
Source: GAO analysis of Pub. L. No. 108-106, Pub. L. No. 108-287, Pub.
L. No. 109-13, and Iraqi Freedom Fund transfers appropriated in Pub. L.
No. 108-106 and Pub. L. No. 108-11.
Notes: Fiscal years 2004 and 2005 supplemental appropriations data
exclude funding for classified programs. Fiscal year 2005 supplemental
appropriations data are through August 2005.
[End of table]
To pay for the military personnel and operation and maintenance costs
of GWOT in fiscal year 2004, the Congress appropriated about $52.4
billion to DOD. Of the $52.4 billion, the Congress provided the
military services about $50.4 billion in the Emergency Supplemental
Appropriations Act for Defense and for the Reconstruction of Iraq and
Afghanistan, 2004.[Footnote 10] In addition, the services used $120
million of the funds provided in late fiscal year 2004 through Title IX
of the Department of Defense Appropriations Act, 2005.[Footnote 11]
DOD also transferred about $1.9 billion from funds originally
appropriated to the Iraqi Freedom Fund. The Iraqi Freedom Fund provides
2-year funds that can be transferred to the services' accounts for
additional expenses for ongoing military operations in Iraq, operations
authorized by the Authorization for Use of Military Force,[Footnote 12]
and other operations and related activities in support of GWOT. Of the
$1.9 billion, about $860 million was provided through the Emergency
Wartime Supplemental Appropriations Act, 2003,[Footnote 13] while about
$1.1 billion was provided through the Emergency Supplemental
Appropriations Act for Defense and for the Reconstruction of Iraq and
Afghanistan, 2004.[Footnote 14]
For fiscal year 2005, the military services had about $62.1 billion
available to pay for the military personnel and operation and
maintenance costs of GWOT. Of this, the Congress appropriated about
$44.5 billion through the Emergency Supplemental Appropriations Act for
Defense, the Global War on Terror, and Tsunami Relief, 2005.[Footnote
15] The military services also had the remaining balance--about $17.3
billion--that was provided through Title IX of the Department of
Defense Appropriations Act, 2005, and was available for obligation in
fiscal year 2005 to help pay for the military personnel and operation
and maintenance costs of GWOT. In addition, as of July 2005, DOD had
transferred about $348 million from funds originally appropriated to
the Iraqi Freedom Fund.
Some Annual Appropriations Described by DOD as for GWOT:
In addition to funds DOD received through supplemental appropriations
for GWOT, beginning in fiscal year 2003, the administration increased
DOD's annual appropriation request by more than $10 billion per year.
DOD described these funds as being intended to support GWOT. According
to a representative from the Office of the Under Secretary of Defense
(Comptroller), in December 2001 the President directed that his annual
budget submission for DOD be increased by about $10 billion annually to
support GWOT. Consequently, Program Budget Decision 736, entitled
Continuing the War on Terrorism and dated January 31, 2002, was
approved by the Under Secretary of Defense (Comptroller). Program
Budget Decision 736 provided for increasing DOD's annual budget request
in the amount of more than $10 billion per year plus inflation in
fiscal years 2003 through 2007 to enhance the department's efforts to
respond to, or protect against, acts or threatened acts of terrorism
against the United States. According to a DOD representative, unless
action is taken to reduce these funds in future budgets, Program Budget
Decision 736 provides for a permanent increase of about $10 billion per
year plus inflation to DOD's annual budget request to support military
operations in the war on terrorism.
As shown in table 2, in fiscal years 2004 and 2005, the Army, Air
Force, and Navy received additional funds in their annual
appropriations--a total of about $7.9 billion in fiscal year 2004 and
about $7.6 billion in fiscal year 2005--which DOD described as for
support of military operations in the war on terrorism. According to
DOD representatives, the Marine Corps did not receive an increase to
its annual appropriation through Program Budget Decision 736.
Table 2: Annual Appropriations for the Military Services Included in
Program Budget Decision 736 to Support GWOT in Fiscal Years 2004 and
2005:
Dollars in millions.
Army;
Available in fiscal year 2004: $1,331.7;
Available in fiscal year 2005: $1,268.0.
Air Force;
Available in fiscal year 2004: $3,506.4;
Available in fiscal year 2005: $3,512.3.
Navy;
Available in fiscal year 2004: $3,013.1;
Available in fiscal year 2005: $2,818.1.
Total;
Available in fiscal year 2004: $7,851.2;
Available in fiscal year 2005: $7,598.4.
Source: GAO analysis of DOD data.
Note: GAO did not audit these data.
[End of table]
Under Program Budget Decision 736, a number of DOD programs were to
receive increases in their proposed annual budgets in both fiscal years
2004 and 2005.[Footnote 16] For example, in fiscal year 2004, Program
Budget Decision 736 indicates that about $2.1 billion was for
counterterrorism and force protection efforts, about $1.2 billion for
combat air patrols over U.S. cities, and about $600 million for such
things as depot maintenance and spare parts. Program Budget Decision
736 indicates funds were to be provided to these programs and others in
fiscal years 2005 through 2007 as well. According to representatives of
the Office of the Under Secretary of Defense (Comptroller), some of the
funds in Program Budget Decision 736 were intended to cover costs
associated with Operation Noble Eagle while others were intended to
cover costs associated with Operation Enduring Freedom.
For fiscal years 2004 and 2005, an Office of the Under Secretary of
Defense (Comptroller) representative stated the additional funds
provided through Program Budget Decision 736 were in the military
services' various appropriations accounts. However, the Office of the
Under Secretary of Defense (Comptroller) has no specific information
about which programs or activities actually received the funds or how
they were eventually expended, including whether they were used in
support of GWOT. Once the services received these additional funds,
they allocated them to their appropriations accounts based on their
judgment of where the funds were most needed. DOD's accounting systems
do not separately identify which appropriations accounts received these
funds, and there are no reporting requirements for DOD to identify to
which appropriation accounts the funds were allocated. While the
military services also stated they received their share of the Program
Budget Decision 736 funds as part of their fiscal year 2004 and fiscal
year 2005 annual appropriations and that some of the funds were used
for war-related expenses, they too could not identify which programs or
activities received the funds and could not document what portion of
these funds were used for war-related expenses. As a result, although
DOD requested these funds to support GWOT, DOD and the military
services cannot be certain that they were actually used to support GWOT-
related activities.[Footnote 17]
In developing the fiscal year 2005 request for supplemental
appropriations to support GWOT, DOD took steps to adjust the request to
reflect the receipt of funds provided through Program Budget Decision
736. In a November 2004 memorandum requesting that all DOD components
provide their GWOT supplemental appropriations estimates for fiscal
year 2005, the Office of the Under Secretary of Defense (Comptroller)
stated the following with respect to funds that had already been
provided through Program Budget Decision 736:
* Funding for GWOT missions previously added to the baseline budget
(e.g., Program Budget Decision 736, Continuing the War on Terrorism)
should be explicitly identified as a reduction to funding requests in
those areas, as appropriate.
* Component requests must consider that that some funding is already in
the baseline accounts. Program Budget Decision 736 provided funds for
antiterrorism, continental United States combat air patrols, and force
protection. The components' submissions should show the total
requirement and note the level of funding already in the baseline for
this purpose. The supplemental request will net out the available
funding.
In the November 2004 memorandum the Office of the Under Secretary of
Defense (Comptroller) further stated that the emergency supplemental
appropriations request will address the incremental costs above the
baseline funding needed to support specific forces and capabilities
required to execute Operation Iraqi Freedom, Operation Enduring
Freedom, and portions (to be determined) of Operation Noble Eagle. DOD
described Operation Noble Eagle as including defending the United
States from airborne attacks and maintaining U.S. air sovereignty. This
operation had been included in the supplemental appropriations request
for fiscal year 2004.
None of the military services provided the information requested in the
November 2004 memorandum and instead the services requested funds for
Operation Noble Eagle. Service budget representatives told us that
Program Budget Decision 736 funds were considered as base program
(e.g., annual appropriations) issues and not supplemental candidates.
According to service budget representatives, they requested funds for
Operation Noble Eagle in fiscal year 2005 that were in addition to the
funds provided through Program Budget Decision 736. For example, the
Navy requested $53.3 million for incremental requirements above its
baseline request. The Army requested more than $1 billion in
incremental requirements above its baseline. However, in preparing the
fiscal year 2005 supplemental appropriations budget request, the Office
of Management and Budget did not include Operation Noble Eagle in the
President's budget request because funds had already been included in
DOD's annual appropriation, as described in Program Budget Decision
736.
Most Fiscal Year 2004 Supplemental Appropriations for GWOT Were Less
Than Reported Obligations; However, DOD Is Not Explicitly Counting
Additional Funds Requested for GWOT in Its Annual Appropriation:
In fiscal year 2004, the difference between supplemental appropriations
available to the military services for GWOT military personnel and
operation and maintenance expenses compared to reported obligations
varied by service. For military personnel, the Navy and Marine Corps
reported more in obligations than they received in supplemental
appropriations, while for operation and maintenance each of the
military services reported more in obligations than it received in
supplemental appropriations. To cover the differences (gaps), DOD and
the military services took several actions, including transferring
funds and reducing or deferring planned spending for peacetime
operations. In the case of the Army and Air Force, which each received
supplemental appropriations that exceeded its reported obligations for
military personnel, this included transferring $801 million and $113
million, respectively, to cover their GWOT operation and maintenance
expenses. In some instances, these actions reduced DOD's flexibility to
cover potential gaps in fiscal year 2005. DOD did not explicitly take
into account the GWOT funds provided through its annual appropriation
that DOD requested for GWOT to help cover the gaps. If it had taken
these funds into account it could have reduced the Army's GWOT gap,
eliminated the GWOT gaps of the Air Force and Navy, and been able to
defer fewer activities.
Difference between Reported GWOT Obligations and Fiscal Year 2004
Supplemental Appropriations for GWOT Varied by Service:
Within the military personnel accounts, as shown in table 3, the Navy
and Marine Corps reported more obligations in support of GWOT than they
received in supplemental appropriations. However, these reported gaps
were a relatively small portion of the services' annual military
personnel appropriations. For example, the Navy's reported gap of $40.4
million represents less than 1 percent of its annual military personnel
appropriation. In fiscal year 2004, both the Army and Air Force
received supplemental appropriations that exceeded their reported
obligations for military personnel. The Army and Air Force used these
funds to cover operation and maintenance expenses related to GWOT, as
discussed below.
Table 3: Military Personnel Fiscal Year 2004 GWOT Supplemental
Appropriations and Reported Obligations:
Dollars in millions.
Total supplemental appropriations for GWOT;
Army: $12,858.9;
Air Force: $3,384.7;
Navy: $816.1;
Marine Corps: $888.6.
Obligations reported;
Army: $11,972.0;
Air Force: $3,272.0;
Navy: $856.5;
Marine Corps: $918.3.
Difference;
Army: $886.9;
Air Force: $112.7;
Navy: $(40.4);
Marine Corps: $(29.7).
Source: GAO analysis of Pub. L. No. 108-106, Iraqi Freedom Fund
transfers appropriated in Pub. L. No. 108-106 and Pub. L. No. 108-11,
and the Consolidated Department of Defense Terrorist Response Cost
Report as of September 30, 2004.
Notes: GAO assessed the reliability of DOD's obligations data and found
that while the data we report reflect the data used by DOD to advise
the Congress on the cost of the war, they may not accurately reflect
the true dollar value of GWOT obligations. Additionally, computed
differences do not take into account GWOT funds requested in annual
appropriations. Gaps are in parentheses.
[End of table]
Within the operation and maintenance accounts, as shown in table 4, in
fiscal year 2004 each of the military services reported more in GWOT
obligations than it received in supplemental appropriations. The Army
reported the largest gap, about $4.3 billion, while the Air Force and
Navy reported gaps of $579 million and about $618 million,
respectively. The Marine Corps reported the smallest gap, about $195
million.
Table 4: Operation and Maintenance Fiscal Year 2004 GWOT Supplemental
Appropriations and Reported Obligations:
Dollars in millions.
Total supplemental appropriations for GWOT;
Army: $25,603.5;
Air Force: $5,552.8;
Navy: $1,936.3;
Marine Corps: $1,371.9.
Obligations reported;
Army: $29,907.7;
Air Force: $6,131.8;
Navy: $2,554.7;
Marine Corps: $1,566.9.
Difference;
Army: $(4,304.2);
Air Force: $(579.0);
Navy: $(618.4);
Marine Corps: $(195.1).
Source: GAO analysis of Pub. L. No. 108-106, Iraqi Freedom Fund
transfers appropriated in Pub. L. No. 108-106 and Pub. L. No. 108-11,
and the Consolidated Department of Defense Terrorist Response Cost
Report as of September 30, 2004.
Notes: GAO assessed the reliability of DOD's obligations data and found
that while the data we report reflect the data used by DOD to advise
the Congress on the cost of the war, they may not accurately reflect
the true dollar value of GWOT obligations. Additionally, computed
differences do not take into account GWOT funds requested in annual
appropriations. Numbers may not subtract due to rounding. Gaps are in
parentheses.
[End of table]
Variety of Actions Were Taken to Cover the Military Services' GWOT Gaps
in Fiscal Year 2004:
To cover the military services' gaps between reported fiscal year 2004
obligations and supplemental appropriations, the Office of the Under
Secretary of Defense (Comptroller) and the military services used a
number of authorities provided to them, including transferring funds
and reducing or deferring planned spending for peacetime operations.
While involving hundreds of millions or sometimes billions of dollars,
in discussing the actions taken to cover the gaps, some service
representatives noted that the gaps represented a small percentage of
their annual appropriations. Within the services' annual operation and
maintenance accounts we found that the gaps varied by service, ranging
from a low of 1.7 percent of the Air Force's annual operation and
maintenance appropriation to a high of 13.7 percent of the Army's
annual operation and maintenance appropriation. In the services' annual
military personnel accounts, all the gaps were less than 1 percent of
their annual military personnel appropriations. However, DOD did not
explicitly take into account the funds provided through its annual
appropriations that it intended for support of GWOT. As discussed
earlier, since DOD's accounting systems do not separately identify the
portion of the department's annual appropriations that were described
as having been requested to support GWOT and there are no reporting
requirements for DOD to identify to which appropriation accounts the
funds were allocated, the military services have lost visibility over
these funds and do not know the extent to which they are being used to
support GWOT. Consequently, despite having asked for the increase, DOD
is not explicitly counting these additional funds when considering
funding for GWOT and alternatively took actions that affected its
peacetime operations, which may create spending pressures in fiscal
year 2005 and later.
Military Service Actions to Address Fiscal Year 2004 GWOT Needs:
Each of the military services projected a gap between reported
obligations and supplemental appropriations at its midyear budget
review. Service representatives told us these projected gaps were
reduced over the course of fiscal year 2004 by reviewing their GWOT
requirements and, in some instances, seeking to reduce or defer planned
spending. With respect to the GWOT gaps faced by the services in fiscal
year 2004, we were told the following:
* For fiscal year 2004, the Army's reported obligations in its
operation and maintenance account exceeded its supplemental
appropriations by about $4.3 billion, substantially less than the $10.9
billion it had projected in the account at its midyear budget review.
To cover the $4.3 billion, DOD and the Army took a number of actions,
including using internal resources and passing the remaining amount on
to the Army's major commands to be absorbed by reducing or deferring
planned peacetime spending to meet its GWOT needs. More specifically,
to cover the Army's gap, the Under Secretary of Defense (Comptroller)
transferred about $3 billion from the working capital funds[Footnote
18] of the Army, Air Force, and Navy--including $1.3 billion from the
Army, about $1.5 billion from the Air Force, and $200 million from the
Navy. In addition, about $801 million was transferred from the Army's
military personnel account to help cover the gap in the Army's
operation and maintenance account, while about $500 million was
transferred from other DOD-wide accounts. The major Army commands
absorbed the remainder. For example, to cover its portion of the gap,
the Army Materiel Command reprioritized or deferred about $184 million
in depot maintenance until fiscal year 2005 for such programs as the
Patriot and Hellfire missile systems. It also reduced or deferred the
number of available training hours for some of its nondeployed units.
However, Army Materiel Command representatives told us that in some
instances, the training hours they deferred to help cover the fiscal
year 2004 gap were deferred until fiscal year 2006.
* The Air Force's gap in its operation and maintenance account of about
$579 million was substantially less than the $1.5 billion it had
projected in the two accounts at its midyear budget review. To cover
the $579 million gap, the Air Force took a number of actions, including
transferring $113 million in funds available in its overall military
personnel appropriation account, decreasing peacetime flying hours,
reducing depot maintenance, and deferring facility sustainment
restoration and modernization projects until fiscal year 2005. The Air
Force's major commands also absorbed a portion of the gap. For example,
the Air Combat Command absorbed its share of the GWOT gap, about $92
million, by reducing or deferring its fiscal year 2004 peacetime
spending. Approximately $46 million, or half of the Air Combat
Command's $92 million share of the gap, was covered by reducing its
peacetime flying hour program by about 6,800 hours. While reducing its
peacetime flying hours helped the Air Combat Command cover its portion
of the gap, Air Combat Command representatives told us the reduced
training opportunities created a training backlog, which could affect
pilot readiness for future combat missions.
* The Navy's combined gap for fiscal year 2004 of about $659 million in
its military personnel and operation and maintenance accounts was less
than its midyear projection of $931 million. To cover the $659 million
gap, the Navy canceled some peacetime spending, including various
nonreadiness operation and maintenance spending and various
infrastructure projects. Of the Navy's major commands, the Atlantic
Fleet and Pacific Fleet absorbed the largest share of the gap for
fiscal year 2004. For example, the Atlantic Fleet absorbed about $110
million by reducing air operations and ship depot maintenance
activities. Navy budget representatives noted that the gap represented
about 1 percent of the total baseline funding available for aircraft
operations and ship depot maintenance for the Navy in that fiscal year.
In addition, the Navy canceled or deferred procurement actions for the
MH-60R Seahawk helicopter, V-22 Osprey, F/A-18 Hornet, and Joint
Tactical Radio System.
* The Marine Corps' combined gap in its military personnel and
operation and maintenance appropriations accounts of about $225 million
for GWOT in fiscal year 2004 was also less than the $446 million
projected at its midyear budget review. To cover the $225 million gap,
the Marine Corps reduced or deferred spending in noncritical areas,
such as facility improvements. The Navy provided the Marine Corps with
funds from its base operating support and facilities sustainment
restoration and modernization appropriations accounts and with $121
million that was transferred to the Navy from the U.S. Transportation
Command's Working Capital Fund. According to Marine Corps
representatives, a portion of the gap was also absorbed by the Marine
Corps' annual military personnel and operation and maintenance
appropriations accounts.
The Navy provided us a detailed discussion of the process used in
addressing gaps. A Navy budget representative said that the Navy
analyzed its entire $116.8 billion in baseline funding (which includes
both the original $114 billion baseline and the added $2.8 billion for
Program Budget Decision 736 initiatives) as potential financing sources
for its GWOT needs. According to the Navy representative the Navy's
internal analysis first looked at funding flexibility in baseline
programs resulting from changes in current year execution. For example,
certain baseline program requirements change from year to year as a
result of development issues, schedule and implementation delays,
manufacturing problems, changes in requirements or inventory levels,
and labor disputes. The accumulated value of those changes in a given
execution year, such as fiscal year 2004, may have made any financial
resources excess to fiscal year 2004 requirements available to fund
GWOT needs. Although their specific identification as such would be
lacking, they stated that previously baselined Program Budget Decision
736 requirements could have been included, by implication, as part of
those deliberations. For example, by the end of fiscal year 2004, based
on delayed execution, about $136 million was reallocated from base
infrastructure support, maintenance, and repair[Footnote 19] to fund
Operation Iraqi Freedom costs. If insufficient funding sources were
identified as part of an execution analysis, then it would be necessary
to make affirmative decisions about reducing baseline programs to fund
the balance of the GWOT needs. Those reductions, for the most part, had
subsequent programmatic and financial impacts. Those changes required
to support the increased GWOT needs were monitored and approved by the
Office of the Under Secretary of Defense (Comptroller) staff during
their annual budget and execution reviews. Some of the changes were
recoverable (such as specific procurement and depot maintenance items
considered deferrable and that could be funded with a subsequent year's
money) and some changes were nonrecoverable (items considered
nondeferrable current expenses, where the performance period has
lapsed, but for which a subsequent year's funding is now available to
fully meet that year's requirements). For example, of the Navy and
Marine Corps' approximately $1.6 billion in absorbed costs in all
appropriation accounts for the Department of the Navy ($1.4 billion was
for Navy items, $200 million was for Marine Corps items), nearly 40
percent of the fiscal year 2004 requirements were considered
recoverable with subsequent year's funding. This included $200 million
for drawing down the Navy Working Capital Fund, which was included in
the Navy's fiscal year 2005 supplemental appropriations request.
As previously discussed, DOD used the military services' working
capital funds as a source of cash to provide funds for GWOT
expenditures in fiscal year 2004. DOD's working capital funds finance
the operations of two fundamentally different types of support
organizations: stock fund activities, which provide spare parts and
other items to military units and other customers, and industrial
activities, which provide depot maintenance, research and development,
and other services, such as those provided by the Defense Financial
Accounting Service, Defense Information Systems Agency, Defense
Commissary Agency, and U.S. Transportation Command. In fiscal year
2004, DOD transferred about $3 billion from the military services'
working capital funds to help cover the Army's gap between reported
obligations and supplemental appropriations.
While such transfers from the services' working capital funds helped
DOD cover its fiscal year 2004 gap, the transfers have left few working
capital funds available to be used in fiscal year 2005. For example, to
help cover the Army's operation and maintenance gap, about $980 million
was transferred from the U.S. Transportation Command's Transportation
Working Capital Fund during fiscal year 2004. This transfer was made
possible due to a surplus of transportation charges collected from the
military services by the U.S. Transportation Command during the year.
However, a U.S. Transportation Command representative told us the
transfers have left the fund's balance below the minimum goal of $517
million.[Footnote 20] Specifically, with the transfer of almost $1
billion in fiscal year 2004 to help cover the Army's operation and
maintenance gap, as of July 2005, there was only $168 million remaining
in the fund, well below the minimum goal for the year. Further, the
representative stated that the projected fund balance for the end of
fiscal year 2005 is about $231 million, still below the minimum goal.
DOD Did Not Explicitly Account for Funds Provided through Its Annual
Appropriation That It Described as for GWOT When Determining How to
Cover Its Fiscal Year 2004 Gaps:
In determining how to cover the gaps between the services' supplemental
appropriations and reported GWOT obligations for military personnel and
operation and maintenance expenses, DOD did not explicitly take into
account the almost $7.9 billion in funds the Army, Air Force, and Navy
received in their annual appropriations through Program Budget Decision
736 to help fund GWOT. This includes $1.3 billion received by the Army,
$3.5 billion received by the Air Force, and $3 billion received by the
Navy. If counted in fiscal year 2004 and applied to the services'
military personnel and operation and maintenance accounts, these
amounts could have reduced the Army's need to transfer funds from other
activities and eliminated the GWOT gaps for the Air Force and the Navy,
as shown in table 5. However, the services acknowledge that they have
lost visibility over the Program Budget Decision 736 funds after fiscal
year 2003 and do not know whether any of the funds were used in support
of GWOT.
Table 5: Comparison of the Military Services' Combined Supplemental and
Annual Appropriations for Military Personnel and Operation and
Maintenance for GWOT in Fiscal Year 2004 to Reported Obligations:
Dollars in millions.
Military personnel and operation and maintenance:
Supplemental appropriations for GWOT;
Army: $38,462.4;
Air Force: $8,937.5;
Navy: $2,752.4;
Marine Corps: $2,260.5.
Annual appropriations for GWOT;
Army: $1,331.7;
Air Force: $3,506.4;
Navy: $3,013.1;
Marine Corps: $0.0.
Total supplemental and annual appropriations for GWOT;
Army: $39,794.1;
Air Force: $12,443.9;
Navy: $5,765.5;
Marine Corps: $2,260.5.
Total obligations reported;
Army: $41,879.7;
Air Force: $9,403.8;
Navy: $3,411.2;
Marine Corps: $2,485.2.
Difference;
Army: $(2,085.6);
Air Force: $3,040.1;
Navy: $2,354.3;
Marine Corps: $(224.7).
Source: GAO.
Notes: GAO assessed the reliability of DOD's obligations data and found
that while the data we report reflect the data used by DOD to advise
the Congress on the cost of the war, they may not accurately reflect
the true dollar value of GWOT obligations. Gaps are in parentheses. GAO
did not audit these data.
[End of table]
We discussed our analysis with DOD representatives at each of the
services' budget offices, who disagreed with our depiction of Program
Budget Decision 736. These representatives believed that our analysis
should take into account the fact that the funds provided through
Program Budget Decision 736 were included in DOD's baseline budget and
therefore were already taken into account when considering funds
available for GWOT. Service budget representatives made the following
observations regarding the Program Budget Decision 736 funds:
* Once merged into those baseline budgets, full justification for
funding is provided in the annual President's budget request. For
example, increased funding for additional security personnel and
physical security equipment were merged with existing program lines and
not subsequently separately identified as to how they were initially
funded or sustained over the years.
* Once the Program Budget Decision 736 funds were in the baseline
budget, they were not in support of specific contingency operations,
for which the Department of Defense Financial Management Regulation,
Volume 12, Chapter 23, Contingency Operations, requires separate
documentation and execution tracking, and no such requirement exists
for "baselined" funds, other than the annual justification exhibits.
That is, Chapter 23 only requires reporting incremental costs (costs
not already in the baseline), and not total costs.
* Subsequent to Program Budget Decision 736 additional requirements
were placed on the services fiscal year 2004-2009 spending program
without accompanying funds. To meet these requirements service budget
representatives said that they looked in part to the funds provided in
Program Budget Decision 736.
We recognize that DOD's annual budget submissions include justification
for all the department's activities, including those funded through
Program Budget Decision 736. However, the funds provided through
Program Budget Decision 736 were identified as being in support of
GWOT. While service budget representatives noted that the documentation
and tracking requirements contained in the Department of Defense
Financial Management Regulation, Volume 12, Chapter 23, Contingency
Operations, do not apply to the funds provided through Program Budget
Decision 736, we believe that DOD should have been tracking these funds
in light of their connection to GWOT. While the services' budget
representatives told us that they took the funds provided through
Program Budget Decision 736 into account in addressing GWOT funding
needs, we note that once these funds were merged into the services'
baseline budgets visibility was lost so there is no assurance as to how
the funds were taken into account or used.
Fiscal Year 2005 Reported Obligations for GWOT Could Exceed
Supplemental Appropriations, Requiring the Military Services to Use
Authorities Provided to Them to Cover the Differences:
Our analysis of the military services' reported obligations for the
first 8 months of fiscal year 2005 and the military services' forecasts
as of June 2005 of full fiscal year 2005 costs suggest the services'
military personnel and operation and maintenance GWOT obligations could
exceed available supplemental appropriations for the war in some
accounts. Our projections of reported GWOT obligations through May 2005
suggest the services should have sufficient supplemental appropriations
for military personnel expenses in fiscal year 2005 but that there
could be gaps for operation and maintenance expenses for the Army and
the Marine Corps. The services' more detailed forecasts suggest a gap
for military personnel expenses for the Air Force of about $500
million, and gaps for operation and maintenance expenses for the Army
and Air Force of about $2.7 billion and about $1 billion, respectively.
The Marine Corps expects its supplemental appropriations will be
sufficient to cover its GWOT costs. To cover any gaps and meet its GWOT
needs, DOD and the services plan to take a variety of actions,
including reprogramming funds from annual appropriations and reducing
or deferring planned spending for peacetime operations.
Supplemental Appropriations for GWOT Military Personnel Costs in Fiscal
Year 2005 Should Be Sufficient for All Services Except for the Air
Force:
Our assessment of reported obligations in fiscal year 2005 through May
2005 suggests that the military services should have sufficient
supplemental appropriations for military personnel expenses in fiscal
year 2005. As figure 1 shows, with 8 months, or about 67 percent, of
the fiscal year gone, the Marine Corps has obligated 46 percent of its
available supplemental appropriations; the Army 54 percent; and the Air
Force and Navy 58 percent each.
Figure 1: Military Services' Fiscal Year 2005 Reported Obligations of
GWOT Military Personnel Supplemental Appropriations through May 2005:
[See PDF for image]
Notes: May 2005 represents 67 percent of the fiscal year. Reported
obligations include those from both the active and reserve components.
GAO assessed the reliability of DOD's obligations data and found that
while the data we report reflect the data used by DOD to advise the
Congress on the cost of the war, they may not accurately reflect the
true dollar value of GWOT obligations. Additionally, computed
differences do not take into account GWOT funds requested in annual
appropriations. Dollars are in thousands.
[End of figure]
Projections of GWOT Obligations through May 2005 Suggest Supplemental
Appropriations for Some Operation and Maintenance Accounts Are Not
Likely to Be Sufficient:
Our assessment of reported obligations within the military services'
operation and maintenance accounts through May 2005 suggests that the
supplemental appropriations provided to the services for GWOT should be
sufficient for the Air Force and Navy but not for the Army and Marine
Corps. As shown in figure 2, the percentage of available supplemental
appropriations obligated in the services' operation and maintenance
accounts as of May 2005, ranged from 49 percent for the Navy and 52
percent for the Air Force to 71 percent for the Army and the Marine
Corps. We recognize that funds are not obligated equally each month
throughout the fiscal year. However, we believe that the further into
the fiscal year the closer to 100 percent obligations should be
relative to appropriations if all appropriated funds are likely to be
obligated. Consequently, given these obligation rates, we believe that
if the Army and Marine Corps continue to obligate funds at the current
rate or higher, their reported obligations within the operation and
maintenance accounts could exceed available supplemental appropriations
in fiscal year 2005, requiring them to use other authorities provided
to them to cover the difference. However, as discussed below, the Air
Force believes it will have an operation and maintenance gap, while the
Marine Corps believes it will have sufficient funds for operation and
maintenance.
Figure 2: Military Services' Fiscal Year 2005 Reported Obligations of
GWOT Operation and Maintenance Supplemental Appropriations through May
2005:
[See PDF for image]
Notes: May 2005 represents 67 percent of the fiscal year. Reported
obligations include those from both the active and reserve components.
GAO assessed the reliability of DOD's obligations data and found that
while the data we report reflect the data used by DOD to advise the
Congress on the cost of the war, they may not accurately reflect the
true dollar value of GWOT obligations. Additionally, computed
differences do not take into account GWOT funds requested in annual
appropriations. Dollars are in thousands.
[End of figure]
Fiscal Year 2005 Midyear Budget Review Forecasts of the Military
Services:
Each of the military services completed a midyear budget review for the
Office of the Under Secretary of Defense (Comptroller), including a
forecast of its full fiscal year 2005 GWOT needs. The Army concluded
that it would not have sufficient supplemental appropriations to cover
its projected GWOT operation and maintenance obligations, while the Air
Force indicated its combined military personnel and operation and
maintenance obligations would exceed available supplemental
appropriations. With respect to the Army's and Air Force's midyear
budget review projections:
* The Army forecast a GWOT gap of about $2.7 billion in its operation
and maintenance account, of which a large component--about $1 billion-
-is attributed to higher fuel costs due to, among other things, the
increase in June 2005 of DOD's composite fuel rate from $56.28 per
barrel to $73.08. Other components of the forecasted gap include
support of the Army's modular force initiative;[Footnote 21] higher
spending in the second half of fiscal year 2005 as compared to the
first half, resulting from deferred spending early in the fiscal year;
and higher spending on recruiting and retention efforts, primarily for
the Army Reserve. According to the Army, the modular force initiative
and its reconstitution and reset efforts are being treated as GWOT
costs in fiscal year 2005.
* The Air Force forecast a GWOT gap of about $500 million in its
military personnel account and about $1 billion in its operation and
maintenance account, for a total gap of about $1.5 billion. Air Force
representatives attributed the gap in its military personnel account
primarily to having higher-than-anticipated end-strength levels, and
stated that the $1 billion gap in its operation and maintenance account
is to replenish the Transportation Working Capital Fund, which was
drawn down last year to help cover the Army's fiscal year 2004 GWOT
gap. Regarding the projected military personnel gap, Air Force
representatives stated that funds were subsequently transferred to pay
for prior obligations at higher-than-anticipated end-strength levels.
Since then, the Air Force has corrected the end-strength imbalance and
expects to be within end strength for GWOT during the remainder of the
fiscal year. As a result of these actions, Air Force representatives no
longer project a military personnel gap for GWOT in fiscal year 2005.
The Navy projected a small gap of about $36 million for GWOT at the
time of its midyear budget review, which it has since covered with cost
savings from shifting the bulk of its transportation of equipment and
supplies from air to sea. The Marine Corps indicated that its
supplemental appropriations should be sufficient to cover reported GWOT
obligations for fiscal year 2005. In considering the services' midyear
budget reviews, our analysis of the Navy and Marine Corps GWOT
obligations indicates substantial under execution in the Navy's
operation and maintenance account and the Marine Corps's military
personnel account. In response, the Navy stated that it expects its
rate of obligating GWOT funds to increase toward the end of fiscal year
2005 due to, among other things, providing additional support in
theatre and on the ground in Iraq as part of Joint Sourcing.[Footnote
22] According to a Navy representative, the Navy had about 5,000
personnel stationed on the ground in Kuwait, Iraq, and Afghanistan at
the end of fiscal year 2004. By the end of fiscal year 2005, the Navy
plans to have about 8,500 personnel in theatre with the additional
personnel having begun to deploy in May 2005. The Marine Corps stated
it expects to obligate an additional $220 million in military personnel
funds due to the new death gratuity benefit, while another $265 million
in military personnel funds will be used to replenish the Marine
Corps's annual appropriation for funds reprogrammed earlier in the
fiscal year to buy additional body-armor and other equipment to counter
the use of improvised explosive devices in Iraq.
DOD Plans to Take a Variety of Actions to Address Its Fiscal Year 2005
GWOT Needs:
To cover the forecasted GWOT needs for fiscal year 2005, DOD, the Army,
and the Air Force have identified a number of steps they plan to take.
These include exercising a number of authorities provided to them, such
as transferring and reprogramming funds from annual appropriations and
reducing or deferring planned spending for peacetime operations.
The Army, the service with the largest forecasted gap in its operation
and maintenance account, plans to take a variety of actions to meet its
fiscal year 2005 GWOT funding needs. Some actions include taking steps
to transfer or reprogram funds. For example, DOD reprogrammed more than
$800 million in funds in May 2005 from the military personnel accounts
of the Air Force,[Footnote 23] Navy, Marine Corps, and Army National
Guard, and $250 million from the Army's Working Capital Fund, to the
Army to meet urgent GWOT needs. Other actions the Army plans to take to
help fund GWOT in fiscal year 2005 involve reducing or deferring
current costs. For example, the Army reports that it has been able to
reduce its fiscal year 2005 Logistics Civil Augmentation Program
(LOGCAP)[Footnote 24] contract costs by about $890 million by reviewing
and reducing current LOGCAP requirements. In discussing its plans to
meet its fiscal year 2005 GWOT needs, the Army plans to use any surplus
funds in its working capital fund to help cover any fiscal year 2005
GWOT gaps. However, due to the transfers from the services' working
capital funds to cover the fiscal year 2004 gaps, as discussed above,
few assets remain elsewhere to cover the Army's fiscal year 2005 GWOT
gap. Should the Army's GWOT gap be larger than forecasted, the Army may
have to absorb the difference in its annual appropriation.
The Air Force also plans to take a variety of actions to address the
gap between its supplemental appropriations and reported operation and
maintenance obligations for GWOT. These include decreasing peacetime
flying hours by $700 million, reducing or deferring depot maintenance
activities by $400 million, and freezing activities involving facility
sustainment and restoration modernization projects. Other areas that
could be targeted for cost reductions or deferments include noncritical
travel and other supplies and equipment.
DOD Is Not Explicitly Considering Funds in Its Annual Appropriations
for GWOT to Cover Its Projected Fiscal Year 2005 Gaps:
To meet its GWOT needs in fiscal year 2005, DOD is again not explicitly
considering the Program Budget Decision 736 funds to support GWOT that
were provided to the military services through their annual
appropriations. However, as discussed earlier, unlike in fiscal year
2004, in fiscal year 2005 some of the funds provided in Program Budget
Decision 736 are being used to fund Operation Noble Eagle, which had
previously been funded as part of GWOT through supplemental
appropriations. In fiscal year 2004 DOD had included $2.2 billion in
its budget request for Operation Noble Eagle. Adjusting for Operation
Noble Eagle at the fiscal year 2004 funding level would result in more
than $5.4 billion in funds included in Program Budget Decision 736 in
support of GWOT for the military services remaining available in fiscal
year 2005. If counted in fiscal year 2005, the amounts potentially
could reduce the need for reprogrammings from other activities and
could reduce the Army's and eliminate the Air Force's GWOT gaps.
Instead, as in fiscal year 2004, the Office of the Under Secretary of
Defense (Comptroller) and the military services will again meet those
needs by taking actions that may affect DOD's peacetime operations,
such as reducing or deferring planned spending. In some instances,
these funding reductions and deferments could add to future spending
pressures in fiscal year 2006 or potentially in later years and run the
risk of producing a large "bow wave" of requirements. This can have
both short-term and long-term impacts. In the short term, deferring
spending can lead to higher costs than expected later in the current
fiscal year, which may need to be covered by additional transfers and
reprogrammings. In the long term, continued deferments can lead to
higher costs.
Conclusions:
The extent to which one considers that GWOT funding has been sufficient
depends on whether one counts both funding provided through
supplemental appropriations and funding included in DOD's annual
appropriation, which DOD requested for GWOT. The administration
increased DOD's annual appropriation request by more than $10 billion
annually beginning in fiscal year 2003 to support GWOT, with the
military services receiving about $7.9 billion of that amount in fiscal
year 2004 and about $7.6 billion in fiscal year 2005. The military
services absorbed the increase into their annual appropriations and
allocated it based on their judgment of where the funds were most
needed. Since DOD's accounting systems do not separately identify these
additional appropriations and there are no reporting requirements for
DOD to identify to which appropriation accounts the funds were
allocated, the military services have lost visibility over these funds
and do not know the extent to which they are being used to support
GWOT. Consequently, despite having asked for the increase, DOD is not
explicitly counting the more than $10 billion when considering funding
for GWOT. In fiscal year 2004, the military services reported
obligations in support of GWOT that were above the supplemental funds
appropriated by the Congress. In response, DOD used authorities granted
to it, including transferring funds and reducing or deferring planned
spending for peacetime operations, to cover the gaps. However, if the
additional funds that were included in DOD's annual appropriation to
help fund the war are included in the analysis, those funds could
potentially have reduced the Army's gap and eliminated the gap for the
Air Force and Navy in fiscal year 2004. In fiscal year 2005, the Army
and the Air Force are again projecting obligations for the war above
their supplemental appropriations, and DOD is taking steps to cover the
gaps. As was the case in fiscal year 2004, the additional funds that
were included in DOD's annual appropriation to help fund the war
potentially could reduce or eliminate the projected gaps for the Army
and Air Force. With military operations in Iraq and Afghanistan
ongoing, and the likely need for DOD to request additional funds to
support GWOT, it is important that DOD fulfill its role as a steward of
taxpayer funds by taking steps to account for all the funds it receives
for the war.
Recommendations for Executive Action:
To improve the visibility and accountability of DOD's use of funds for
GWOT, we recommend that the Secretary of Defense, in future requests
for supplemental appropriations, adjust such requests to reflect the
additional funds DOD requested and received in its annual
appropriations to support GWOT and provide the Congress with an
explanation of these adjustments. We further recommend that in
addressing any future GWOT funding needs the Secretary consider the
additional GWOT funds provided through the department's annual
appropriation when assessing how to cover expenses for the war and
document its decisions.
Matter for Congressional Consideration:
Because DOD did not concur with our recommendation to adjust its future
supplemental appropriations requests to reflect the additional funds
the department requested and received in its annual appropriations to
support GWOT and explain these adjustments to the Congress, we have no
confidence that the Congress will receive the information that we
believe the Congress needs to properly assess DOD's requests for
supplemental appropriations to support the war. Further, because the
amount of funds DOD is receiving to support GWOT through its annual
appropriations is substantial--more than $10 billion annually--the
Congress should consider directing DOD, when it submits future
supplemental appropriations requests, to provide an explanation of how
such requests reflect the funds DOD requested and already received in
its annual appropriations to support GWOT.
Agency Comments and Our Evaluation:
DOD provided written comments on a draft of this report. Its comments
are discussed below and are reprinted in appendix II.
DOD did not concur with our recommendations. DOD further commented that
the report confuses a Program Budget Decision, which is an internal
document, with the President's budget, which is the official
explanation of DOD's budget request, and that funds are not
appropriated in accordance with a Program Budget Decision. In addition,
DOD commented that the report's focus on the Program Budget Decision
results in the inaccurate conclusion that if DOD had considered these
funds it could have reduced the Army's GWOT gap and eliminated the GWOT
gaps of the Air Force and Navy. In that regard, DOD stated that the
only resources available to the department are those appropriated by
the Congress and these funds were considered when determining the needs
and expenses of the war.
We recognize that a Program Budget Decision is an internal document and
that the President's budget is the official explanation of DOD's budget
request and that funds appropriated are determined by the Congress--not
by either a Program Budget Decision or the President's budget. In our
report, we refer to Program Budget Decision 736 and the President's
budget not to establish how much money the Congress appropriated to
support GWOT, but to establish how much money DOD intended for GWOT. As
stated in our report, according to a representative from the Office of
the Under Secretary of Defense (Comptroller), in December 2001 the
President directed that his annual budget submission for DOD be
increased by about $10 billion annually to support GWOT. Consequently,
Program Budget Decision 736, entitled Continuing the War on Terrorism
and dated January 31, 2002, was approved by the Under Secretary of
Defense (Comptroller). Program Budget Decision 736 provided for
increasing DOD's annual budget request in the amount of more than $10
billion per year plus inflation in fiscal years 2003 through 2007 to
enhance the department's efforts to respond to, or protect against,
acts or threatened acts of terrorism against the United States. We
therefore believe that since the funds referenced in Program Budget
Decision 736 were specifically identified as being requested in support
of GWOT, DOD should maintain visibility over how these funds were used
to support GWOT. We believe that if DOD asks for a significant increase
in appropriations and explains that the increase is needed to support
GWOT, DOD should be able to show that it actually used those funds for
GWOT.
DOD did not concur with our recommendations that the Secretary of
Defense (1) adjust future supplemental appropriations requests to
reflect the additional funds DOD received in its annual appropriations
to support GWOT and explain these adjustments to the Congress and (2)
also consider the additional GWOT funds provided through DOD's annual
appropriations in addressing any future GWOT funding needs. In
commenting on our first recommendation, DOD stated that the
department's supplemental appropriations request accounts for all
relevant adjustments to the annual appropriation bill. DOD also
commented that it builds and submits supplemental appropriations
requests based on the incremental cost of the operation, which it
described as those additional costs to the DOD component conducting the
operation that are not covered in their existing budgets and would not
have been incurred had they not been supporting the contingency. It is
not apparent, however, that DOD's request for supplemental
appropriations for fiscal year 2004 in fact reflected amounts already
appropriated. The President's fiscal year 2005 supplemental
appropriations request did reflect amounts already enacted, but only
because the Office of Management and Budget, not DOD, made the
adjustments.
As we discuss in this report, DOD included a $10 billion increase in
its fiscal year 2004 annual appropriations in order to support GWOT. In
its Program Budget Decision 736, DOD stated that $1.2 billion of that
amount would be used for combat air patrols over U.S. cities, which is
part of Operation Noble Eagle. At the same time, in its fiscal year
2004 supplemental appropriations request for GWOT, DOD included funding
for Operation Noble Eagle, but without explaining why it needed amounts
in addition to those that the Congress already provided.
In addition, although DOD stated that the department's supplemental
appropriations request accounts for all relevant adjustments to the
annual appropriation bill, as stated in our report, in a November 2004
memorandum issued by the Office of the Under Secretary of Defense
(Comptroller) the Comptroller's office sought to adjust DOD's
supplemental appropriations request for fiscal year 2005 to reflect
funds already provided. In that memorandum, the Office of the Under
Secretary of Defense (Comptroller) stated that funding in fiscal year
2005 for GWOT missions previously added to the baseline budget (e.g.,
Program Budget Decision 736, Continuing the War on Terrorism) should be
explicitly identified as a reduction to funding requests in those
areas, as appropriate. The memorandum further requested that the
components' submissions should show the total requirement and note the
level of funding already in the baseline for this purpose. The
memorandum directed that the services' supplemental appropriations
requests net out the available funding and address the incremental
costs above the baseline funding needed to support specific forces and
capabilities required to execute Operation Iraqi Freedom, Operation
Enduring Freedom, and portions (to be determined) of Operation Noble
Eagle. However, as stated in our report, none of the military services
provided the information requested in the November 2004 memorandum and
instead the military services requested supplemental appropriations for
Operation Noble Eagle. Nevertheless, in preparing the fiscal year 2005
supplemental appropriations request, the Office of Management and
Budget did not include Operation Noble Eagle in the President's budget
request because funds had already been included in DOD's annual
appropriation, pursuant to DOD's request, as described in Program
Budget Decision 736.
We believe that our recommendation has merit and have retained it. In
addition, since DOD does not agree with the recommendation and the
amount of funds at issue is substantial--more than $10 billion
annually--we have added a matter for congressional consideration.
Specifically, the Congress should direct DOD, when it submits future
supplemental appropriations requests, to provide an explanation of how
such requests reflect the additional funds that were addressed in
Program Budget Decision 736 and which DOD requested and received in its
annual appropriations to support GWOT.
With respect to our second recommendation, DOD commented that it
considers all funds provided through the department's annual
appropriation when addressing how to cover expenses for the war. We
recognize that DOD reviews all funds when determining how to cover its
GWOT needs. However, DOD, as it explained in Program Budget Decision
736, intended increased annual appropriations to support GWOT, but then
lost visibility of the funds requested. There is no documentation,
therefore, regarding how the department took the funds that it
requested into account or whether it was applying the entire amount to
cover its GWOT needs. We believe that since DOD stated that the
additional annual funds were needed to support GWOT, and DOD continues
to include this funding in its request for annual appropriations, to
fulfill its role as a steward of taxpayer funds DOD should explicitly
maintain visibility over how these funds are used to support GWOT and
consider the entire amount to be available for GWOT. We therefore
continue to believe our recommendation has merit and have retained it,
including expanding it to recommend that DOD also document its
decisions.
We are sending copies of this report to other interested congressional
committees; the Secretary of Defense; the Under Secretary of Defense
(Comptroller); and the Director, Office of Management and Budget.
Copies of this report will also be made available to others upon
request. In addition, this report will be available at no charge on the
GAO Web site at [Hyperlink, http://www.gao.gov].
If you have any questions regarding this report, please contact me at
(202) 512-9619 or [Hyperlink, pickups@gao.gov]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Principal contributors to this report
were Steve Sternlieb, Assistant Director; Richard K. Geiger; Wesley A.
Johnson; James Nelson; and David Mayfield.
Signed by:
Sharon L. Pickup:
Director, Defense Capabilities and Management:
List of Congressional Committees:
The Honorable John Warner:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Committee on Armed Services:
United States Senate:
The Honorable Judd Gregg:
Chairman:
The Honorable Kent Conrad:
Ranking Minority Member:
Committee on the Budget:
United States Senate:
The Honorable Ted Stevens:
Chairman:
The Honorable Daniel K. Inouye:
Ranking Minority Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Duncan L. Hunter:
Chairman:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
The Honorable Jim Nussle:
Chairman:
The Honorable John M. Spratt, Jr.:
Ranking Minority Member:
Committee on the Budget:
House of Representatives:
The Honorable C.W. Bill Young:
Chairman:
The Honorable John P. Murtha:
Ranking Minority Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
To identify funding for the Global War on Terrorism (GWOT), we reviewed
applicable annual and supplemental Department of Defense (DOD)
appropriations in fiscal years 2004 and 2005. We also reviewed DOD
reports on the transfer of funds from the Iraqi Freedom Fund to support
GWOT activities, and DOD reports on the transfer or reprogramming of
funds among various appropriation accounts or budget activities to
support GWOT. In addition, we reviewed material related to the decision
to add funds to DOD's annual appropriation to support GWOT,
specifically Program Budget Decision 736, entitled Continuing the War
on Terrorism, dated January 31, 2002, and approved by the Under
Secretary of Defense (Comptroller).
To assess the extent of differences between supplemental appropriations
and reported obligations for GWOT, we compared supplemental
appropriations provided to the military services to reported
obligations in fiscal year 2004 and reported obligations through May
2005 and assessed obligations through May 2005 for fiscal year
2005.[Footnote 25] Specifically, we identified applicable supplemental
appropriations in fiscal years 2004 and 2005 and compared them to the
reported amounts obligated by each service in DOD's Supplemental and
Cost of War Execution Reports.[Footnote 26] We limited our review to
the obligation of funds appropriated for military personnel and
operation and maintenance for the Army, Air Force, Navy, and Marine
Corps, for both active and reserve forces, because they represented the
majority of the funds obligated in fiscal years 2004 and 2005, about 90
percent in each year. We excluded classified programs from our review,
because obligations for those programs are not reported in DOD's
Supplemental and Cost of War Execution Reports. We did not review the
obligation of funds for investment, which are used for procurement;
military construction; and research, development, test, and evaluation.
In addition, for fiscal year 2005, we reviewed the latest available
obligation data and held discussions with the military services on the
results of their midyear budget reviews. We compared the services'
reported military personnel and operation and maintenance obligations
through May 2005, the latest available obligation data at the time of
our review, to the supplemental appropriations provided to calculate
the proportion of funds obligated through May. We then compared those
proportions to the proportion of the fiscal year that has elapsed
through May--which represents 67 percent of the fiscal year--to assess
whether based on obligations through May funding is likely to be
adequate. We recognize that funds are not obligated equally each month
throughout the fiscal year. However, we believe that the further into
the fiscal year the closer to 100 percent obligations should be
relative to appropriations if all appropriated funds are likely to be
obligated.
GWOT obligations provided in this report are DOD's claimed obligations
as reported in the Supplemental and Cost of War Execution Reports. In
related work,[Footnote 27] we have reported these data to be of
questionable reliability. For example, we found financial management
systems with acknowledged weaknesses, a lack of systematic processes to
ensure accurate data entry, failure to use actual data when it was
available, and improperly categorized costs. Therefore, we are unable
to ensure that DOD's reported obligations for GWOT are complete,
reliable, and accurate. Consequently, the gaps we identify between
supplemental appropriations and DOD's reported obligations may not
reliably reflect true differences between supplemental appropriations
and obligations and therefore should be considered approximations.
Despite the uncertainty about the obligation data, we are reporting the
information because it is the only data available on overall GWOT costs
and the only way to approach an estimate of the costs of the war. Also,
despite the uncertainty surrounding the true dollar figure for
obligations, these data are used to advise the Congress on the cost of
the war. As such, obligation data provided in this report reflect DOD
reported obligations, however unreliable those reports may be.
To determine actions taken by DOD and the services to cover any
identified gaps between reported obligations and supplemental
appropriations for GWOT, we held discussions with DOD representatives
from the Office of the Under Secretary of Defense (Comptroller) and the
Army, Air Force, Navy, and Marine Corps. At the major command level, we
discussed with service representatives any actions taken to cover gaps
and the impacts of actions taken to cover those gaps on their budgeted
peacetime operations.
We interviewed DOD representatives regarding GWOT obligations and
funding for fiscal years 2004 and 2005 in the following locations:
* Office of the Under Secretary of Defense (Comptroller), Washington,
D.C.
* Department of the Army, Headquarters, Washington, D.C.
* Army Forces Command and Headquarters, Third Army, Fort McPherson,
Georgia.
* Army Installation Management Agency, Arlington, Virginia.
* Army Materiel Command, Fort Belvoir, Virginia.
* Army Pacific Command, Fort Shafter, Hawaii.
* Department of the Air Force, Headquarters, Washington, D.C.
* Air Force Air Combat Command, Langley Air Force Base, Virginia.
* Air Force Air Mobility Command, and Headquarters, U.S. Transportation
Command, Scott Air Force Base, Illinois.
* Department of the Navy, Headquarters, Washington, D.C.
* Navy Atlantic Fleet Command, Norfolk Naval Base, Virginia.
* Navy Pacific Fleet Command, Pearl Harbor, Hawaii.
* Marine Corps, Headquarters, Washington, D.C.
* Marine Corps Forces, Pacific, Camp Smith, Hawaii.
We performed our work from November 2004 through August 2005 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Comments from the Department of Defense:
UNDER SECRETARY OF DEFEN5E:
COMPTROLLER:
1100 DEFENSE PENTAGON:
WASHINGTON, DC 20301-1100:
SEP 6 2005:
Mr. David Walker:
Comptroller General:
U.S. Government Accountability Office:
441 G Street, NW:
Room 7100:
Washington, DC 20548:
Dear Mr. Walker:
This is the Department of Defense (DoD) response to the Government
Accountability Office (GAO} Draft Report GAO-OS-767, titled "GLOBAL WAR
ON TERRORISM: DoD Should Consider All Funds Requested for the War When
Determining Needs and Covering Expenses," dated August 18, 2005, (GAO
Code 350616). The Department appreciates the opportunity to review the
draft report and provide comments.
The Department disagrees with the recommendations made in the GAO draft
report. The report confuses a Program Budget Decision (PBD), which is
an internal management document, with the President's Budget (PB),
which is the official explanation of the Department of Defense (DoD)
budget request. Funds are not appropriated in accordance with a PBD.
The report's focus on the PBD results in the inaccurate conclusion
that, "if DoD had considered these funds, it could have reduced the
Army's GWOT gap and eliminated the GWOT gaps of the Air Force and
Navy." A PBD is not a source of funding. The only resources available
to the Department are those appropriated by the Congress, and these
funds were considered when determining the needs and expenses of the
war.
Thank you for the opportunity to provide the Department's response.
Sincerely,
Signed by:
David L. Norquist:
Acting Principal Deputy:
Enclosures: As stated:
Department of Defense Comments GAO-OS-767 (GAO Code 350616):
SUBJECT: GAO Draft Report, August 18, 2005, titled "GLOBAL WAR ON
TERRORISM: DOD Should Consider All Funds Requested for the War When
Determining Needs and Covering Expenses." (GAO Code 350616):
DISCUSSION:
* The GAO report outlined two recommendations.
* The Department of Defense (DoD) nonconcurs on the findings.
* A restatement of the recommendation and the Department's comments
follows:
RECOMMENDATION l: The GAO recommended that the Secretary of Defense
adjust future requests for supplemental appropriations to reflect the
additional funding it requested and received in its annual
appropriations to support the Global War on Terrorism and provide the
Congress with an explanation of these adjustments.
DoD COMMENT TO RECOMMENDATION l: Nonconcur. The Department's
supplemental request accounts for all relevant adjustments to the
annual appropriation bill. The Department of Defense builds and submits
supplemental requests based on the incremental cost of the operation.
Incremental costs are those additional costs to the DoD Component
conducting the operation that are not covered in their existing budgets
and would not have been incurred had they not been supporting the
contingency.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense, in
addressing any future Global War on Terrorism (GWOT) funding needs,
consider the additional Global War on Terrorism funding provided
through the Department's annual appropriation when addressing how to
cover expenses for the war.
DoD COMMENT TO RECOMMENDATION 2: Nonconcur. The Department considers
all funding provided through the Department's annual appropriation when
addressing how to cover expenses for the war. All of the military
departments conduct extensive internal reviews of all their funds for
assets (savings) and offsets (directed programmatic cuts) which can be
reprogrammed to finance unanticipated GWOT costs.
[End of section]
(350616):
FOOTNOTES
[1] GAO, Military Operations: Fiscal Year 2004 Costs for the Global War
on Terrorism Will Exceed Supplemental, Requiring DOD to Shift Funds
from Other Uses, GAO-04-915 (Washington, D.C. July 21, 2004), and
Military Operations: DOD's Fiscal Year 2003 Funding and Reported
Obligations in Support of the Global War on Terrorism, GAO-04-668
(Washington, D.C. May 13, 2004).
[2] Department of Defense Financial Management Regulation, 7000.14-R,
vol. 1, Definitions, p. xvii (December 2001).
[3] See GAO-04-915.
[4] DOD's financial systems only capture total obligations, and the
services use various management information systems to identify
incremental obligations and to estimate costs.
[5] See GAO-04-668.
[6] GAO, Defense Budget: Tracking of Emergency Response Funds for the
War on Terrorism, GAO-03-346 (Washington, D.C. Apr. 30, 2003).
[7] GAO, Global War on Terrorism: DOD Needs to Improve the Reliability
of Cost Data and Provide Additional Guidance to Control Costs, GAO-05-
882 (Washington, D.C. Sept. 21, 2005).
[8] GAO, Military Operations: Some Funds for Fiscal Year 1999
Contingency Operations Will Be Available for Future Needs, GAO/NSIAD-99-
244BR (Washington, D.C. Sept. 21, 1999), and Military Operations:
Fiscal Year 2003 Obligations Are Substantial, but May Result in Less
Obligations Than Expected, GAO-03-1088 (Washington, D.C. Sept. 17,
2003).
[9] An example of specific transfer authority is found in Section 8006
of the Department of Defense Appropriations Act, 2004 (Pub. L. No. 108-
87 (Sept. 30, 2003)), which allows DOD to transfer excess cash balances
from the Defense Working Capital Fund to the operation and maintenance
appropriations in amounts as determined by the Secretary with the
approval of the Office of Management and Budget.
[10] Pub. L. No. 108-106 (Nov. 6, 2003).
[11] Pub. L. No. 108-287, Title IX (Aug. 5, 2004). DOD was provided $25
billion through Title IX of the Department of Defense Appropriations
Act, 2005, of which about $17.4 billion was provided for military
personnel and operation and maintenance expenses. These funds were
available for use in fiscal years 2004 and 2005.
[12] Pub. L. No. 107-40 (Sept. 18, 2001).
[13] Pub. L. No. 108-11, Title I, ch. 3 (Apr. 16, 2003).
[14] Pub. L. No. 108-106 (Nov. 6, 2003).
[15] Pub. L. No. 109-13 (May 11, 2005).
[16] Program Budget Decision 736 also indicates some funds were
provided to the Department of Energy.
[17] Although DOD requested the funds associated with Program Budget
Decision 736 to enhance the department's efforts to combat terrorism,
the Congress did not legally restrict DOD from using them for non-GWOT
activities.
[18] A working capital fund is a revolving fund that relies on sales
revenue rather than direct congressional appropriations to finance its
operations. Customers, in this case, the military services, use
appropriated funds, primarily operation and maintenance appropriations,
to finance orders placed with a working capital fund. Working capital
funds are intended to generate sufficient revenue to cover full
operational costs and operate on a break-even basis over time, that is,
neither to make a profit nor incur a loss.
[19] The $136 million was initially provided as part of baseline
funding for physical security improvements.
[20] See Department of Defense Financial Management Regulation, 7000.14-
R, vol. 2B, ch. 9, para. 090103. The minimum goal represents 7 to 10
days of operational costs and cash adequate to meet 6 months of capital
disbursements.
[21] The Army's modular force initiative, which has been referred to as
the largest Army reorganization in 50 years, encompasses the Army's
total force--active Army, National Guard, and Army Reserve--and
directly affects not only the Army's combat units, but related support
and command and control. The foundation of the Army modular force
initiative is the creation of brigade combat teams--brigade-sized units
that will have a common organizational design and will increase the
pool of available units for deployment.
[22] Joint Sourcing refers to the use of Navy and Air Force personnel
to support and meet the requirements of the Army. Personnel provided
through Joint Sourcing include medical, supply, logistics,
intelligence, and security personnel; construction battalions; military
police; and others.
[23] Although the Air Force reported a projected gap in supplemental
appropriations for military personnel through the end of the fiscal
year, some funds were reprogrammed from the Air Force to prevent the
Army from running out of operating funds in May 2005.
[24] LOGCAP is an Army program that plans for the use of a private
sector contractor to support worldwide contingency operations. Examples
of the types of support available include laundry and bath, food
service, sanitation, billeting, maintenance, and power generation.
LOGCAP has been used extensively to support U.S. forces in recent
operations in southwest Asia, with more than $15 billion in estimated
work as of January 2005.
[25] DOD's financial systems only capture total obligations, and the
services use various management information systems to identify
incremental obligations and to estimate costs.
[26] Through December 2004, these reports were called the Consolidated
Department of Defense Terrorist Response Cost Reports. Beginning in
January 2005, DOD renamed these reports the Supplemental and Cost of
War Execution Reports.
[27] GAO, Global War on Terrorism: DOD Needs to Improve the Reliability
of Cost Data and Provide Additional Guidance to Control Costs, GAO-05-
882 (Washington, D.C. Sept. 21, 2005).
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