Global War on Terrorism
Observations on Funding, Costs, and Future Commitments Gao ID: GAO-06-885T July 18, 2006After the terrorist attacks of September 11, 2001, the President announced a Global War on Terrorism (GWOT), requiring the collective instruments of the entire federal government to counter the threat of terrorism. Ongoing military and diplomatic operations overseas, especially in Iraq and Afghanistan, constitute a key part of GWOT. These operations involve a wide variety of activities such as combating insurgents, civil affairs, capacity building, infrastructure reconstruction, and training military forces of other nations. The U.S. has reported substantial costs to date for GWOT related activities and can expect to incur significant costs for an unspecified time in the future, requiring decision makers to consider difficult trade-offs as the nation faces increasing long-range fiscal challenges. GAO has issued several reports on current and future financial commitments required to support GWOT military operations, as well as diplomatic efforts to stabilize and rebuild Iraq. This testimony discusses (1) the funding Congress has appropriated to the Department of Defense (DOD) and other U.S. government agencies for GWOT-related military operations and reconstruction activities since 2001; (2) costs reported for these operations and activities and the reliability of DOD's reported costs, and (3) issues with estimating future U.S. financial commitments associated with continued involvement in GWOT.
Since 2001, Congress has appropriated about $430 billion to DOD and other government agencies for military and diplomatic efforts in support of GWOT. This funding has been provided through regular appropriations as well as supplemental appropriations, which are provided outside of the normal budget process. Since September 2001, DOD has received about $386 billion for GWOT military operations. In addition, agencies including the Department of State, DOD, and the Agency for International Development have received since 2001 about $44 billion to fund reconstruction and stabilization programs in Iraq ($34.5 billion) and Afghanistan ($9 billion) and an additional $400 million to be used in both Iraq and Afghanistan. Since 2001, U.S. government agencies have reported significant costs associated with GWOT, but GAO has concerns with the reliability of DOD's reported cost data. Through April 2006, DOD has reported about $273 billion in incremental costs for GWOT-related operations overseas--costs that would not otherwise have been incurred. DOD's reported GWOT costs and appropriated amounts differ generally because DOD's cost reporting does not capture some items such as intelligence and Army modular force transformation. Also, DOD has not yet used funding made available for multiple years, such as procurement and military construction. GAO's prior work found numerous problems with DOD's processes for recording and reporting GWOT costs, including long-standing deficiencies in DOD's financial management systems and business processes, the use of estimates instead of actual cost data, and the lack of adequate supporting documentation. As a result, neither DOD nor the Congress reliably know how much the war is costing and how appropriated funds are being used or have historical data useful in considering future funding needs. GAO made several recommendations to improve the reliability and reporting of GWOT costs. In addition to reported costs for military operations, U.S. agencies have obligated about $23 billion of $30 billion received for Iraqi reconstruction and stabilization, as of January 2006. U.S commitments to GWOT will likely involve the continued investment of significant resources, requiring decision makers to consider difficult trade-offs as the nation faces increasing fiscal challenges in the years ahead; however, predicting future costs is difficult as they depend on several direct and indirect cost variables. For DOD, these include the extent and duration of military operations, force redeployment plans, and the amount of damaged or destroyed equipment needed to be repaired or replaced. Future cost variables for other U.S. government agencies include efforts to help form governments and build capable and loyal security forces in Afghanistan and Iraq, and meet the healthcare needs of veterans, including providing future disability payments and medical services.
GAO-06-885T, Global War on Terrorism: Observations on Funding, Costs, and Future Commitments
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Testimony:
Before the Subcommittee on National Security, Emerging Threats, and
International Relations, Committee on Government Reform, House of
Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 2:00 p.m. EDT:
Tuesday, July 18, 2006:
Global War on Terrorism:
Observations on Funding, Costs, and Future Commitments:
Statement of David M. Walker Comptroller General of the United States:
GAO-06-885T:
GAO Highlights:
Highlights of GAO-06-885T, a testimony to the Chairman, Subcommittee on
National Security, Emerging Threats, and International Relations,
Committee on Government Reform, House of Representatives
Why GAO Did This Study:
After the terrorist attacks of September 11, 2001, the President
announced a Global War on Terrorism (GWOT), requiring the collective
instruments of the entire federal government to counter the threat of
terrorism. Ongoing military and diplomatic operations overseas,
especially in Iraq and Afghanistan, constitute a key part of GWOT.
These operations involve a wide variety of activities such as combating
insurgents, civil affairs, capacity building, infrastructure
reconstruction, and training military forces of other nations. The U.S.
has reported substantial costs to date for GWOT related activities and
can expect to incur significant costs for an unspecified time in the
future, requiring decision makers to consider difficult trade-offs as
the nation faces increasing long-range fiscal challenges.
GAO has issued several reports on current and future financial
commitments required to support GWOT military operations, as well as
diplomatic efforts to stabilize and rebuild Iraq. This testimony
discusses (1) the funding Congress has appropriated to the Department
of Defense (DOD) and other U.S. government agencies for GWOT-related
military operations and reconstruction activities since 2001; (2) costs
reported for these operations and activities and the reliability of
DOD‘s reported costs, and (3) issues with estimating future U.S.
financial commitments associated with continued involvement in GWOT.
What GAO Found:
Since 2001, Congress has appropriated about $430 billion to DOD and
other government agencies for military and diplomatic efforts in
support of GWOT. This funding has been provided through regular
appropriations as well as supplemental appropriations, which are
provided outside of the normal budget process. Since September 2001,
DOD has received about $386 billion for GWOT military operations. In
addition, agencies including the Department of State, DOD, and the
Agency for International Development have received since 2001 about $44
billion to fund reconstruction and stabilization programs in Iraq
($34.5 billion) and Afghanistan ($9 billion) and an additional $400
million to be used in both Iraq and Afghanistan.
Since 2001, U.S. government agencies have reported significant costs
associated with GWOT, but GAO has concerns with the reliability of
DOD‘s reported cost data. Through April 2006, DOD has reported about
$273 billion in incremental costs for GWOT-related operations
overseas”costs that would not otherwise have been incurred. DOD‘s
reported GWOT costs and appropriated amounts differ generally because
DOD‘s cost reporting does not capture some items such as intelligence
and Army modular force transformation. Also, DOD has not yet used
funding made available for multiple years, such as procurement and
military construction. GAO‘s prior work found numerous problems with
DOD‘s processes for recording and reporting GWOT costs, including long-
standing deficiencies in DOD‘s financial management systems and
business processes, the use of estimates instead of actual cost data,
and the lack of adequate supporting documentation. As a result, neither
DOD nor the Congress reliably know how much the war is costing and how
appropriated funds are being used or have historical data useful in
considering future funding needs. GAO made several recommendations to
improve the reliability and reporting of GWOT costs. In addition to
reported costs for military operations, U.S. agencies have obligated
about $23 billion of $30 billion received for Iraqi reconstruction and
stabilization, as of January 2006.
U.S commitments to GWOT will likely involve the continued investment of
significant resources, requiring decision makers to consider difficult
trade-offs as the nation faces increasing fiscal challenges in the
years ahead; however, predicting future costs is difficult as they
depend on several direct and indirect cost variables. For DOD, these
include the extent and duration of military operations, force
redeployment plans, and the amount of damaged or destroyed equipment
needed to be repaired or replaced. Future cost variables for other U.S.
government agencies include efforts to help form governments and build
capable and loyal security forces in Afghanistan and Iraq, and meet the
healthcare needs of veterans, including providing future disability
payments and medical services.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-885]T.
To view the full product, including scope and methodology, click on the
link above. For more information, contact Sharon L. Pickup at (202) 512-
9619 or pickups@gao.gov.
[End of Section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss our work to date on the
funding, reported costs,[Footnote 1] and future commitments of the
Global War on Terrorism (GWOT) overseas. I recently testified on the
National Strategy for Victory in Iraq, in which I stated that there are
some positive attributes to the new strategy, including a clear purpose
and scope.[Footnote 2] The strategy also identifies U.S. involvement in
Iraq as a "vital national interest and the central front in the war on
terror." However, among its deficiencies is the absence of current and
future cost data for Iraq. After the terrorist attacks of September 11,
2001, the President announced a Global War on Terrorism, requiring the
collective instruments of the entire federal government to counter the
threat of terrorism. The United States and its partners are attacking
terrorists both at home and abroad, denying terrorists sanctuary and
sponsorship, disrupting the financing of terror, and building and
maintaining a united global front against terrorism. Ongoing military
and diplomatic operations overseas constitute a key part of GWOT and
involve a wide variety of activities such as combating insurgents,
civil affairs, capacity building, reconstruction operations, and
training military forces of other nations. These operations are
currently focused on Iraq and Afghanistan. Clearly, costs to the United
States in financial terms in no way compare to the loss of human life.
To date, over 2,800 military personnel have died as a result of GWOT
operations and many more have been wounded in action.
As I have highlighted in previous testimony, our nation is not only
threatened by external security threats, but also from within by
growing fiscal imbalances due primarily to known demographic trends and
rising health care costs.[Footnote 3] These trends are compounded by
the near-term deficits arising from new discretionary and mandatory
spending as well as lower revenues as a share of the economy. If left
unchecked, these fiscal imbalances will ultimately impede economic
growth, have an adverse effect on our future standard of living, and in
due course affect our ability to address key national and homeland
security needs. These factors create the need to make choices that will
only become more difficult and potentially disruptive the longer they
are postponed. The United States' commitment to GWOT will likely
involve the continued investment of significant resources, requiring
decision makers to consider difficult trade-offs as the nation faces
increasing fiscal challenges, including a growing debt burden and
interest costs on such debt, in the years ahead.
My testimony today will focus on the financial commitments required to
support military operations associated with GWOT in Iraq and
Afghanistan, as well as diplomatic efforts to stabilize and rebuild
Iraq. Specifically, I will discuss (1) the funding Congress has
appropriated to the Department of Defense (DOD) and other U.S.
government agencies for GWOT-related military operations and
reconstruction and stabilization activities since 2001, (2) costs
reportedly incurred for these operations and activities and the
reliability of DOD's reported costs, and, (3) issues with estimating
the future financial commitments associated with the United States'
continued involvement in GWOT.
In preparing this testimony, we have relied on previously issued GAO
reports[Footnote 4] and testimonies on the costs and other aspects of
military operations and reconstruction and stabilization activities, as
well as a large body of ongoing work on GWOT-related topics. We
performed our work in accordance with generally accepted government
auditing standards.
Summary:
Since the beginning of GWOT in 2001, Congress has appropriated about
$430 billion to DOD and other U.S. government agencies for military and
diplomatic efforts in support of GWOT. This funding has been provided
through regular appropriations as well as supplemental appropriations,
which are provided outside of the normal budget process. Since
September 2001, DOD has received about $386 billion for GWOT military
operations, including funding for homeland defense through Operation
Noble Eagle. This $386 billion includes "bridge" funding in fiscal
years 2005 and 2006 to continue GWOT operations until supplemental
appropriations could be enacted. In addition, U.S. government agencies,
including the Department of State (State), DOD, and the United States
Agency for International Development (USAID), have received about $44
billion since 2001 to fund reconstruction and stabilization programs in
Iraq ($34.5 billion) and Afghanistan ($9 billion) with an additional
$400 million for the Commanders' Emergency Response Program in Iraq and
Afghanistan. For fiscal year 2007, DOD has requested another $50
billion in bridge funding for military operations and other U.S.
government agencies have requested $771 million for reconstruction and
stabilization activities.
Since 2001, U.S. government agencies have reported hundreds of billions
of dollars in costs associated with GWOT; however, we have previously
reported on our concerns with DOD's data reliability and cost
reporting.[Footnote 5] DOD has reported incremental costs of about $273
billion for overseas GWOT-related activities through April 2006. This
amount includes almost $215 billion for operations in Iraq and almost
$58 billion for operations in Afghanistan, the Horn of Africa, the
Philippines, and elsewhere.[Footnote 6] These reported costs do not
include obligations for intelligence and the Army's modular force
transformation. The difference between the amount appropriated and
DOD's reported costs through April 2006 can generally be attributed to
unreported costs for intelligence and Army modular force
transformation, as well as funding for procurement, military
construction, and research, development, test, and evaluation, which
can be obligated over multiple years, that has not yet been obligated.
However, our prior work has found numerous problems with DOD's
processes for recording and reporting costs for GWOT, including long-
standing deficiencies in DOD's financial management systems and
business processes, the use of estimates instead of actual costs, and
the lack of adequate supporting documentation. For example, we found
inadvertent double counting in a portion of DOD's reported costs
amounting to almost $1.8 billion from November 2004 through April 2005.
Furthermore, DOD's reported costs for GWOT operations overseas have
grown steadily in each fiscal year through fiscal year 2005--from about
$105 million in fiscal year 2001, to begin preparation for operations
in Afghanistan, to about $81.5 billion in fiscal year 2005. With this
steady growth, it is important to ensure that all commands seek to
control costs to the extent possible. In addition to reported costs for
military operations, about $23 billion has been obligated for Iraqi
reconstruction and stabilization, as of January 2006. However, U.S.
government agencies, other than DOD, do not formally track all GWOT
costs. This, along with DOD's cost reliability and reporting problems,
make it difficult for the decision makers to reliably know how much the
war is costing, to determine how appropriated funds are being spent,
and to use historical data to predict future trends.
The United States' commitments to GWOT will likely involve the
continued investment of significant resources, requiring decision
makers to consider difficult trade-offs as the nation faces increasing
fiscal challenges in the years ahead. Predicting future costs will be
difficult because they are dependent on several direct and indirect
cost variables; however, they are likely to be in the hundreds of
billions of dollars. Future cost variables for DOD include the extent
and duration of military operations, the facilities that will be needed
to support servicemembers overseas, force redeployment plans and the
costs to repair and replace damaged or destroyed equipment used during
operations. Future cost variables for other U.S. government agencies
include the efforts to help form national and provincial governments
and build management capacity as well as capable and loyal security
forces in both Afghanistan and Iraq. There will also be further need
for funding reconstruction activities to restore, sustain, and protect
critical infrastructure. Another long-term cost associated with GWOT
will be caring for veterans. The Department of Veterans' Affairs (VA)
estimated that more than 100,000 GWOT veterans are currently using VA
facilities, and future healthcare costs will likely increase as more
servicemembers require treatment from injuries and mental health
conditions such as post-traumatic stress disorder. There will also be
future commitments associated with payments to those veterans with long-
term disabilities. With GWOT costs likely continuing for the
foreseeable future, decision makers will have to carefully weigh
priorities and make difficult financial decisions. In assessing trade-
offs, we would encourage DOD to consider moving other GWOT costs into
the baseline budget, as it has done with Operation Noble Eagle. This is
consistent with our prior suggestion that, once an operation reaches a
known level of effort and costs are more predictable, more funding
should be built into the baseline budget.
Background:
The United States is engaged in a comprehensive effort to protect and
defend the homeland and defeat terrorism. Using all instruments of
national power, the United States and its partners are attacking
terrorists both at home and abroad, denying terrorists sanctuary and
sponsorship, disrupting the financing of terror, and building and
maintaining a united global front against terrorism. After the
terrorist attacks of September 11, 2001, military operations began with
Operation Noble Eagle, which is aimed at defending the U.S. homeland
from terrorist attacks, and Operation Enduring Freedom, which takes
place principally in and around Afghanistan, but also covers additional
operations in the Horn of Africa, the Philippines, and elsewhere. In
2003, DOD began Operation Iraqi Freedom, which takes place in and
around Iraq. DOD and the military services are responsible for carrying
out these operations. Recently, DOD reported about 132,000 U.S.
military personnel are deployed to Iraq and about 15,000 are deployed
to Afghanistan.
Diplomatic efforts are also underway to rebuild areas in and around
Iraq and Afghanistan, as well as to assist these countries in
rebuilding their governments and creating secure nations. State is
responsible for all U.S. activities in Iraq except security and
military operations. Other U.S. government agencies also play
significant roles in this reconstruction effort, including the USAID
and the U.S. Army Corps of Engineers. The Multi-National Security
Transition Command-Iraq, which operates under the Multi-National Force-
Iraq, leads coalition efforts to train, equip, and organize Iraqi
security forces. In Afghanistan, USAID manages the majority of
reconstruction programs and operations. Other U.S. agencies provide
additional assistance, including DOD. Members of the North Atlantic
Treaty Organization also play a key role in training and equipping
Afghan forces.
Since 2001, DOD has prepared reports on the costs of its involvement in
GWOT. The costs of military contingency operations are referred to as
"incremental costs," which are costs that are directly attributable to
the operation and would not otherwise have been incurred, were it not
for the operation. Specifically, the costs are above and beyond
baseline training, operations, and personnel costs. Incremental costs
include the pay of mobilized reservists as well as the special pays and
allowances for deployed personnel, such as imminent danger pay and
foreign duty pay for those personnel serving in Operation Iraqi Freedom
and Operation Enduring Freedom; the cost of transporting personnel and
materiel to the theater of operation and supporting them upon arrival;
and the operating cost of equipment, such as vehicles and aircraft,
among many other costs. Costs that are incurred regardless of whether
there is a contingency operation, such as the base pay of active duty
military personnel, are not considered incremental.
DOD tracks the obligations incurred to support GWOT and produces a
monthly cost report, which is distributed throughout the department and
used by senior DOD leadership, along with other information, in
discussing the cost of the war. It is also used in formulating future
budget requests to fund GWOT. The report identifies the monthly and
cumulative incremental GWOT obligations. DOD reports the costs by
service, defense agency, contingency operation, and appropriation. On
October 1, 1998, DOD implemented a standard contingency cost breakdown
structure consisting of 55 cost categories to improve contingency cost
reporting consistency between its multiple services and agencies.
Examples of cost categories include facilities/base support and
airlift. Furthermore, this cost breakdown structure was also to
facilitate future efforts to understand and interpret differences
between estimated and actual costs. DOD Financial Management Regulation
7000.14-R, volume 12, chapter 23, generally establishes financial
policy and procedures related to DOD contingency operations. The
regulation incorporates the common cost categories and multiple
subcategories, which were established in 1998 and updated in September
2005, that are used to report DOD's monthly GWOT costs.
Obligations are the foundation of all GWOT cost reporting. For example,
operation and maintenance obligations in support of GWOT represent tens
of thousands, if not hundreds of thousands, of individual transactions
ranging in value from one penny to millions of dollars. When
obligations are incurred, the military services enter them into their
accounting systems using accounting codes. Using the Army as an
example, an Army budget activity, such as an installation or unit,
initially obligates funds for acquired goods and services by using the
Standard Army Accounting Classification Code. An obligation entry
includes information on the funding source; the operational mission,
such as Operation Iraqi Freedom; and the category of cost. The cost
categories are established by the services.
Funding for the Global War on Terrorism:
Since 2001, Congress has appropriated about $430 billion to DOD and
other U.S. government agencies for military operations and
reconstruction and stabilization activities supporting GWOT. Much of
the funding has come in the form of supplemental appropriations. Some
funding has also come through the normal baseline budget appropriated
to the departments. For example, in fiscal years 2005 and 2006, DOD was
provided so-called "bridge" funding--$25 billion and $50 billion,
respectively--through its regular appropriation, which was intended to
fund operations from the beginning of the fiscal year until a
supplemental appropriation could be enacted. Also, funds are
appropriated to the various appropriations accounts for each department
and are not specifically designated for operations in Iraq or
Afghanistan. Since September 2001, DOD has received about $386 billion
to fund military operations supporting GWOT. In addition, about $44
billion has been made available to U.S. agencies--including DOD, USAID,
and State--for reconstruction and stabilization efforts in Iraq ($34.5
billion) and Afghanistan ($9 billion) with an additional $400 million
for use in Iraq and Afghanistan through the Commander's Emergency
Response Program. These efforts include training and equipping of
security forces and repairing critical infrastructure. (See table 1.)
For fiscal year 2007, DOD has requested another $50 billion in bridge
funding for military operations and other U.S. government agencies have
requested $771 million for reconstruction and stabilization activities.
Table 1: Total GWOT Military Operations and Reconstruction and
Stabilization Funding for Fiscal Years 2001 through 2006:
Budget authority in millions.
Military operations[A];
FY 2001: 16,623;
FY 2002: 17,749;
FY 2003: 73,546;
FY 2004: 61,400;
FY 2005: 100,888[B];
FY 2006: 116,022;
Total: 386,228.
Reconstruction and stabilization[C];
FY 2001: [Empty];
FY 2002: 500;
FY 2003: 4,800;
FY 2004: 21,800;
FY 2005: 9,100;
FY 2006: 7,730;
Total: 43,930.
Total;
FY 2001: 16,623;
FY 2002: 18,249;
FY 2003: 78,346;
FY 2004: 83,200;
FY 2005: 109,988;
FY 2006: 123,722;
Total: 430,128.
Source: GAO.
[A] GAO analysis based on congressional appropriations acts.
[B] Of this total, $25 billion was available to DOD in FY 2004 for
military operations.
[C] GAO analysis for Iraq and Congressional Research Service reports
for Afghanistan. Reconstruction and Stabilization funds are for Iraq
and Afghanistan only.
[End of table]
The $386 billion DOD has received to fund military operations
supporting GWOT also includes funding for homeland defense under
Operation Noble Eagle. This operation was funded through supplemental
appropriations for DOD until fiscal year 2005, when it was moved into
DOD's baseline budget. This movement is consistent with our prior
suggestion that, once an operation reaches a known level of effort and
costs are more predictable, more funding should be built into the
baseline budget. This $386 billion also includes funding for DOD's
intelligence programs, as well as other DOD initiatives, such as the
Army's efforts to transform its traditional division-based force into a
more rapidly deployable modular force that is better able to conduct
joint and expeditionary operations. Beginning in fiscal year 2007, the
Army's modular transformation will be included in DOD's regular
baseline appropriation. Prior to passage of the most recent
supplemental appropriation, military service officials told us that
they had already spent the $50 billion bridge that was included in the
fiscal year 2006 defense appropriations act and had started to use
baseline appropriations for GWOT activities, as well as undertake cost-
cutting measures until the supplemental was enacted.[Footnote 7] DOD
has requested another $50 billion in bridge funding as part of its
fiscal year 2007 budget.
In addition to the funding provided to support military operations,
Congress has appropriated about $44 billion to DOD and other U.S.
government agencies to support important reconstruction and
stabilization activities in Iraq and Afghanistan since 2001. These
activities support GWOT objectives because they help train and equip
local security forces, and help establish the foundations of a sound
economy with the capacity to deliver essential services, such as clean
water and reliable electricity. A growing economy also provides
employment opportunities as an alternative to recruitment efforts made
by insurgents. Since 2003, about $34.5 billion[Footnote 8] has been
provided to support these types of activities in Iraq and, since
September 2001, about $9 billion to support these activities in
Afghanistan. The recent supplemental appropriation also provided an
additional $400 million for the Commander's Emergency Response Program
for use in Iraq and Afghanistan. This would bring total reconstruction
and stabilization funding to over $44 billion.
Funding for reconstruction and stabilization efforts has supported the
following activities, among others:
* Training and equipping of Iraqi security forces. Since fiscal year
2003, about $11.7 billion has been made available for U.S. security and
justice programs in Iraq, including funds to train and equip the Iraqi
security forces. Over the past several months, the Secretaries of State
and Defense have cited progress in developing Iraqi security forces,
and reported that the numbers of operational army personnel and trained
and equipped police have increased from about 142,000 in March 2005 to
about 266,000 in June 2006. However, as we have previously reported,
the number of trained and equipped forces does not provide reliable
information on their capabilities.[Footnote 9] In addition, the
administration received $3.0 billion in the recent fiscal year 2006
supplemental appropriation to continue moving the Iraqi security forces
toward stand-alone operational capacity.
* Restoring Iraq's essential services. Since fiscal year 2003, about
$10.5 billion has been made available for restoring essential services
in Iraq, specifically activities in the oil, water, health, and
electricity sectors. U.S. reconstruction efforts have helped increase
electricity generation capacity, restart crude oil production, and
restore some water treatment plants. However, key reconstruction goals
in the oil, electricity, and water sector have yet to be achieved due
to security, management, and sustainment challenges in U.S.-funded
projects. The administration received an additional $1.5 billion in the
recent supplemental appropriation for reconstruction assistance to
Iraq, including $50 million to USAID's Iraq Community Action Program
and $50 million for democracy, rule of law, and reconciliation
programs.
* Training and equipping the Afghan national army. The United States
led the international effort to train and equip the Afghan national
army, which is crucial to both long-term security and U.S. counter-
terror efforts. About 26,500 troops have been trained and equipped and
the defense force is projected to reach up to 70,000 military and
civilian personnel, according to State reporting. The administration
has received $1.9 billion in the fiscal year 2006 supplemental
appropriation to further prepare Afghan security forces to operate
without U.S. support.
The U.S. government also funds a variety of other programs that
indirectly support GWOT. For example, Congress provides funding for
security assistance on a worldwide basis to help train or equip foreign
security forces (military and police). In fiscal year 2006, Congress
provided an estimated $4.5 billion for two security assistance
programs, the International Military Education and Training program and
Foreign Military Financing program. In addition, the U.S. government
reported costs of $1.2 billion on worldwide public diplomacy programs
in fiscal year 2005.
The U.S. Has Reported Hundreds of Billions in Costs of Ongoing Military
and Reconstruction and Stabilization Operations, but Data Weaknesses
Make It Difficult to Reliably Know Cost of Military Operations:
Since GWOT began in 2001, U.S. government agencies have reported
hundreds of billions of dollars in costs for overseas military and
reconstruction operations; however, as we have previously reported,
data reliability and reporting concerns make it difficult to know DOD's
total GWOT costs. Since 2001, DOD has reported costs of about $273
billion on overseas GWOT military operations through the end of April
2006. The department's reported costs have grown steadily from a
reported about $105 million in fiscal year 2001, to begin preparations
for operations in Afghanistan, to over $81.5 billion in fiscal year
2005. U.S government agencies have reported costs of about $23 billion
for Iraqi reconstruction and stabilization. However, U.S. government
agencies, other than DOD, do not formally track all GWOT costs. This,
along with DOD's cost reliability and reporting problems, make it
difficult for the decision makers to reliably know how much the war is
costing, to determine how appropriated funds are being spent, and to
use historical data to predict future trends.
DOD's Reported Costs for Military Operations:
Since the attacks of September 11, 2001, DOD has reported cumulative
incremental costs of about $273 billion, through the end of April 2006,
on military operations overseas in support of GWOT. This amount
includes almost $215 billion for operations in Iraq and almost $58
billion on operations in Afghanistan, the Horn of Africa, the
Philippines, and elsewhere. This does not include obligations for
intelligence activities and the Army's modular force transformation.
The difference between the amount appropriated and DOD's reported costs
through April 2006 can generally be attributed to these unreported
obligations for intelligence and Army modular force transformation, as
well as funding for procurement, military construction, and research,
development, test, and evaluation, which can be obligated over multiple
years, that has not yet been obligated. In addition to the costs for
overseas operations, DOD has also reported obligations of $27.7 billion
through April 2006 for operations in defense of the homeland U.S.,
under Operation Noble Eagle.
To date, the largest reported costs for the overseas GWOT operations
have typically been associated with two of DOD's appropriations
accounts--operation and maintenance and military personnel. Operation
and maintenance expenses cover a number of things, such as operational
support for housing, food, and services; transportation to move people
and supplies and equipment into the theaters; and the repair of
equipment. Military personnel expenses include military pay and
allowances for mobilized reservists, as well as the special payments or
allowances, such as imminent danger pay and the family separation
allowance that all qualifying military personnel receive. While
expenses for operation and maintenance, and military personnel have
tended to be among the highest, DOD has also reported incurring costs
for procurement of equipment and other items.
As we have reported in the past, we have significant concerns about the
overall reliability of DOD's reported cost data. As a result, neither
DOD nor Congress can reliably know how much the war is costing. As we
reported in September 2005, we found numerous problems with DOD's
processes for recording and reporting costs for GWOT[Footnote 10].
Factors affecting the reliability of DOD's reported costs include long-
standing deficiencies in DOD's financial management systems and
business processes, the use of estimates instead of actual costs, and
the lack of supporting documentation. In at least one case, our work
showed that some reported costs may have been materially overstated.
Specifically, reported obligations for mobilized Army reservists in
fiscal year 2004 were based primarily on estimated rather than actual
information and differed from related payroll information by as much as
$2.1 billion, or 30 percent of the amount DOD reported in its cost
report. In addition, we found inadvertent double counting in a portion
of DOD's reported costs amounting to almost $1.8 billion from November
2004 through April 2005.
In our September 2005 report, we made several recommendations to the
Secretary of Defense to (1) undertake a series of steps to ensure that
the services' reported GWOT costs are accurate and reliable; (2) direct
the Office of the Under Secretary of Defense (Comptroller) to oversee
the services' efforts and to develop a systematic process to review and
test the reliability of the overall GWOT reports; (3) expand the
department's financial management regulation for contingency operations
to include contingencies as large as GWOT; and (4) establish guidelines
to control costs and require the services to keep the Comptroller's
office informed of their efforts in this area.
Since the time of our report, we know that DOD has taken some measures
in response to our recommendations intended to improve the reliability
and accuracy of its cost reports, such as requiring the military
services to identify variances in reported costs from month to month,
and determine the causes. However, our initial review suggests that DOD
and the services have yet to take sufficient action to fully implement
these measures and that certain weaknesses in cost reporting continue
to exist. Without aggressive action on the part of DOD and the
services, the reliability of cost reports will remain in question.
Also, there has been an ongoing issue with the timeliness of DOD's cost
reporting. For example, the cost reports for October through December
2005 were not issued until March 2006. To address this long-standing
problem, Congress, in the National Defense Authorization Act for Fiscal
Year 2006, directed that DOD provide the cost reports to GAO no later
than 45 days after the end of the month being reported.[Footnote 11]
DOD has now provided GAO with the March and April cost reports on
schedule.
DOD's Reported Costs Have Steadily Grown:
DOD's reported costs for GWOT operations have grown steadily in each
fiscal year through fiscal year 2005--from about $105 million in fiscal
year 2001 to about $81.5 billion in fiscal year 2005. For fiscal year
2006, as of April 2006, DOD has reported obligations of about $49
billion; about $41.9 billion for Iraq and about $7.5 billion for
Afghanistan. These amounts include about:
* $22.5 billion in operating support, which pays for transportation,
fuel, maintenance, housing, food, services, and other items;
* $5.3 billion for procurement of equipment and other items;
* $9.9 billion in military personnel costs, including special pays and
allowances for deployed military personnel;
* $2.9 billion for personnel support, including clothing and medical
support;
* $4.0 billion for transportation, including airlift and sealift;
* $2.6 billion in support for the Iraq Security Forces;
* $813 million for the Afghanistan Security Forces; and,
* $474 million in support of coalition forces.
Costs for the remainder of fiscal year 2006 are expected to be higher
than DOD anticipated, in part because the Army has been unable to
follow through with plans to close a number of forward operating bases
and consolidate troops at some of the larger locations. Also, savings
resulting from a United States and coalition hand-off of operations in
Afghanistan to troops from nations representing the North Atlantic
Treaty Organization is not expected to be realized until after fiscal
year 2007. Furthermore, the rising cost of fuel is likely to push costs
even higher than envisioned at the start of the fiscal year.
In examining the historical growth of reported overseas GWOT costs, the
largest increase has been in operations and maintenance expenses. For
example, between fiscal year 2002 and fiscal year 2005, DOD has
reported increases in these expenses from about $7.6 billion to about
$48.7 billion. According to DOD, some of this increase is attributable
to higher fuel costs and increased operational support costs for
contracts to provide housing, food, and services for the military
locations in Iraq and Afghanistan. For the same time frames, reported
obligations for military personnel have increased from about $3.4
billion to about $14.9 billion, and reported procurement obligations
have increased from $0 to about $16.5 billion.
With the steady growth in reported GWOT costs, we believe there is a
need to ensure that all commands seek to control costs to the extent
possible. As we reported in September 2005, individual commands have
taken steps to control costs and DOD policy generally advises its
officials of their financial management responsibilities to ensure the
prudent use of contingency funding.[Footnote 12] However, DOD has not
established guidelines that would require commands to take steps to
control costs and keep DOD informed of these steps as we recommended in
our prior report. In the absence of such guidelines and reports, DOD
cannot be sure that enough is being done to control costs.
U.S. Government Agencies Have Reported Obligating Most of Their
Reconstruction and Stabilization Program Funding:
U. S. government agencies have reported obligating $23 billion for
Iraqi reconstruction and stabilization, as of January 2006. However,
U.S. government agencies, other than DOD, do not formally track all
GWOT costs. Among other uses, these funds have been used for
infrastructure repair of the electricity, oil, water, and health
sectors; training and equipping of Iraqi security forces (military and
police); and administrative expenses.
State reports that the remaining funds will not be used for large
reconstruction projects, but to sustain the projects that have already
been built and to build greater capacity at the national, provincial,
and municipal levels for better and more responsive governments.
Global War on Terrorism Costs Will Likely Continue for the Foreseeable
Future:
It appears the United State's military and diplomatic commitments in
Iraq and Afghanistan will continue for the foreseeable future and are
likely to be in the hundreds of billions of dollars. However, costs are
difficult to predict because they depend on several direct and indirect
cost variables. DOD's future costs will likely be affected by the pace
and duration of military operations, the types of facilities needed to
support troops overseas, force redeployment plans, and the amount of
damaged or destroyed equipment that will need to be repaired or
replaced. Other future costs to the U.S. government include nation-
building and reconstruction efforts and treating injured GWOT veterans.
These costs will require administration decision makers and Congress to
consider difficult trade-offs as the nation faces increasing fiscal
challenges in the years ahead.
Future DOD Costs:
The future costs associated with DOD's commitments to GWOT depend on
several variables, including (1) the extent and duration of operations,
(2) the types of facilities that will be required to support troops
overseas, and (3) the amount of equipment that will need to be restored
or replaced. As DOD has done with Operation Noble Eagle, we would
encourage the department to consider moving other GWOT costs into the
baseline budget. This is consistent with our prior suggestion that,
once an operation reaches a known level of effort and costs are more
predictable, more funding should be built into the baseline
budget.[Footnote 13] Doing so will assist decision makers in
determining investment priorities and making trade-offs among funding
needs.
Extent and Duration of Military Operations:
It is uncertain how long DOD will be engaged in a high pace of military
operations associated with GWOT, making it difficult to predict costs
associated with future troop levels and mission requirements. There has
also been some discussion of reducing the number of troops in Iraq and
Afghanistan. However, DOD officials have not announced information
about the level or timing of any troop reduction or redeployment plans.
While it would appear that reducing the number of troops in theater
could lower costs for these operations, we have seen from previous
operations in Bosnia and Kosovo that costs may rise due to the
increased use of contractors to replace the military personnel. Bases
still have to be maintained, even with fewer military members in them.
Also, if the pace of operations remains high because of security
concerns or hostilities, costs for force protection, fuel, and other
items could remain high.
Facilities to Support Overseas Troops:
The United States does not currently have any basing agreements with
Iraq. DOD has constructed facilities in Iraq and neighboring countries
supporting missions in both Iraq and Afghanistan. Examples of
facilities funded by military construction funds and other
appropriations funding include force protection, airfield and road
improvements, fuel handling, power and water distribution, and support
facilities. The Secretary of Defense recently testified that already
some 30 U.S. military bases have been returned to Iraqi control or
closed altogether.[Footnote 14] If the United States decides to enter
into agreements with the new governments in Iraq and Afghanistan to
have an enduring presence in these countries, costs to make our
temporary bases into more permanent facilities could be significant.
Equipment Restoration and Replacement:
Sustained GWOT operations have and will continue to take a toll on the
condition and readiness of military equipment. The United States faces
short-and long-term costs to maintain and restore equipment in theater,
as well as reequip units as these missions end and the units return to
their home stations. The uncertainties of how long ongoing operations
will continue make it difficult to estimate future costs of maintaining
and replacing this large amount of equipment.
The Army and Marine Corps will have the largest reset costs of the
services. DOD has reported Army equipment usage rates have averaged two
to eight times those of peacetime rates, while senior Marine Corps
officials testified that the ground equipment used by the Corps in
ongoing operations has experienced usage rates four to nine times that
of peacetime rates. We recently testified that the services are
currently funding their reset programs through the use of supplemental
appropriations and plan to rely on supplemental appropriations for
reset funding through at least fiscal year 2007.[Footnote 15] According
to recent testimony, the Army requirement for reset in fiscal year 2007
is $17.1 billion. The Army expects the requirement beyond fiscal year
2007 to be $12 billion to $13 billion per year through the end of the
conflict and for a minimum of two to three years thereafter. In recent
testimony, the Marine Corps stated that $11.9 billion is needed to
manage the equipment in Operation Iraqi Freedom and Operation Enduring
Freedom for fiscal year 2007 and an estimated additional requirement of
$5.3 billion for each year that the conflict continues. The
uncertainties of pace and duration of ongoing operations as well as the
overall condition of major equipment items make it difficult to
estimate future equipment reset costs. Equipment used in operations in
Iraq will eventually require more intensive repair and overhaul than
what is typically expected in peacetime. While the services are working
to refine overall requirements, the total requirements and costs are
unclear.
In addition to resetting a large number of major equipment items, the
Army and Marine Corps must also plan to replace active, National Guard,
and Reserve equipment left in theater to support ongoing operations. As
we previously testified, in late 2003 the Army began to direct
redeploying National Guard and Reserve units to leave their equipment
in theater for use by deploying forces.[Footnote 16] DOD policy
requires the Army to replace equipment transferred to it from the
Reserve Component including temporary withdrawals or loans in excess of
90 days,[Footnote 17] yet at the time of our report in October 2005,
the Army had neither created a mechanism in the early phases of the war
to track Guard equipment left in theater nor prepared replacement plans
for this equipment, because the practice of leaving equipment behind
was intended to be a short-term measure. As of June 2006, only 3
replacement plans have been endorsed by the Secretary of Defense, all
to replace National Guard equipment, while 22 plans are in various
stages of approval. While the exact dollar estimate for these
replacements will not be known until operations in Iraq cease, it will
likely cost billions of dollars.
Future Nation-Building Costs:
Future cost variables for other U.S. government agencies include the
efforts to help form national and provincial governments and build
management capacity in both Afghanistan and Iraq and build capable and
loyal Iraqi and Afghani security forces. Also, there will be further
need for funding to restore, sustain, and protect infrastructure. The
new Iraqi government will need significant help in building the
procurement, financial management, and accountability systems needed to
govern and provide basic services to millions of its citizens. In
addition, the 18 provincial governments will also require assistance in
building management capacity and delivering results to the Iraqi people
that make a difference in their daily lives. The costs of sustaining an
Iraqi force of 266,000 personnel may require the Iraqi government to
spend more money on personnel, maintenance, and equipment than
originally anticipated. In addition, the new Iraqi security forces will
have recurring training needs, and will need additional assistance in
replacing lost or stolen equipment, and in developing improved
logistical and sustainment capabilities.
While most of the reconstruction money for Iraq has been obligated,
additional funds will be needed to finance remaining reconstruction
needs, and to restore, sustain, and protect the infrastructure that has
been built to date. For example,
* Iraqi needs are greater than originally anticipated. In the next
several years, Iraq will need an estimated $30 billion to reach and
sustain oil capacity of 5 million barrels per day, according to
industry experts and U.S. officials. For electricity, they will need
$20 billion through 2010, according to the Department of Energy's
Energy Information Administration. Iraqi budget constraints and limited
government managerial capacity limit its ability to contribute to
future rebuilding efforts.
* There is widespread corruption in Iraq. Reconstruction efforts have
not taken the risk of corruption into account when assessing the costs
of achieving U.S. objectives in Iraq. The International Monetary Fund,
the World Bank, Japan, and the European Union officials cite corruption
in the oil sector as a special problem. In addition, according to State
officials and reporting documents, about 10 percent of refined fuels
are diverted to the black market, and about 30 percent of imported
fuels are smuggled out of Iraq and sold for a profit.
* Future international contributions for Iraq may be limited. Most of
the U.S. funds have been obligated and about 70 percent of the $13.6
billion in international pledges are in the form of loans.
* The new U.S. embassy will be costly. The embassy is projected to cost
about $592 million, but the full cost of establishing a diplomatic
presence across Iraq is still unknown.
* Additional funds are needed to train and equip Afghan security
forces. The United States, other donors, and the new Afghan government
face significant challenges to establishing viable Afghan army and
police forces.[Footnote 18] Although DOD and State have not yet
prepared official cost estimates, the army and police programs could
cost up to $7.2 billion to complete and about $600 million annually to
sustain. Moreover, slow progress in resolving other Afghan security
problems--the lack of an effective judiciary, the substantial illicit
narcotics industry, and the continued presence of armed militias--
threaten to undermine overall progress made toward providing nationwide
security and ensuring the stability of the Afghan government.
Future Costs for Veterans:
Lastly, one of the variables that can influence how much these efforts
will cost the United States is the long-term cost of caring for our
veterans. Both improvements in medical care in the field and in body
armor have increased the survival rate of those who are seriously
injured in combat. However, seriously injured survivors will likely
require substantial long-term medical care from the VA, and may require
extensive inpatient and home and community-based support services to
assist those with traumatic brain injury, spinal cord injury, and other
severely disabling conditions. We also know that many servicemembers
have been exposed to intense and prolonged combat, which research has
shown to be strongly associated with the risk of developing post-
traumatic stress disorder. This disorder can occur after experiencing
or witnessing a life-threatening event and is the most prevalent mental
health disorder resulting from combat. Mental health experts predict
that 15 percent or more of the servicemembers returning from operations
in Iraq and Afghanistan will develop post-traumatic stress
disorder.[Footnote 19] In addition to an influx of more severely
injured patients, the VA health care system will be required to serve
large numbers of returning veterans with shorter term, more routine,
health care needs.
VA has estimated that a little more than 100,000 veterans from
operations in Iraq and Afghanistan are currently using VA health care
services. VA originally underestimated by 77,000 the number of
returning veterans who would use its health care, which in part
required the VA to request additional appropriations in both fiscal
years 2005 and 2006. Long-term estimates of how many returning veterans
will use VA health care and the costs of that care are imprecise for a
variety of reasons, including uncertainty about the duration of
operations in the theaters as discussed above. But, current levels of
usage by returning servicemembers indicate a growing VA health care
workload and costs. Furthermore, while we have no clear idea of the
magnitude, there will undoubtedly be long-term financial commitments
associated with payments to veterans with long-term disabilities.
Mr. Chairman, this concludes my prepared statement. I would be happy to
answer any questions you and the subcommittee members may have.
FOOTNOTES
[1] For purposes of this testimony, the term "costs" refers to the
obligations that have been incurred by U.S. agencies in support of
GWOT. Obligations are incurred through actions such as orders placed,
contracts awarded, services received, or similar transactions made
during a given period that will require payments during the same or a
future period.
[2] GAO, Rebuilding Iraq: More Comprehensive National Strategy Needed
to Help Achieve U.S. Goals and Overcome Challenges, GAO-06-953T
(Washington, D.C.: July 11, 2006).
[3] GAO, Defense Management: Key Elements Needed to Successfully
Transform DOD Business Operations, GAO-05-629T (Washington, D.C.: Apr.
28, 2005).
[4] For example, see 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) and GAO,
Rebuilding Iraq: Governance, Security, Reconstruction, and Financing
Challenges, GAO-06-697T (Washington, D.C.: Apr. 25, 2006).
[5] GAO-05-882.
[6] In addition to the costs for overseas operations, DOD has also
reported obligations of $27.7 billion through April 2006 for operations
in defense of the homeland U.S., under Operation Noble Eagle.
[7] Emergency Supplemental Appropriations Act for Defense, the Global
War on Terror, and Hurricane Recovery, 2006, Pub. L. No. 109-234
(2006).
[8] The $34.5 billion includes funding for the following activities and
programs: security and justice; restoring essential services such as
oil, electricity, and water; other sectors; and administrative costs.
[9] GAO, Rebuilding Iraq: Preliminary Observations on Challenges in
Transferring Security Responsibilities to Iraqi Military and Police,
GAO-05-431T, (Washington, D.C., Mar. 14, 2005).
[10] GAO-05-882.
[11] Pub. L. No. 109-163, §1221(c) (2006).
[12] GAO-05-882.
[13] GAO, Bosnia: Costs Are Exceeding DOD's Estimate, GAO/ NSIAD-96-
024BR (Washington, D.C.: July 25, 1996).
[14] "Senate Armed Services Committee Holds Hearing on Defense
Authorization", a speech presented by Secretary of Defense, Donald
Rumsfeld at the Senate Armed Services Committee, Feb. 7, 2006.
[15] GAO, Defense Logistics: Preliminary Observations on Equipment
Reset Challenges and Issues for the Army and Marine Corps, GAO-06-604T
(Washington, D.C.: Mar. 30, 2006).
[16] GAO, Reserve Forces: Army National Guard's Role, Organization, and
Equipment Need to be Reexamined, GAO-06-170T (Washington, D.C.: Oct.
20, 2005).
[17] Department of Defense Directive 1225.6, Equipping the Reserve
Forces (Apr. 7, 2005).
[18] GAO, Afghanistan Security: Efforts to Establish Army and Policy
Have Made Progress, but Future Plans Need to be Better Defined, GAO-05-
575 (Washington, D.C.: June 30, 2005). The estimates in this report
have not been updated.
[19] GAO, Post-Traumatic Stress Disorder: DOD Needs to Identify the
Factors Its Providers Use to Make Mental Health Evaluation Referrals
for Servicemembers, GAO-06-397 (Washington, D.C.: May 11, 2006).
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