Combating Terrorism
Increased Oversight and Accountability Needed over Pakistan Reimbursement Claims for Coalition Support Funds Gao ID: GAO-08-806 June 24, 2008The United States has reimbursed Pakistan, a key ally in the global war on terror, about $5.56 billion in Coalition Support Funds (CSF) for its efforts to combat terrorism along its border with Afghanistan. The Department of Defense (Defense) provides CSF to 27 coalition partners for costs incurred in direct support of U.S. military operations. Pakistan is the largest recipient of CSF, receiving 81 percent of CSF reimbursements as of May 2008. This report focuses on (1) the extent to which Defense has consistently applied its guidance to validate the reimbursements claimed by Pakistan and (2) how the Office of the Defense Representative to Pakistan's (ODRP) role has changed over time. To address these objectives, GAO reviewed CSF oversight procedures, examined CSF documents, and interviewed Defense officials in Washington, D.C., U.S. Central Command in Florida, and Pakistan.
Defense Comptroller issued new guidance in 2003 to enhance CSF oversight. The guidance calls for, among other things, CSF reimbursement claims to contain quantifiable information that indicates the incremental nature of support (i.e., above and beyond normal operations), validation that the support or service was provided, and copies of invoices or documentation supporting how the costs were calculated. While Defense generally conducted macro-level analytical reviews called for in its guidance, such as determining whether the cost is less than that which would be incurred by the United States for the same service, for a large number of reimbursement claims Defense did not obtain detailed documentation to verify that claimed costs were valid, actually incurred, or correctly calculated. GAO found that Defense did not consistently apply its existing CSF oversight guidance. For example, as of May 2008, Defense paid over $2 billion in Pakistani reimbursement claims for military activities covering January 2004 through June 2007 without obtaining sufficient information that would enable a third party to recalculate these costs. Furthermore, Defense may have reimbursed costs that (1) were not incremental, (2) were not based on actual activity, or (3) were potentially duplicative. GAO also found that additional oversight controls were needed. For example, there is no guidance for Defense to verify currency conversion rates used by Pakistan, which if performed would enhance Defense's ability to monitor for potential overbillings. Defense's guidance does not specifically task ODRP with attempting to verify Pakistani military support and expenses, despite recognition by Defense officials that such verification is best performed by U.S. officials in Pakistan, who have access to Pakistani officials and information. As such, ODRP did not try to verify Pakistan CSF claims from January 2004 through August 2006. Beginning in September 2006, without any formal guidance or directive to do so from U.S. Central Command or the Defense Comptroller, ODRP began an effort to validate Pakistani military support and expenses. This increased verification effort on the part of ODRP contributed to an increase in the amount of Pakistani government CSF claims disallowed and deferred. Prior to ODRP's increased verification efforts, the average percentage of Pakistani claims disallowed or deferred for January 2004 through August 2006 was a little over 2 percent. In comparison, the average percentage of Pakistani claims disallowed or deferred for September 2006 through February 2007 was 6 percent and for the most recent claims (March 2007 through June 2007) processed in February 2008, was approximately 22 percent. However, ODRP's continued oversight activity is not assured, as Defense had not developed formal guidance delineating how and to what degree ODRP should attempt to verify Pakistani claims for reimbursement. GAO recognizes that Defense may not be able to fully verify every Pakistani claim without the ability to access Pakistani records or do onsite monitoring. However, such ability would enhance CSF oversight.
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-08-806, Combating Terrorism: Increased Oversight and Accountability Needed over Pakistan Reimbursement Claims for Coalition Support Funds
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
June 2008:
Combating Terrorism:
Increased Oversight and Accountability Needed over Pakistan
Reimbursement Claims for Coalition Support Funds:
Combating Terrorism:
GAO-08-806:
GAO Highlights:
Highlights of GAO-08-806, a report to congressional requesters.
Why GAO Did This Study:
The United States has reimbursed Pakistan, a key ally in the global war
on terror, about $5.56 billion in Coalition Support Funds (CSF) for its
efforts to combat terrorism along its border with Afghanistan. The
Department of Defense (Defense) provides CSF to 27 coalition partners
for costs incurred in direct support of U.S. military operations.
Pakistan is the largest recipient of CSF, receiving 81 percent of CSF
reimbursements as of May 2008.
This report focuses on (1) the extent to which Defense has consistently
applied its guidance to validate the reimbursements claimed by Pakistan
and (2) how the Office of the Defense Representative to Pakistan‘s
(ODRP) role has changed over time. To address these objectives, GAO
reviewed CSF oversight procedures, examined CSF documents, and
interviewed Defense officials in Washington, D.C., U.S. Central Command
in Florida, and Pakistan.
What GAO Found:
Defense Comptroller issued new guidance in 2003 to enhance CSF
oversight. The guidance calls for, among other things, CSF
reimbursement claims to contain quantifiable information that indicates
the incremental nature of support (i.e., above and beyond normal
operations), validation that the support or service was provided, and
copies of invoices or documentation supporting how the costs were
calculated. While Defense generally conducted macro-level analytical
reviews called for in its guidance, such as determining whether the
cost is less than that which would be incurred by the United States for
the same service, for a large number of reimbursement claims Defense
did not obtain detailed documentation to verify that claimed costs were
valid, actually incurred, or correctly calculated. GAO found that
Defense did not consistently apply its existing CSF oversight guidance.
For example, as of May 2008, Defense paid over $2 billion in Pakistani
reimbursement claims for military activities covering January 2004
through June 2007 without obtaining sufficient information that would
enable a third party to recalculate these costs. Furthermore, Defense
may have reimbursed costs that (1) were not incremental, (2) were not
based on actual activity, or (3) were potentially duplicative. GAO also
found that additional oversight controls were needed. For example,
there is no guidance for Defense to verify currency conversion rates
used by Pakistan, which if performed would enhance Defense‘s ability to
monitor for potential overbillings.
Defense‘s guidance does not specifically task ODRP with attempting to
verify Pakistani military support and expenses, despite recognition by
Defense officials that such verification is best performed by U.S.
officials in Pakistan, who have access to Pakistani officials and
information. As such, ODRP did not try to verify Pakistan CSF claims
from January 2004 through August 2006. Beginning in September 2006,
without any formal guidance or directive to do so from U.S. Central
Command or the Defense Comptroller, ODRP began an effort to validate
Pakistani military support and expenses. This increased verification
effort on the part of ODRP contributed to an increase in the amount of
Pakistani government CSF claims disallowed and deferred. Prior to
ODRP‘s increased verification efforts, the average percentage of
Pakistani claims disallowed or deferred for January 2004 through August
2006 was a little over 2 percent. In comparison, the average percentage
of Pakistani claims disallowed or deferred for September 2006 through
February 2007 was 6 percent and for the most recent claims (March 2007
through June 2007) processed in February 2008, was approximately 22
percent. However, ODRP‘s continued oversight activity is not assured,
as Defense had not developed formal guidance delineating how and to
what degree ODRP should attempt to verify Pakistani claims for
reimbursement.
GAO recognizes that Defense may not be able to fully verify every
Pakistani claim without the ability to access Pakistani records or do
onsite monitoring. However, such ability would enhance CSF oversight.
What GAO Recommends:
GAO recommends that Defense consistently implement existing oversight
criteria, formalize ODRP‘s oversight responsibilities, and implement
additional controls. Defense generally concurred with the
recommendations but stated that the report lacked sufficient context,
such as Pakistan‘s military contributions enabled by CSF and Defense‘s
broad legal authority to dispense funds. This report does recognize
Pakistan‘s contributions and Defense‘s legal authority.
To view the full product, including the scope and methodology, click on
[http://www.gao.gov/cgi-bin/getrpt?GAO-08-806]. For more information,
contact Charles Michael Johnson Jr. at (202) 512-7331 or
johnsoncm@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Defense Did Not Consistently Apply Its Existing Guidance, and
Additional Procedures Are Needed to Ensure Accountability over CSF to
Pakistan:
ODRP Began Playing a Larger Role in the CSF Oversight Process in Late
2006; However, ODRP's Continued Oversight Is Not Assured:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: Pakistan CSF Reimbursement Claims, January 2004-June
2007:
Appendix IV: GAO Contact and Staff Acknowledgments:
Table:
Table 1: December 2003 CSF Guidance for Embassies, Combatant
Commanders, and the Comptroller:
Figures:
Figure 1: U.S. CSF Reimbursements to Pakistan, October 2001 through
June 2007:
Figure 2: CSF Reimbursement Process:
Figure 3: Comptroller Approvals and Disapprovals of Pakistani Navy CSF
Reimbursement Claims for Boats, by Month, December 2005 through June
2007:
Figure 4: Average Monthly Food Costs Per Person by Force Reimbursed to
Pakistan Government, September 2004 through June 2007:
Figure 5: Effect of Exchange Rate Fluctuations on One Fixed Pakistani
Claimed Cost, September 2004 through August 2005:
Figure 6: Reimbursement Process for Pakistani Claims, March through
June 2007:
Figure 7: Pakistani CSF Reimbursement Claims Disallowed or Deferred,
January 2004 through June 2007:
Abbreviations:
CENTCOM: U.S. Central Command:
Comptroller: Office of the Under Secretary of Defense for Comptroller:
CSF: Coalition Support Funds:
Defense: Department of Defense:
FATA: Federally Administered Tribal Areas:
IMF: International Monetary Fund:
ODRP: Office of the Defense Representative to Pakistan:
United States Government Accountability Office:
Washington, DC 20548:
June 24, 2008:
Congressional Requesters:
Following the attacks of September 11, 2001, the United States began
reimbursing coalition partners for their logistical and combat support
of U.S. military operations in the global war on terror. These
reimbursements, known as Coalition Support Funds (CSF), have reimbursed
27 coalition allies for incremental costs (i.e., costs above and beyond
the partner country's normal operating costs) incurred in direct
support of U.S. military operations. Pakistan is the largest recipient
of CSF payments, receiving $5.56 billion of $6.88 billion (81 percent)
of all CSF reimbursements as of May 2008. CSF is structured as a
reimbursement mechanism whereby the U.S. Department of Defense
(Defense) policy is to validate that support was provided, costs were
incurred, and that these costs were incremental to a country's normal
military operations.[Footnote 1] In Pakistan, most of the
reimbursements through CSF are intended to enable the government of
Pakistan to attack terrorist networks in the Federally Administered
Tribal Areas (FATA) and stabilize the border areas.[Footnote 2]
Congress granted the Secretary of Defense the authority to make CSF
payments "in such amounts as the Secretary may determine in [his]
discretion, based on documentation determined by the Secretary of
Defense to adequately account for the support provided."[Footnote 3]
Any such determination by the Secretary shall be final and conclusive.
Despite this broad authority, concerns have been raised, given the
large amounts of CSF reimbursement payments to Pakistan, about the
level of accountability and oversight over these funds.
This report focuses on (1) the extent to which Defense has consistently
applied its guidance to validate the reimbursements claimed by Pakistan
and (2) how the Office of Defense Representative to Pakistan's (ODRP)
role has changed over time.
To address our objectives, we obtained information on CSF procedures
from relevant officials at the Office of the Under Secretary of Defense
for Comptroller (Comptroller), the Office of the Under Secretary of
Defense for Policy, U.S. Central Command (CENTCOM), ODRP, and the State
Department's Bureau of Political-Military Affairs. We also examined all
CSF oversight documentation provided to us, including Pakistani
government reimbursement claims, ODRP memos, CENTCOM validation memos,
Comptroller evaluations, and other CSF documentation from February 2002
through February 2008 (February 2008 was when the latest claim, for
March through June 2007, was reimbursed). To assess the application of
current CSF guidance, we examined the CSF oversight documentation noted
above from January 2004 through February 2008. We chose this time frame
because a previous Defense Inspector General report had already
examined the pre-January 2004 CSF oversight controls and made
recommendations to improve oversight.[Footnote 4] We evaluated these
controls against all available Comptroller criteria and guidance, as
well as internal control standards and general cost accounting criteria
for adequacy, eligibility, and reasonableness. As part of our data
reliability process, we confirmed that the data provided by the
Comptroller were accurately recorded in the software we used to analyze
the data. To assess the oversight role played by ODRP, we met with the
relevant ODRP, CENTCOM, and Comptroller officials, as well as with
other officials from the U.S. Embassy and Pakistan's Ministries of
Defense and Interior. We visited Peshawar, near the FATA, to discuss
operations being reimbursed with CSF funds with the U.S. consulate and
Pakistan's 11th Army Corps and Frontier Corps.
This is the fourth in a series of products we plan to release assessing
various aspects of the U.S. engagement with Pakistan to combat
terrorism.[Footnote 5] We plan to issue a fifth product that assesses
the U.S. security, political, and development assistance activities
used to meet U.S. strategic goals in Pakistan, as well as the progress
of these efforts.
We conducted this performance audit from September 2007 through June
2008 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives. (See app. I
for details on our scope and methodology.)
Results in Brief:
We found that Defense did not consistently apply its existing CSF
oversight guidance and that certain deficiencies existed in Defense's
oversight procedures. Defense's 2003 guidance calls for, among other
things, CSF reimbursement claims to contain quantifiable information
that indicates the incremental nature of support (i.e., above and
beyond normal operations), validation that the support or service was
provided, and copies of invoices or documentation supporting how the
costs were calculated. While Defense generally conducted the macro-
level analytical reviews called for in its guidance, such as
determining whether the cost is less than that which would be incurred
by the United States for the same services, for a large number of
claims Defense did not obtain sufficient documentation from Pakistan to
verify that claimed costs were incremental,[Footnote 6] actually
incurred, or correctly calculated as called for by the Comptroller's
CSF guidance. For example, as of May 2008, Defense paid over $2 billion
in Pakistani reimbursement claims for military activities covering
January 2004 through June 2007 without obtaining detailed information
that would enable a third party to recalculate these costs.[Footnote 7]
In addition, Defense often did not adequately document the basis for
their decisions to allow or disallow claims, and we found
inconsistencies in Defense payments that were not explained. As a
result, Defense may have reimbursed costs that (1) were not
incremental--i.e., above and beyond normal operations; (2) were not
based on actual activity; or (3) were potentially duplicative. For
example, Defense paid:
* more than $200 million for Pakistan's air defense radar before ODRP
questioned whether this was an incremental cost, as stipulated in CSF
guidance;[Footnote 8]
* approximately $30 million for army road construction and $15 million
for bunker construction without evidence that the roads and bunkers had
been built; and:
* an average of more than $19,000 per vehicle per month for Pakistani
navy reimbursement claims that appeared to contain duplicative charges
for a fleet of fewer than 20 passenger vehicles.
We also found that additional oversight controls were needed.
Comptroller guidance calls for a historical comparison of claimed
costs; however, the Comptroller's instructions do not indicate how this
comparison should be performed. In addition, we found that there is no
guidance for Defense to verify currency conversion rates used by
Pakistan, which if performed would enhance Defense's ability to monitor
for potential overbillings.
Defense's 2003 guidance does not specifically task ODRP with attempting
to verify Pakistani military support and expenses, despite recognition
by Defense officials in Washington and CENTCOM that such verification
is best performed by U.S. officials in Pakistan, who have access to
Pakistani officials and information. As such, ODRP did not try to
verify Pakistan CSF claims from January 2004 through August 2006.
Beginning in September 2006, without any formal guidance or directive
to do so from CENTCOM or the Comptroller, ODRP began an effort to
validate Pakistani military support and expenses. This increased
verification effort on the part of ODRP contributed to an increase in
the amount of Pakistani government CSF claims disallowed and deferred.
Prior to ODRP's increased verification efforts, the average percentage
of Pakistani claims disallowed or deferred for January 2004 through
August 2006 was almost 3 percent. In comparison, the average percentage
of Pakistani claims disallowed or deferred for September 2006 through
February 2007 was 6 percent, and for the most recent claims (March 2007
through June 2007), processed in February 2008, was approximately 22
percent. For example, ODRP observed poor readiness rates of Pakistani
helicopters and recommended deferring payment for helicopter
maintenance that had been routinely reimbursed. However, ODRP's
continued oversight activity is not assured. As of May 2008, Defense
had not developed formal guidance delineating how and to what degree
ODRP should attempt to verify Pakistani military support and expenses.
To improve CSF oversight, we are recommending that Defense consistently
implement existing oversight criteria, formalize the roles and
responsibilities of ODRP, work with the government of Pakistan to gain
greater access, clarify guidance for cost fluctuation analysis, and
develop criteria to evaluate the effect of currency exchange rates on
reimbursement claims. Defense generally concurred with our
recommendations, and indicated they had updated their CSF guidance to
incorporate our recommendations. We plan to review this guidance when
it is made available to us.
Defense provided written comments on the report, which are reproduced
in appendix II. We also met with cognizant officials from Defense to
discuss their comments and observations. Defense provided technical
comments and updates which we incorporated throughout the report, as
appropriate.
Defense's comments noted that our report did not give sufficient weight
to (1) Pakistan's military contributions enabled by CSF; (2) the
Department's adherence to the law; and (3) Pakistan's accounting
standards. Our report does reflect Pakistan's contributions and the
role of CSF, and states that Congress gave Defense broad authority to
make CSF payments. Regarding Pakistan's accountability standards, we
acknowledge that there are limitations in any arrangement with another
sovereign nation, but note that Pakistan provided more detailed
documentation to support their claims after a request from the
Comptroller in 2006.
Background:
In late 2001, as the United States focused on toppling the Taliban
regime and fighting al Qaeda in Afghanistan, Pakistan's importance as
an ally in the global war on terror increased. According to Defense,
Pakistan's military operations and other contributions to Operation
Enduring Freedom in Afghanistan quickly threatened to become
unsustainable on its $2.5 billion defense budget. As a result, Defense
requested supplemental funding from Congress to provide payments to
Pakistan for logistical and military support in connection with
Operation Enduring Freedom. In response, Congress passed the Defense
Appropriations Act for Fiscal Year 2002, stipulating that the "Defense
Emergency Response Fund" could be used by the Secretary of Defense to
reimburse coalition partners for logistical and military support to
U.S. military operations.[Footnote 9] This funding became known as
Coalition Support Funds.
To provide Defense with maximum flexibility, Congress passed the
Defense Appropriations Act for Fiscal Year 2002, which granted the
Secretary of Defense the authority to make CSF payments notwithstanding
any other provision of law in such amounts as the Secretary may
determine in his discretion, based on documentation determined by the
Secretary to adequately account for the logistical and military support
provided by partner nations.[Footnote 10] Any such determination by the
Secretary shall be final and conclusive. The act did, however, require
Defense to provide a 15-day notification of upcoming CSF
reimbursements. Congress continued to provide funding for Pakistan
through Defense without requiring specific accountability controls
until 2008.[Footnote 11] Subsequent legislation required Defense to
provide quarterly reports to the House and Senate Committees on
Appropriations and the House and Senate Armed Services Committees on
the use of funds made available for payments to Pakistan and other CSF
recipients. Despite these revisions to the reporting requirements,
Congress has consistently left decision-making on the suitability of
documentation to the discretion of the Secretary of Defense. Defense,
on its own, has instituted guidance that goes beyond what is mandated
in law.
According to Defense, CSF is critical to ensure Pakistan's continued
support of U.S. efforts to combat terrorism. Defense officials stated
that without CSF or a similar mechanism to reimburse Pakistan for
support in Operation Enduring Freedom, Pakistan could not afford to
deploy military forces along the Pakistan-Afghanistan border to support
U.S. military operations in Afghanistan. Defense also indicates that 84
percent of all containerized cargo and approximately 40 percent of all
fuel for U.S. and coalition forces operating in Afghanistan passes
through Pakistan. According to Defense officials, CSF has been a major
factor in Pakistan's ongoing cooperation in support of U.S. goals in
Pakistan and Afghanistan.
Defense has used CSF to reimburse Pakistan for Operation Al Mizan, a
major deployment of the Pakistan army in the North West Frontier
Province and the Federally Administered Tribal Areas (FATA) that border
Afghanistan that began in 2001 and has continued in various phases to
this date.[Footnote 12] Defense also states that CSF payments to
Pakistan have played a key role in supporting U.S. national security
goals in Pakistan to combat terrorists that threaten U.S. interests in
America, Pakistan, Afghanistan, and Western Europe. The CSF
reimbursements to Pakistan from October 2001 through June 2007 (the
latest period of support reimbursed by Defense) are shown in figure 1.
Figure 1: U.S. CSF Reimbursements to Pakistan, October 2001 through
June 2007:
This figure is a bar graph showing U.S. CSF reimbursements to Pakistan,
October 2001 through June 2007. The X axis represents dates, and the Y
axis represents U.S. dollars (in millions).
Dates: Oct.-Dec. 2001;
U.S. dollars: 300.
Dates: Jan.-Dec. 2002;
U.S. dollars: 847.
Dates: Jan.-Dec. 2003;
U.S. dollars: 753.
Dates: Jan.-Dec. 2004;
U.S. dollars: 1221.
Dates: Jan.-Dec. 2005;
U.S. dollars: 915.
Dates: Jan.-Dec. 2006;
U.S. dollars: 1070.
Dates: Jan.-June 2007;
U.S. dollars: 453.
[See PDF for image]
Source: GAO analysis of Defense oversight documentation.
Note: The most recent claims processed during our review were completed
in February 2008 and covered Pakistani government reimbursement claims
for the months March 2007 through June 2007.
[End of figure]
Evolution of the CSF Oversight Process:
In a February 2002 internal memo, the Comptroller expressed
dissatisfaction with Defense's ability to verify the costs claimed in
Pakistan's December 2001[Footnote 13] reimbursement claim. The
Comptroller noted that the reimbursement claim contained total costs
but no supporting details. For example, the claim reported a total cost
for army airlift without providing information on number of sorties
flown, the dates, costs, time frames, purpose, number or types of
aircraft flown, or number of man-hours involved. According to the
February 2002 memo, the government of Pakistan was unprepared or unable
to reconstruct these costs in a verifiable manner in line with standard
U.S. government accounting practices and expectations. Staff at CENTCOM
in Tampa, Florida, and at ODRP in the embassy were unable to fill in
such details. Despite this concern, the Defense Office of General
Counsel concluded, based on the statutory authority provided to the
Secretary of Defense, that the Secretary of Defense could legally
reimburse all of the cost categories identified by the Comptroller as
legally defensible. The United States eventually reimbursed Pakistan
$300 million.
In 2003, at the request of the Comptroller, the Defense Inspector
General performed an audit of the CSF oversight process for all
countries seeking CSF reimbursements. The report found deficiencies in
both Defense's CSF guidance, as well as the supporting documentation
CSF recipients provided to support their claims. It recommended
improvements in Defense's analysis of CSF reimbursement requests and
greater documentation requirements for countries seeking reimbursement.
In response, the Comptroller published guidance in December 2003 to
clarify the roles and responsibilities of CENTCOM and other regional
combatant commanders and of the Comptroller in the CSF oversight
process. The 2003 guidance notes that Congress provided the Secretary
of Defense with the authority to determine how much to reimburse
partner countries, and how much documentation was required to
adequately account for the support provided. However, the guidance also
stated that CENTCOM and the Comptroller are to obtain sufficient
documentation to validate that Pakistani military support had been
provided and that costs were incurred, reasonable, and appropriate
under the CSF program. Table 1 summarizes the review criteria in the
December 2003 Comptroller guidance. We address the implementation of
these and other criteria in greater detail later in this report.
Table 1: December 2003 CSF Guidance for Embassies, Combatant
Commanders, and the Comptroller:
Office responsibility: Defense personnel (such as ODRP) at embassies
assist host country military personnel in formulating their claims for
reimbursement before forwarding the claims to their combatant
commander;
Guidance: * CSF reimburses countries that have incurred incremental
costs (i.e., above and beyond normal levels) to provide logistical and
military support to U.S. military operations in connection with U.S.
operations in Iraq, Afghanistan, and elsewhere in the global war on
terrorism;
* Examples of reimbursable costs: transport of forces, sustainment of
forces, increased use of equipment or vehicles;
* Requests for reimbursement must contain quantifiable information that
clearly indicates incremental nature of support, such as total
personnel fed, number and types of vehicles repaired, total fuel
consumed, total number of flight sorties.
Office responsibility: Combatant commanders (such as CENTCOM) must
submit documentation to the Comptroller that sufficiently supports the
country's reimbursement request;
Guidance: * Identification of who requested the service, for what
period of time (i.e., a one-time reimbursement requirement versus a
recurring requirement), and the initial estimate of the cost of the
support or service;
* Validation that the support or service was provided, and confirmation
that the costs incurred were incremental (i.e., that the costs were
based on the U.S. requirement and would not otherwise have been
incurred by the country requesting reimbursement);
* A narrative description of the types of costs incurred and a
description of how the costs for each were computed;
* Copies of invoices for support provided, or in the absence of
invoices, documentation supporting how the costs were derived for each
category of cost, and their basis of measurement.
Office responsibility: Comptroller receives the package from CENTCOM
and evaluates the reasonableness of the reimbursement request;
Guidance: * Comparison, at a macro level, of claimed costs to the U.S.
cost to provide the same support;
* Evaluation of the reasonableness of the individual categories for
which reimbursement is requested;
* Comparison of representative U.S. costs for a subset of items (where
similar comparisons can be made);
* Assessment that the claimed costs are consistent with previous
reimbursement requests.
Source: Defense.
[End of table]
Under the December 2003 guidance and oversight process, Pakistan would
first submit its claim for reimbursement to ODRP at the U.S. Embassy in
Islamabad. According to Comptroller guidance, ODRP would assist the
Pakistani military in formulating the reimbursement claim before
sending the claim to CENTCOM in Tampa, Florida. CENTCOM would then
conduct its own review in an attempt to link claimed expenses to U.S.
military operations before forwarding the claim package to the
Comptroller. Under this process, ODRP and CENTCOM staff can make
recommendations to defer or disallow costs based on their analysis of
the Pakistan submission; however, the Comptroller makes the final
recommendation to the Secretary of Defense on which costs should be
paid, deferred, or disallowed.
The Department of State, the Office of Management and Budget, and
Congress also have a role in the CSF oversight process after the
Comptroller has finished its review. The Department of State and the
Under Secretary of Defense for Policy must each verify that the CSF
reimbursement is consistent with the U.S. government's national
security policy and does not adversely affect the balance of power in
the region. In addition, Defense is required to consult with the
Director of the Office of Management and Budget during the CSF process.
Defense is also required to provide a 15-day notification of the
upcoming reimbursement, as well as quarterly reports to the House and
Senate Committees on Appropriations and the House and Senate Armed
Services Committees on the use of funds made available for payments to
Pakistan and other CSF recipients. Congress passed the National Defense
Authorization Act for Fiscal Year 2008, which now requires Defense to
submit an itemized description of logistic support, supplies, and
services "provided by Pakistan to the United States for which the
United States provided reimbursement" during the period beginning
February 1, 2008 and ending September 30, 2009.[Footnote 14] The CSF
process is detailed in figure 2.
Figure 2: CSF Reimbursement Process:
This figure is a flowchart of CSD reimbursement process.
[See PDF for image]
Source: GAO analysis of Defense documentation and discussions with
OUSD/Comptroller.
[End of figure]
In July 2006, the Comptroller provided the Pakistani government with a
cost template and information intended to clarify the types of costs
that were reimbursable under CSF and the information the Comptroller
required to support Pakistan's reimbursement claims. Furthermore,
according to Defense, the Office of the Under Secretary of Defense for
Policy emphasized the importance of enhancing transparency within
Pakistan's CSF claims in a June 2007 letter to the Pakistan Ministry of
Defense.
Defense Did Not Consistently Apply Its Existing Guidance, and
Additional Procedures Are Needed to Ensure Accountability over CSF to
Pakistan:
We found that Defense did not consistently apply existing CSF guidance
and that certain deficiencies existed in their oversight
procedures.[Footnote 15] We reviewed the Pakistani claims for January
2004 through June 2007, as well as related CENTCOM and Comptroller
memos, to determine if DOD had consistently applied the Comptroller
criteria issued in December 2003. The memos prepared by the Comptroller
generally included the four macro-level analytical reviews outlined in
the criteria; however, implementation of these criteria was not
sufficient to validate claimed costs. For example, the Comptroller
generally performed a comparison of total claimed costs to the
estimated U.S. cost to provide the same services; however, there was
not enough information in the Pakistani claims to determine that the
claimed amount and the estimated U.S. cost included the same expenses
or that the claimed costs were valid. Defense guidance developed by the
Comptroller calls for obtaining sufficient information to validate
Pakistani claims to determine that costs were incurred, reasonable, and
appropriate. However, Defense did not fully implement this criteria.
For example, Defense reimbursed Pakistan over $2 billion for claims
from January 2004 through June 2007 without obtaining detailed
documentation that would allow a third party to recalculate the costs.
In addition, Defense often did not adequately document the basis for
their decisions to allow or disallow claims, and we found
inconsistencies in Defense payments that were not explained. As a
result, Defense may have paid costs that were (1) not incremental, (2)
not based on actual activity, or (3) potentially duplicative. We also
found that additional oversight controls were needed. Specifically,
while Comptroller guidance calls for a historical comparison of claimed
costs, the guidance does not indicate why or how the comparison should
be performed. Additionally, Defense did not verify the currency
conversion rates used by Pakistan from January 2004 through June 2007
and, as a result, may have overpaid Pakistani claims due to the
devaluation of the Pakistan rupee.
Defense Made Payments without Obtaining Detailed Documentation to
Support Pakistani Claims:
The Comptroller's CSF guidance states that Pakistani claims should
include associated invoices. In the absence of such support, CENTCOM
officials should obtain from Pakistan a detailed description of how
these costs were computed. For example, claims for fuel should include
information such as total fuel consumed, the number and types of
vehicles supported, and best available assessments of the number of
miles driven or hours employed. However, we found that few of the
Pakistani claims we reviewed met the criteria contained in the
Comptroller's guidance. For example, 76 percent of the army's costs
from January 2004 through June 2007 lacked sufficient information to
allow Defense to perform basic recalculations needed to verify the
claims, such as quantity times price.[Footnote 16] Despite the lack of
documentation, Defense reimbursed Pakistan more than $2.2 billion. An
official at ODRP with a role in reviewing CSF reimbursement claims
stated that, based on the scarce details provided in the CSF claims, it
was nearly impossible to know the actual cost of claimed items. When we
discussed this issue with the Comptroller's office, they indicated that
the Pakistani claims do not provide enough detail to explain the
context of the costs, which makes it difficult to determine whether the
costs are incremental (i.e., that claimed costs are above and beyond
the partner country's normal operating costs) and, therefore, whether
under the Comptroller's guidance the costs should be reimbursed.
We found other examples where Defense officials did not obtain
sufficient information necessary to validate the claims and did not
adequately document the basis for their decisions to allow or disallow
claims. As a result, there were inconsistencies in Defense's
reimbursement of certain costs. For example, as illustrated in figure
3, Defense paid Pakistani navy claimed costs for boats for about half
of the months and disallowed them the other half, despite no
discernable differences in the level of support the Pakistani
government provided for the claims.
Figure 3: Comptroller Approvals and Disapprovals of Pakistani Navy CSF
Reimbursement Claims for Boats, by Month, December 2005 through June
2007:
This figure is a timeline showing Comptroller approvals and
disapprovals of Pakistani Navy CSF reimbursement claims for boasts, by
month, December 2005 through June 2007.
Month/Year: December 2005;
Disallowed: [Empty];
Paid: [Check].
Month/Year: January 2006;
Disallowed: [Empty];
Paid: [Check].
Month/Year: February 2006;
Disallowed: [Empty];
Paid: [Check].
Month/Year: March 2006;
Disallowed: [Check];
Paid: [Empty].
Month/Year: April 2006;
Disallowed: [Check];
Paid: [Empty].
Month/Year: May 2006;
Disallowed: [Check];
Paid: [Empty].
Month/Year: June 2006;
Disallowed: [Check];
Paid: [Empty].
Month/Year: July 2006;
Disallowed: [Check];
Paid: [Empty].
Month/Year: August 2006;
Disallowed: [Check];
Paid: [Empty].
Month/Year: September 2006;
Disallowed: [Empty];
Paid: [Check].
Month/Year: October 2006;
Disallowed: [Empty];
Paid: [Check].
Month/Year: November 2006;
Disallowed: [Check];
Paid: [Empty].
Month/Year: December 2006;
Disallowed: [Check];
Paid: [Empty].
Month/Year: January 2007;
Disallowed: [Check];
Paid: [Empty].
Month/Year: February 2007;
Disallowed: [Check];
Paid: [Empty].
Month/Year: March 2007;
Disallowed: [Empty];
Paid: [Check].
Month/Year: April 2007;
Disallowed: [Empty];
Paid: [Check].
Month/Year: May 2007;
Disallowed: [Empty];
Paid: [Check].
Month/Year: June 2007;
Disallowed: [Empty];
Paid: [Check].
[See PDF for image]
Source: Defense.
Note: Figure includes all monthly reimbursement claims that itemized
costs for navy rigid hull inflatable boats.
[End of figure]
We identified additional inconsistently reimbursed costs that contained
no discernable differences in the level of support. For example, the
Comptroller generally disallowed Pakistani army claims for bulletproof
jackets but occasionally paid them. Conversely, the Comptroller
generally paid for army telephone cables but occasionally disallowed
these costs. Without better support for the rationale behind disallowed
costs, we could not determine if these costs were reimbursed consistent
with the Comptroller's guidance. According to Defense officials,
payments were made based on informed judgment, however they could not
provide documentation to support each instance.
Defense Paid Costs That May Not Have Been Incremental:
Comptroller guidance states that reimbursement claims must clearly
indicate the incremental nature of the logistical and military support
provided--i.e., that claimed costs are above and beyond the partner
country's normal operating costs. However, we found that the Pakistani
claims did not provide such information, which led to differences among
Defense officials as to whether the claims should be disallowed or
deferred until Pakistan could provide additional support.
Defense paid Pakistan $200 million in radar expenses from January 2004
through February 2007. For the March through June 2007 claims, ODRP
recommended the Comptroller disallow the costs, reasoning that this was
not an incremental expense, as terrorists in the FATA did not have air
attack capability. However, the Comptroller took the position that
Pakistan likely incurred some increased costs by using the radars to
police the airspace over the Northwest Frontier Province (i.e., to
patrol, monitor, and provide air traffic control) and provide air
traffic control for U.S. military support flights into Afghanistan. The
Comptroller nonetheless agreed that the claims lacked sufficient detail
to determine whether these charges were definitively incremental. In
the March through June 2007 claim package, the Comptroller chose to
defer the air defense radar costs until Pakistan could provide better
justification for the charges.
Defense May Have Paid Costs That Were Not Based on Actual Activity or
Expenses:
According to the Comptroller's criteria, both the Comptroller and
CENTCOM are responsible for validating that claimed costs are
associated with actual activities and are based on documentation that
adequately accounts for the support provided. However, the
documentation we reviewed as part of our audit did not provide
sufficient support that all claimed costs were based on actual activity
or expenses. For example, Defense paid more than $30 million for army
road construction[Footnote 17] and over $15 million for army bunker
construction[Footnote 18] without adequate support. Defense paid these
costs despite a CENTCOM recommendation to disallow the claims for road
construction in September and October 2006 due to insufficient
documentation. For the most recent claims processed in February 2008,
covering the months March 2007 through June 2007, concerns about the
validity of these charges led ODRP to request that the Pakistani
military provide the coordinates of the roads and bunkers built. As of
June 2008, Pakistan had not provided this additional information, and
Defense has not paid these costs.
We also found large unexplained differences between the average costs
of food per person for each force, as shown in figure 4.
Figure 4: Average Monthly Food Costs Per Person by Force Reimbursed to
Pakistan Government, September 2004 through June 2007:
This figure is a combination line graph showing average monthly costs
per person by force reimbursed to Pakistan government, September 2004
through June 2007. The X axis represents the years, and the Y axis
represents U.S. dollars.
Month/Year: Sep. 2004;
Cost per (Pakistan air force): 766.23;
Cost per (Pakistan army): 170.65;
Cost per (Pakistan navy): 1085.42.
Month/Year: Oct. 2004;
Cost per (Pakistan air force): 385.98;
Cost per (Pakistan army): 170.74;
Cost per (Pakistan navy): 480.
Month/Year: Nov. 2004;
Cost per (Pakistan air force): 390;
Cost per (Pakistan army): 170.69;
Cost per (Pakistan navy): 495.79.
Month/Year: Dec. 2004;
Cost per (Pakistan air force): 390;
Cost per (Pakistan army): 170.69;
Cost per (Pakistan navy): 479.59.
Month/Year: Jan. 2004;
Cost per (Pakistan air force): 386.86;
Cost per (Pakistan army): 164.96;
Cost per (Pakistan navy): 492.23.
Month/Year: Feb. 2004;
Cost per (Pakistan air force): 386.86;
Cost per (Pakistan army): 164.96;
Cost per (Pakistan navy): 496.4.
Month/Year: Mar. 2004;
Cost per (Pakistan air force): 386.86;
Cost per (Pakistan army): 164.96;
Cost per (Pakistan navy): 447.66.
Month/Year: Apr. 2004;
Cost per (Pakistan air force): 386.86;
Cost per (Pakistan army): 164.96;
Cost per (Pakistan navy): 496.3.
Month/Year: May 2005;
Cost per (Pakistan air force): 386.86;
Cost per (Pakistan army): 165;
Cost per (Pakistan navy): 480.
Month/Year: Jun. 2005;
Cost per (Pakistan air force): 386.86;
Cost per (Pakistan army): 165;
Cost per (Pakistan navy): 444.34.
Month/Year: Jul. 2005;
Cost per (Pakistan air force): 386.86;
Cost per (Pakistan army): 165;
Cost per (Pakistan navy): 549.02.
Month/Year: Aug. 2005;
Cost per (Pakistan air force): 386.86;
Cost per (Pakistan army): 165;
Cost per (Pakistan navy): 528.7.
Month/Year: Sep. 2005;
Cost per (Pakistan air force): 368.57;
Cost per (Pakistan army): 165;
Cost per (Pakistan navy): 636.7.
Month/Year: Oct. 2005;
Cost per (Pakistan air force): 368.57;
Cost per (Pakistan army): 165;
Cost per (Pakistan navy): 651.3.
Month/Year: Nov. 2005;
Cost per (Pakistan air force): 368.57;
Cost per (Pakistan army): 165;
Cost per (Pakistan navy): 630.
Month/Year: Dec. 2005;
Cost per (Pakistan air force): 368.57;
Cost per (Pakistan army): 165;
Cost per (Pakistan navy): 806.
Month/Year: Jan. 2006;
Cost per (Pakistan air force): 368.57;
Cost per (Pakistan army): 165;
Cost per (Pakistan navy): 806.
Month/Year: Feb. 2006;
Cost per (Pakistan air force): 368.57;
Cost per (Pakistan army): 165;
Cost per (Pakistan navy): 806.
Month/Year: Nov. Mar. 2006;
Cost per (Pakistan air force): 368.57;
Cost per (Pakistan army): 181.5;
Cost per (Pakistan navy): 806.
Month/Year: Nov. Apr. 2006;
Cost per (Pakistan air force): 368.57;
Cost per (Pakistan army): 181.5;
Cost per (Pakistan navy): 775.81.
Month/Year: Nov. May. 2006;
Cost per (Pakistan air force): 368.57;
Cost per (Pakistan army): 181.5;
Cost per (Pakistan navy): 775.81.
Month/Year: Nov. Jun. 2006;
Cost per (Pakistan air force): 368.57;
Cost per (Pakistan army): 181.5;
Cost per (Pakistan navy): 780.
Month/Year: Nov. Jul. 2006;
Cost per (Pakistan air force): 409.07;
Cost per (Pakistan army): 181.5;
Cost per (Pakistan navy): 806.
Month/Year: Aug. 2006;
Cost per (Pakistan air force): 409.07;
Cost per (Pakistan army): 181.5;
Cost per (Pakistan navy): 806.
Month/Year: Nov. Sep. 2006;
Cost per (Pakistan air force): 409.07;
Cost per (Pakistan army): 181.5;
Cost per (Pakistan navy): 181.5.
Month/Year: Nov. Oct. 2006;
Cost per (Pakistan air force): 409.07;
Cost per (Pakistan army): 181.5;
Cost per (Pakistan navy): 181.
Month/Year: Nov. Nov. 2006;
Cost per (Pakistan air force): 408.9;
Cost per (Pakistan army): 181.49;
Cost per (Pakistan navy): 431.
Month/Year: Nov. Dec. 2006;
Cost per (Pakistan air force): 408.9;
Cost per (Pakistan army): 181.5;
Cost per (Pakistan navy): 459.
Month/Year: Jan. 2007;
Cost per (Pakistan air force): 408.95;
Cost per (Pakistan army): 181.5;
Cost per (Pakistan navy): 462.2.
Month/Year: Feb. 2007;
Cost per (Pakistan air force): 408.89;
Cost per (Pakistan army): 208.74;
Cost per (Pakistan navy): 378.2.
[See PDF for image]
Source: GAO analysis of food cost data from Defense and troop levels
from Pakistan claims.
Note: Pakistani reimbursement claims January 2004 through August 2004
did not provide sufficient information to allow us to calculate average
food costs per person.
[End of figure]
As figure 4 shows, navy monthly food costs per person were generally
higher than monthly air force and army food costs per person. Navy
claims for food rapidly increased from approximately $445 per sailor in
June 2005 to $800 per sailor in December 2005, while air force and army
food costs per person remained stable. Despite these anomalies, the
Comptroller continued to pay the navy $800 per sailor for food until
September 2006, when the Comptroller partially disallowed these costs,
reducing the cost of navy food to the same amount as that paid for the
army (approximately $200 per person). In November 2006, Defense
approved navy food cost at approximately the same level as that paid
for the air force (approximately $400 per person). However, the
Comptroller deferred all navy food costs for the March through June
2007 claim period (processed in February 2008), pending receipt of
additional justification from Pakistan.
In addition, we found that Defense paid the Pakistani navy more than
$1.5 million in possibly inflated costs for damage to navy vehicles. On
average, Defense paid the Pakistani navy more than $5,700 per vehicle
per month in damages, in comparison with the army's average claim of
less than $100 per vehicle per month.[Footnote 19] According to the
most recent navy claims, these vehicles generally consisted of
passenger cars and SUVs that were not involved in combat. By contrast,
the army vehicles were used to conduct military operations in the FATA
and border region.
Defense Paid Costs That Were Potentially Duplicative:
Comptroller guidance calls for CENTCOM to ensure that costs are not
counted twice; however, none of the CENTCOM memos we reviewed provided
any indication that a review for duplicate costs had been performed. As
a result, Defense paid more than $8.9 million in potentially
duplicative costs. For example, the most recent Pakistani navy claim
(June 2007) includes cost categories titled "vehicle damage" and "cost
of vehicles repaired," but there is no detail provided to explain the
differences between these two categories, and there was insufficient
detail to determine whether some or all of the claimed costs were
unique or duplicative. This claim also included the categories "cost of
fuel for vehicles" and "average cost of running of vehicle deployment
on operation," which could also contain duplicate charges. The detail
provided within these categories was insufficient to determine the
difference between these costs, and therefore they could contain
duplicate charges. Despite this lack of detail, we found that Defense
paid the Pakistani navy an average of over $19,000 per vehicle per
month (more than $3.7 million per year)[Footnote 20] to operate,
maintain, and repair a fleet of fewer than 20 passenger vehicles
without sufficient information to determine that these costs were not
duplicative.
Opportunities Exist to Improve CSF Oversight Controls:
We found deficiencies in the Comptroller's guidance concerning
historical comparison of claimed costs and verification of currency
conversions. Specifically, we found that while Comptroller guidance
calls for a historical comparison of claimed costs, it does not
indicate how this comparison should be performed. In addition, we found
that CSF guidance does not require Defense to identify or evaluate the
exchange rates used to convert claimed costs from Pakistani rupees into
U.S. dollars, and, as a result, potential overbillings may have gone
undetected.
Potentially Significant Cost Fluctuations Were Not Investigated:
The Comptroller guidance calls for the Comptroller to perform a
historical comparison of claimed costs to previous reimbursements made
by the United States for similar support. Such an analysis could
identify costs that do not reflect actual activity levels. However, we
found that the Comptroller's guidance does not describe how the
comparison should be performed. In our audit, we found that some of
Pakistan's claimed costs experienced potentially significant
unexplained fluctuations from month to month. Although the Comptroller
noted some of these fluctuations, we found that it did not investigate
the reasons behind them. For example, Defense paid the army's
largest[Footnote 21] cost claimed in April 2006, which experienced a 12
percent ($2.8 million) increase from March, without investigating this
fluctuation. As a result, Defense may be paying for costs based on
activities that did not occur.
Currency Conversions Were Not Verified:
CSF guidance does not require Defense to identify or evaluate the
exchange rates used for claims presented in U.S. dollars. Foreign
currency exchange rates, such as those computed by the International
Monetary Fund (IMF), fluctuate.[Footnote 22] As a result, transactions
made in a foreign currency can result in transaction gains or losses.
Since January 2004, the Pakistani rupee has declined over 6 percent
against the U.S. dollar. Consequently, fewer dollars should have over
time purchased more rupees, resulting in a lower cost to the CSF
program. Pakistani reimbursement claims are presented in U.S. dollars;
however, the Comptroller did not verify the currency conversions
calculated by Pakistan. Although the Comptroller was not required to do
so, lack of such verification may have resulted in overpayment of
Pakistan claims. For example, on one cost category we reviewed, Defense
may have overpaid more than $1.25 million over 12 months because it did
not consider the currency conversion used to calculate the cost. In
performing our review, we used the claimed amounts[Footnote 23] and
exchange rates that were stated in Pakistan's September and October
2004 claims, and we converted the claimed cost into rupees. We then
converted the claimed cost back into U.S. dollars using the applicable
IMF exchange rates and compared the resulting figure with the amount
paid by Defense. Figure 5 illustrates the results of our analysis and
shows that CSF would have been billed fewer dollars had IMF exchange
rates been used.
Figure 5: Effect of Exchange Rate Fluctuations on One Fixed Pakistani
Claimed Cost, September 2004 through August 2005:
This figure is a combination line graph showing the effect of exchange
rate fluctuations on one fixed Pakistani claimed cost, September 2004
through August 2005. The X axis represents the month and year, and the
Y axis represents U.S. dollars. The lines represent the amounts
claimed, and the amounts converted using IMF exchange rates.
Amounts claimed Amounts converted using IMF exchange rates
Month and Year: Sept.-04;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5629.87.
Month and Year: Oct.-04;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5607.5.
Month and Year: Nov.-04;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5590.04.
Month and Year: Dec.-04;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5579.81.
Month and Year: Jan.-05;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5615.74.
Month and Year: Feb. 2005;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5615.74.
Month and Year: Mar. 2005;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5615.74.
Month and Year: Apr. 2005;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5615.74.
Month and Year: May-05;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5580.71.
Month and Year: June-05;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5562.74.
Month and Year: July-05;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5566.74.
Month and Year: Aug. 2005;
Amounts claimed: 5700;
Amounts converted using IMF exchange rates: 5564.4.
[See PDF for image]
Source: GAO analysis of Pakistani claims and IMF data.
Note: IMF data includes market rate, period average, by month, exchange
rates for U.S. dollars per Pakistan rupee.
[End of figure]
Most of the Pakistani claims do not provide enough information to
determine if the costs were appropriately converted from rupees to
dollars. Therefore, we were unable to calculate the potential
overbilling for all claims for the entire period under review. However,
if Pakistan has been using a fixed exchange rate, then Defense has
likely overpaid its reimbursements. If the rupee continues to decline
against the dollar, future Pakistani claims calculated using a fixed
exchange rate will become more and more inflated over time.
ODRP Began Playing a Larger Role in the CSF Oversight Process in Late
2006; However, ODRP's Continued Oversight Is Not Assured:
Defense's 2003 guidance did not specifically task ODRP with attempting
to verify Pakistani military support and expenses, despite recognition
by Defense officials that such verification is best performed by U.S.
officials in Pakistan, who have direct access to Pakistani officials
and information. As such, ODRP did not try to verify Pakistani CSF
claims until September 2006, when, without any formal guidance or
directive to do so, ODRP began an effort to validate Pakistani military
support and expenses. This increased verification effort contributed to
an increase in the amount of disallowals and deferrals of the Pakistani
government's CSF claims from an average of a little over 2 percent from
January 2004 through August 2006, an average of 6 percent from
September 2006 through February 2007, and 22 percent for the most
recent claims (March 2007 through June 2007) processed in February
2008. Despite this increased effort, there is no assurance that ODRP
will continue this level of oversight because Defense has not issued
formal guidance delineating ODRP verification responsibilities.
Defense Never Formally Tasked ODRP to Attempt to Verify That Pakistani
Military Support Was Provided and That Costs Were Incurred:
According to the Standards for Internal Control in the Federal
Government, clear delegation of authority and responsibility is
important to establishing an effective internal control
system.[Footnote 24] Defense officials in Washington, at CENTCOM, and
at the U.S. Embassy in Islamabad stated that U.S. officials in Pakistan
are best suited to perform primary verification that Pakistani military
support was provided and that claimed costs were actually incurred.
ODRP officers have access to a broad range of Pakistani military
officials, including some involved in military operations, and can
conduct limited field visits and onsite inspections if permitted by the
Pakistani government. By contrast, Comptroller staff are located
thousands of miles from Pakistan and lack the level of access available
to ODRP officials. Despite this, Defense never explicitly tasked ODRP
with performing such verification efforts.
In Pakistan's case, the Comptroller's 2003 guidance did not specify
whether this verification should take place in Pakistan or from CENTCOM
in Florida. The guidance simply indicated that ODRP should assist
Pakistan in formulating their claims. However, the guidance did not
require or suggest that ODRP attempt to verify that Pakistan's claimed
military support had been provided or that its costs were actually
incurred. For example, it did not recommend that ODRP conduct any
oversight activities, such as onsite inspections of completed Pakistani
construction or a comparison of flight hours to maintenance costs.
ODRP Initiated Verification of Pakistani Support and Costs; Contributed
to Increases in the Amount of Claims Deferred or Disallowed:
In late 2006, without any formal guidance or directive to do so from
CENTCOM or the Comptroller, ODRP began an effort to verify that
Pakistani military support was provided and costs were actually
incurred as claimed in the military's requests for reimbursement.
According to ODRP officials, this new effort stemmed from a concern
that some of Pakistan's reported costs may not have been valid or
properly supported. They also stated that the Comptroller's July 2006
presentation to Pakistani officials helped ODRP conduct more detailed
verification because Pakistan began to provide greater detail in its
reimbursement claims. ODRP officials who were in Pakistan from July
2005 through March 2008 stated they had received no training or
guidance from Defense on whether, or how, to conduct verification of
Pakistani reimbursement claims. These officials said that the 2006
presentation was the first time they had seen any guidance on what
could or could not be reimbursed under the CSF program or what type of
information was needed to support Pakistan's reimbursement claims.
As a result, ODRP recommended for the first time that Defense disallow
or defer costs that it found questionable, beginning with Pakistan's
September through October 2006 claim. For example, ODRP recommended
that the Comptroller disallow payments to Pakistan for procurement of
bulletproof vests, radios, and road construction due to insufficient
information necessary to verify the costs. Defense eventually
disallowed approximately $13 million of the September through October
2006 reimbursement claim.
ODRP's increased verification efforts contributed to significantly
larger disallowals and deferrals ($81.2 million) in the most recently
processed (February 2008) Pakistan government reimbursement claims for
the months of March through June 2007. ODRP recommended deferring
payment on $38.1 million in claimed costs until the Pakistani
government provided information necessary to verify its claims. For
example, ODRP recommended deferring payment to Pakistan on its
reimbursement request for $22.3 million in helicopter maintenance
costs. ODRP found that even though the United States had paid Pakistan
$55 million in CSF reimbursements for maintenance of helicopters in the
border area, only a few of these helicopters were fully
operational.[Footnote 25] According to ODRP officials, the Pakistani
army was not maintaining the helicopters, causing essential systems to
malfunction. Given the poor readiness rates, ODRP recommended that the
Comptroller defer payment on Pakistan's helicopter maintenance claims
until a process could be implemented to ensure that Pakistan could
maintain its helicopter fleet. ODRP also recommended disallowing
payment on an additional $42.3 million to Pakistan for such things as
air defense radars, procurement of tents and vests, and funding for
Pakistan's joint staff headquarters operations.
After ODRP submitted its recommendations, CENTCOM and the Comptroller
performed their own reviews of the reimbursement claim (see fig. 6).
Figure 6: Reimbursement Process for Pakistani Claims, March through
June 2007:
This figure is a flowchart showing the reimbursement process for
Pakistani claims, March through June 2007.
[See PDF for image]
Source: GAO analysis of Defense oversight documentation.
[End of figure]
The Comptroller disagreed with some of ODRP's recommendations. For
example, ODRP recommended disallowing $26.4 million for the maintenance
of air defense radars since terrorists in the border region possessed
no air force. The Comptroller noted, however, that these radars could
also provide air traffic control for Pakistani military aircraft
operating in the area and for U.S. military flights to Afghanistan. As
a result, the Comptroller modified ODRP's recommendations to disallow
certain costs and instead deferred payment on these costs until
Pakistan could provide more information to support the reimbursement
request. However, as of May 2008, Defense has not paid any of these
deferred CSF costs because Pakistan has not provided evidence to
indicate that these costs were valid. Figure 7 shows the increased CSF
disallowals and deferrals during ODRP's increased oversight activity in
the September through October 2006 claims, and particularly in the
latest claim period (March through June 2007), when Defense disallowed
or deferred a total of $81.2 million over these four months.
Figure 7: Pakistani CSF Reimbursement Claims Disallowed or Deferred,
January 2004 through June 2007:
This figure is a line graph showing Pakistani CSF reimbursement claims
disallowed or deferred, January 2004 through 2007. The X axis
represents the month/year, and the Y axis represents the U.S. dollars
(in millions). Between September 2006 and Jube 2007, the graph shows
increased ODRP oversight.
Month/year: Jan. 2004;
U.S. dollars: 2.
Month/year: Feb. 2004;
U.S. dollars: 2.
Month/year: Mar. 2004;
U.S. dollars: 3.
Month/year: Apr. 2004;
U.S. dollars: 3.
Month/year: May 2004;
U.S. dollars: 3.
Month/year: June 2004;
U.S. dollars: 3.
Month/year: July 2004;
U.S. dollars: 7.
Month/year: Aug. 2004;
U.S. dollars: 5.7903.
Month/year: Sept. 2004;
U.S. dollars: 0.
Month/year: Oct. 2004;
U.S. dollars: 0.
Month/year: Nov. 2004;
U.S. dollars: 0.
Month/year: Dec. 2004;
U.S. dollars: 0.
Month/year: Jan. 2005;
U.S. dollars: 2.
Month/year: Feb. 2005;
U.S. dollars: 0.
Month/year: Mar. 2005;
U.S. dollars: 3.
Month/year: Apr. 2005;
U.S. dollars: 0.
Month/year: May 2005;
U.S. dollars: 1.
Month/year: June 2005;
U.S. dollars: 1.
Month/year: July 2005;
U.S. dollars: 1.
Month/year: Aug. 2005;
U.S. dollars: 2.
Month/year: Sept. 2005;
U.S. dollars: 4.
Month/year: Oct. 2005;
U.S. dollars: 0.
Month/year: Nov. 2005;
U.S. dollars: 0.
Month/year: Dec. 2005;
U.S. dollars: 0.
Month/year: Jan. 2006;
U.S. dollars: 2.
Month/year: Feb. 2006;
U.S. dollars: 1.
Month/year: Mar. 2006;
U.S. dollars: 1.
Month/year: Apr. 2006;
U.S. dollars: 1.
Month/year: May 2006;
U.S. dollars: 3.
Month/year: June 2006;
U.S. dollars: 4.
Month/year: July 2006;
U.S. dollars: 1.
Month/year: Aug. 2006;
U.S. dollars: 2.
Month/year: Sept. 2006;
U.S. dollars: 6.
Month/year: Oct. 2006;
U.S. dollars: 7.
Month/year: Nov. 2006;
U.S. dollars: 6.
Month/year: Dec. 2006;
U.S. dollars: 5.
Month/year: Jan. 2007;
U.S. dollars: 5.
Month/year: Feb. 2007;
U.S. dollars: 4.
Month/year: Mar. 2007;
U.S. dollars: 23.
Month/year: Apr. 2007;
U.S. dollars: 22.
Month/year: May. 2007;
U.S. dollars: 21.
Month/year: June. 2007;
U.S. dollars: 15.
[See PDF for image]
Source: Defense.
Note: There is a lag between the claimed period and Defense's
reimbursement of claims. At the time of the issue of this report, the
March through June 2007 claims, reimbursed in February 2008, were the
latest round of claims reimbursed by Defense. GAO has not verified the
reliability of Comptroller's data processing.
[End of figure]
The amount disallowed or deferred for March through June 2007
represents a significant increase in CSF oversight by Defense. For
example, from January 2004 through August 2006, Defense disallowed or
deferred an average of a little more than 2 percent of each monthly
Pakistani reimbursement claim, for a total of $59.4 million over a 32-
month period. In comparison, the average percentage of Pakistani claims
disallowed or deferred for September 2006 through February 2007 was 6
percent or $33.3 million over a 6-month period and for the most recent
claims (March 2007 through June 2007) processed in February 2008, was
approximately 22 percent, or $81.2 million in a four month period. This
four month period accounts for approximately 53 percent of the total
CSF funding disallowed or deferred by Defense since January 2004
($173.92 million).
Based on our assessment, it appears that ODRP began this increased
oversight effort without any formal guidance or directive to do so. The
Comptroller has provided no formal guidance that stipulates ODRP should
verify that Pakistani military support has actually been performed and
that expenses were actually incurred. Furthermore, officials at ODRP
from 2005 to early 2008 said that the Comptroller had provided no
guidance or training on the level of oversight they should provide.
Despite this lack of guidance, in November 2007, officials at the
Comptroller and the Office of the Under Secretary of Defense for Policy
stated that ODRP was in fact responsible for performing this oversight.
However, as of May 2008, Defense had not formalized any new guidance on
ODRP's verification responsibilities.
No Guidance to Ensure Continued Oversight by ODRP:
Despite ODRP's increased oversight activity, continuity of this
oversight is not assured. According to Standards for Internal Control
in the Federal Government, clear delegation of authority and
responsibility is important to establishing an effective internal
control system.[Footnote 26] However, as of May 2008, ODRP continued to
lack formal guidance or training that explicitly described either its
oversight responsibilities or the procedures for conducting such
oversight. Staff at ODRP stated they had previously received little to
no guidance or training on their specific role in analyzing Pakistani
CSF reimbursement claims. Formal guidance is especially important in
Pakistan, where U.S. officials are generally limited to 1-year tours
due to the status of the U.S. mission in Islamabad as a high-risk post.
Because of the constant turnover of Defense officials in Pakistan,
clear guidance is needed to ensure the continuity of oversight efforts.
In addition, the Comptroller has never provided guidance on how ODRP
and Defense representatives in other sovereign countries should verify
that the countries actually provided military support and that expenses
were actually incurred. ODRP is largely dependent upon the quality of
information supplied by the Pakistani military. According to Defense
officials, Defense lacks the authority to audit the internal finances
of the Pakistani military. Because of this, ODRP staff described their
analysis as "macro-level verification," whereby the reasonableness of
high-level costs reported in the Pakistani claim is judged through a
comparison with other information. For example, ODRP's recommendation
to defer helicopter maintenance costs in the March through June 2007
claims stemmed from their comparison of Pakistan's reported maintenance
costs against ODRP's knowledge of the low readiness rates of Pakistan's
helicopters. Although such analyses can be supplanted by anecdotal
information from discussions with Pakistani military officials or
through occasional visits to the field, according to ODRP, the
Pakistani government strictly controls foreigners' access to the FATA,
making spot-checks difficult. The Pakistani submissions are, therefore,
the chief component of the ODRP analysis.
ODRP officials said they doubted that ODRP would ever be able to fully
verify actual costs in Pakistan. First, the Pakistani military reports
costs to ODRP that are already aggregates of many smaller costs. For
example, food cost would include costs for procurement, transport,
storage, and field preparation that ODRP cannot directly monitor.
Furthermore, according to ODRP, although the Pakistani government
generally keeps detailed financial records, these records are usually
in paper form and electronic record keeping is rare. Additionally, the
Pakistani military does not possess automated systems to track
logistics and supplies. Because of these factors, information retrieval
from the field and collation at the Pakistani joint staff level can
take a great deal of time and may entail a certain amount of
approximation and averaging. Given Pakistan's record-keeping systems,
it is unclear to what level of precision ODRP should be expected to
verify Pakistani support and incurred costs.
Conclusions:
Coalition Support Funds are critical components of America's global war
on terror and the primary support for Pakistani operations to destroy
the terrorist threat and close the terrorist safe haven in Pakistan's
FATA. Following the attacks of September 11, 2001, Congress quickly
authorized emergency funding to prevent another attack, and given the
grave and immediate threat at the time, Congress recognized that
ensuring accountability for these funds was secondary to protecting the
nation from another attack. However, given the large amounts of funding
provided to Pakistan since October 2001, and indications that Pakistan
will continue to receive such payments in the future, we believe that
Defense should ensure it follows its own guidance and consider what
other guidance is needed.
Our assessment found that while CSF played a key role in Pakistan's
support for our war on terror, Defense had not followed its existing
guidance and provided little oversight of the effort at the embassy in
Pakistan. Defense had concerns about the accuracy of Pakistan's claims
from the very first claim submitted in 2001. Based on the lack of
supporting evidence in the Pakistani claims from January 2004 through
June 2007 (the latest claims reimbursed by Defense), we found that
neither Defense nor we could determine if Pakistan had actually
incurred most of the costs in their claims. Prior to 2004, it appears
that there was even less evidence to support Pakistan's claims. As a
result, we conclude that Defense cannot accurately determine how much
of the $5.56 billion in costs reimbursed to Pakistan since 2001 were
actually incurred.
As a result of these and other findings, we believe that Defense should
consistently implement its own CSF guidance to fully verify Pakistani
claims and ensure the effective use of CSF in meeting key U.S. national
security goals. While we recognize that CSF is used to support 27
countries in fighting terrorism, the fact that Pakistan receives 81
percent of these funds indicates that Defense should provide oversight
procedures that reflect the role Pakistan plays as both the major
recipient of CSF and its role in supporting U.S. national security
objectives in Pakistan and Afghanistan. Additionally, we recognize that
Defense may not be able to fully verify all Pakistani claims without
having the ability to access the Pakistani government's records and
make site visits or conduct spot checks. ODRP's recent increased
efforts, however, show that greater oversight may be achieved through
the use of U.S. representatives in Pakistan.
Recommendations for Executive Action:
To improve the impact and oversight of CSF payments to Pakistan, we
make the following five recommendations to the Secretary of Defense:
* Consistently implement existing criteria to disallow or defer
Pakistani claims that do not include the documentation needed to verify
the claims.
* Define and formalize the roles and responsibilities of ODRP.
* Work with the government of Pakistan to develop procedures to allow
ODRP or other U.S. representatives to conduct greater oversight of CSF
use in Pakistan, including the potential use of onsite inspections.
* Clarify guidance for Comptroller analysis of cost fluctuations.
* Develop and apply criteria to evaluate currency exchange rates to
ensure that the U.S. government is not overpaying for Pakistan
operations.
Agency Comments and Our Evaluation:
Defense provided written comments on the report, which are reproduced
in appendix II.
Defense generally concurred with our recommendations, and indicated
they had updated their CSF guidance to incorporate our recommendations.
We plan to review this guidance when it is made available to us. In
addition, Defense's comments noted that our report did not give
sufficient weight to three areas. These include the Pakistan's
significant contributions to the global war on terror enabled by CSF;
the fact that the Department has adhered to the law; and that Pakistan
is a sovereign country that may not meet U.S. accounting and
administration standards. However, our report does reflect Pakistan's
efforts in combating terrorism and the role of CSF. Furthermore, we
note several times that Congress granted the Secretary of Defense the
authority to make CSF payments in such amounts as the Secretary may
determine in his discretion, based on documentation determined by the
Secretary of Defense to adequately account for the support provided.
Although we acknowledge that there are limitations in any arrangement
with another sovereign nation, we believe that Defense should work more
closely with Pakistan to improve their capacity to support these
claims. We note that the information provided by Pakistan has improved
over time, particularly when Defense has provided additional guidance
to Pakistan. For example, following the Comptroller's visit to Pakistan
in 2006, Pakistan's more detailed submissions allowed ODRP to conduct
greater oversight of Pakistan's claims, leading to the increases in
deferrals and disallows in late 2006 and 2007. In addition, we did not
assume that Pakistan could provide receipts for all items; we assessed
whether Defense followed its guidelines. According to the Comptroller's
guidelines, a recipient country's reimbursement claim must contain
quantifiable information and supporting documentation on how costs were
derived so Defense can validate the claim. Most of Pakistan's claims
that we reviewed lacked this information.
We also received technical comments from Defense, which we have
incorporated throughout the report, where appropriate.
We are sending copies of this report to interested congressional
committees, as well as the Secretaries of State and Defense. We will
also make copies available to others upon request. In addition, the
report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-7331 or johnsoncm@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major contributions
to this report are listed in appendix IV.
Signed by:
Charles Michael Johnson Jr.:
Director, International Affairs and Trade:
List of Requesters:
The Honorable Howard L. Berman:
Chairman:
The Honorable Ileana Ros- Lehtinen:
Ranking Member:
Committee on Foreign Affairs:
House of Representatives:
The Honorable Gary L. Ackerman:
Chairman:
The Honorable Mike Pence:
Ranking Member:
Subcommittee on the Middle East and South Asia:
Committee on Foreign Affairs:
House of Representatives:
The Honorable John F. Tierney:
Chairman:
The Honorable Christopher Shays:
Ranking Member:
Subcommittee on National Security and Foreign Affairs:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Tom Harkin:
The Honorable Robert Menendez:
United States Senate:
[End of section]
Appendix I: Scope and Methodology:
Legislation governing the Coalition Support Funds (CSF) program states
that the Secretary of Defense's determination whether documentation
adequately supports reimbursement to key cooperating nations is final
and conclusive. Our review therefore focused on the extent to which
Defense has applied its own guidance to validate reimbursements and on
Office of the Defense Representative to Pakistan's (ODRP) role in this
process. To conduct our review, we obtained information on current
procedures from relevant officials at the Office of the Under Secretary
of Defense for Comptroller (Comptroller), the Office of the Under
Secretary of Defense for Policy, U.S. Central Command (CENTCOM), ODRP,
and the State Department's Bureau of Political-Military Affairs. We
also examined all CSF oversight documentation provided to us, including
Pakistani government reimbursement claims, ODRP memos, CENTCOM
validation memos, Comptroller evaluations, and other CSF documentation
from February 2002 through June 2007 (the latest period of support
reimbursed by Defense.) Additionally, we examined all Defense CSF
guidance provided to us.
To examine the extent to which Defense has applied its guidance to
validate costs claimed by Pakistan, we first reviewed a December 2003
Defense Inspector General report[Footnote 27] that cited deficiencies
in the CSF oversight process from October 2001 through May 2003.
Because this report led to new CSF oversight guidance in December 2003,
our assessment of Defense's oversight controls focused on 42 monthly
reimbursement claims submitted by the Pakistani government from January
2004 to June 2007. As part of our data reliability process, we
confirmed that the data provided by the Comptroller were accurately
recorded in the software we used to analyze the data. We did not verify
the reliability of Comptroller's data processing. As part of this
review, we examined all available Comptroller criteria and guidance--
including the December 2003 guidance, as well as the July 2006
presentation to the Pakistani government and the February 2008
flowchart. Using the Comptroller criteria, the internal control
standards, and general cost accounting criteria for adequacy,
eligibility, and reasonableness, we:
* recalculated selected portions of Pakistani claims for mathematical
accuracy;
* reviewed items included in claims and noted items that may be
nonincremental under CSF, duplicative charges, and questionable dollar
amounts for the charges;
* compared selected claims and payments over time to analyze
consistency of charges disallowed;
* reviewed ODRP cables and memos, CENTCOM analyses, and Comptroller
analyses for support for charges, disallowed amounts, and fluctuations
in claimed amounts;
* compared supporting documentation to Comptroller-issued criteria to
determine compliance; and:
* compared supporting documentation to internal control criteria to
determine the sufficiency of Comptroller criteria and current oversight
procedures.
To assess the oversight role played by ODRP, we met with the officials
noted above, as well as with other officials from the U.S. Embassy and
Pakistan's Ministries of Defense and Interior. We visited Peshawar,
near the Federally Administered Tribal Areas, to conduct discussions
with the U.S. consulate and Pakistan's 11th Army Corps and Frontier
Corps regarding operations being reimbursed with CSF funds. We also
examined all of the previously mentioned CSF oversight documents and
guidance.
We conducted this performance audit from September 2007 to June 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the Department of Defense:
The Assistant Secretary Of Defense:
2700 Defense Pentagon:
Washington, DC 20301-2700:
Asian & Pacific Security Affairs:
Mr. Charles Johnson Jr.:
Director, International Counterterrorism Issues, International Affairs
and Trade:
Government Accountability Office:
441 G Street, N.W.:
Washington, D.C. 20548:
Mr. Johnson:
This is the Department of Defense (DoD) response to the GAO Draft
Report, "Combating Terrorism: Increased Oversight and Accountability
Over Pakistan Reimbursement Claims for Coalition Support Funds Needed
(GAO-08-806)," dated June 16, 2008.
We have enclosed comments addressing the report. My point of contact is
Mr. Eric Lebson, 703-697-3754, or e-mail: eric.lebson@osd.mil.
Sincerely,
Signed:
for James J. Shinn:
GAO Draft Report Dated June 16, 2008 Gao-08-806:
"Combating Terrorism: Increased Oversight and Accountability Over
Pakistan Reimbursement Claims for Coalition Support Funds Needed,"
Department Of Defense Comments On The Draft Report By GAO On Coalition
Support Funds:
The Department of Defense (DoD) appreciates the opportunity to comment
on this draft report. DoD welcomes periodic reviews on the
administration of critical DoD programs like Coalition Support Funds
(CSF) and looks forward to recommendations to enhance effectiveness and
oversight. In the case of this investigation, however, DoD believes the
draft of the final report fails to give sufficient weight to three key
areas:
* The context in which CSF evolved, the significant contribution to the
Global War on Terror (GWoT) that Pakistan has made and that CSF
enabled, and the required flexibility in guidance and processes for
contingency environments.
* The fact that the Department has consistently adhered to the letter
and spirit of the law while continuously providing oversight and
analysis of submissions.
* That Pakistan and several other recipients of reimbursements under
the CSF authority are sovereign countries that may not meet U.S.-
comparable standards of accounting and administration.
CSF Context:
During the buildup and initial phases of Operation Enduring Freedom
(OEF), Pakistan allowed the U.S. nearly unlimited use of its airspace,
made available four of its air bases and one seaport for staging and
onward movement of deploying coalition forces, provided jet fuel and
other utilities at these locations, and deployed substantial ground
forces to provide force protection. In December 2001, at U.S. request,
the Pakistan Army deployed major ground forces for the first time in
its history into the largely ungoverned Federally Administered Tribal
Areas (FATA) to attempt to capture remnants of Al Qaeda and Afghan
Taliban forces fleeing into Pakistan from the Tora Bora area of
Afghanistan.
As of October 2007, approximately 40 percent of fuel (roughly 120,000
gallons per day) and 84 percent of all containerized cargo for delivery
to Coalition forces operating in Afghanistan passed through Pakistan.
Pakistan's cooperation in facilitating this support is a critical
component of the Coalition's ability to operate in Afghanistan.
The financial demands of military operations and other contributions to
OEF on the relatively restricted Pakistan defense budget (approximately
$2.5 billion in 2001) quickly threatened to become unsustainable.
Initially, the U.S. used a variety of methods to reimburse Pakistan and
other coalition partners for their contributions to OEF and the GWoT,
which eventually resulted in Congress providing the CSF authority.
Without the CSF authority or a similar mechanism to reimburse Pakistan
for its level of effort in OEF, it is unlikely that Pakistan would have
the financial capacity to deploy and maintain sizable military forces
in the FATA and other locations along the Pakistan- Afghanistan border
to support U.S. and International Security Assistance Force (ISAF)
military operations in Afghanistan. Such support has been significant.
Since December 2001, Pakistan has conducted 91 major and countless
small operations in the FATA and other locations along the border with
Afghanistan.
The cost to Pakistan of these operations, in human terms, has been
significant. Approximately 1,400 Pakistani security forces members have
lost their lives since 2001 in the GWoT; since July 2007, over 700
Pakistanis have been killed by suicide bombings. CSF reimbursements to
Pakistan have been a significant factor in Pakistan's ability to assist
U.S. operations in the GWoT.
DoD Oversight of CSF:
DoD regularly reviews implementation of the CSF program to ensure it is
effective and complies with Congressional intent. DoD frequently
refines the review and approval process for CSF reimbursements to adapt
to coalition country systems and to apply lessons learned in the
contingency environment. A series of meetings with involved parties
took place in conjunction with the 2006 revision. OSD Comptroller is
presently promulgating revised 2008 guidance. Useful inputs from
independent entities – such as the DoD Inspector General and the
Government Accountability Office (GAO) – combined with our internal
initiatives and visits with responsible parties throughout the process
have, and will continue to, enhance oversight and facilitate improved
communications and consistency. The various offices within the U.S.
Embassy in Islamabad, U.S. Central Command, and the Office of the
Secretary of Defense each play a role in managing the program and in
identifying opportunities for enhancement.
Pakistan – like the other 26 recipient nations of CSF – is a sovereign
country. Their bookkeeping standards, processes and sensitivity about
military operations are different and, at times, less transparent than
our own. The political circumstances under which nations like Pakistan
operate make their processes somewhat different from our own. In
addition, the tribal areas of Pakistan are `denied areas' – not only to
U.S. forces, but largely to Pakistani military forces as well. This
impacts their responsiveness, apparent transparency, and ability to
work with us on the ground to conduct on-site verification of claimed
expenses. The Government of Pakistan provides documentation for all of
its CSF claims. However, the GAO appears to operate on a presumption
that receipts are available for all items, when the reality is that
receipts are not readily available for helicopter flying hours, road
building and maintenance of tracks in a combat zone. In cases where
receipts are not available, DoD procedures provide for the use of a
comparison with U.S. costs for similar operations as an important tool
in analyzing reasonableness.
DoD Responses to GAO Recommendations:
* Recommendation 1: The GAO recommends that the Secretary of Defense
consistently implement existing criteria to disallow or defer Pakistani
claims that do not supply the documentation needed to verify their
claims. (p. 39/GAO Draft Report)
DOD Response: Partially concur. The Department concurs with the
importance of following a set of criteria to support approval of
payments while simultaneously accommodating the fact that partner
countries often do not have financial systems, recordkeeping
procedures, and data transparency comparable to the United States. The
Department has clarified its guidance to emphasize the criteria used to
approve payments when invoices, receipts, or contracts are not
available to substantiate claims. Such criteria will include non-
financial indicators such as the size and scope of the mission for
which costs are claimed. In the absence of detailed documentation, the
Department will continue to evaluate claims under authority provided by
statute.
* Recommendation 2: The GAO recommends that the Secretary of Defense
define and formalize the roles and responsibilities of the Office of
Defense Representative to Pakistan (ODRP). (p. 39/CIAO Draft Report)
DOD Response: Concur. The Department updated its guidance to clarify
the roles and responsibilities of the U.S. Embassy personnel assigned
to interact with cooperating nations on the subject of CSF
reimbursements.
* Recommendation 3: The GAO recommends that the Secretary of Defense
work with the Government of Pakistan to develop procedures to allow the
Office of Defense Representative to Pakistan or other U.S.
representatives to conduct greater oversight of coalition support funds
use in Pakistan, including the potential use of on-site monitoring. (p.
39/GAO Draft Report)
DOD Response: Concur. The Government of Pakistan does not permit access
to the FATA to U.S. forces; therefore, certain operations require
Pakistani forces to perform actions unaccompanied by U.S. on-site
monitors. Pakistan has legitimate concerns about the safety of U.S.
government representatives on tribal territory when they are operating
in such close proximity to Al Qaeda and/or the Taliban. Because CSF is
a reimbursement for expenses already incurred by Pakistan, on-site
monitoring is not a realistic verification requirement. However, to the
degree possible, Embassy and ODRP personnel work with Pakistani
officials to conduct on-site inspections as a regular element of our
security assistance relationship. DoD will continue to seek out such
opportunities.
* Recommendation 4: The GAO recommends that the Secretary of Defense
clarify guidance for Comptroller analysis of cost fluctuations. (p.
39/GAO Draft Report)
DOD Response: Concur. The Department has already incorporated this
recommendation into its revised guidance.
* Recommendation 5: The GAO recommends that the Secretary of Defense
develop and apply criteria to evaluate currency exchange rates to
ensure that the U.S. Government is not overpaying for Pakistan
operations. (p. 39/GAO Draft Report)
DOD Response: Concur. The Department has already incorporated this
recommendation into its revised guidance.
[End of section]
Appendix III Pakistan CSF Reimbursement Claims, January 2004-June
2007A:
Table 2:
Date: Jan. 04;
Pakistan request: $60,531,000;
Defense reimbursement: $58,251,000;
Disallowed or deferred: $2,280,000;
Percentage of claim disallowed or deferred: 3.77%.
Date: Feb. 04;
Pakistan request: 65,334,100;
Defense reimbursement: 62,981,000;
Disallowed or deferred: 2,353,100;
Percentage of claim disallowed or deferred: 3.60.
Date: Mar. 04;
Pakistan request: 79,541,600;
Defense reimbursement: 76,886,000;
Disallowed or deferred: 2,655,600;
Percentage of claim disallowed or deferred: 3.34.
Date: Apr. 04;
Pakistan request: 84,890,100;
Defense reimbursement: 82,094,200;
Disallowed or deferred: 2,795,900;
Percentage of claim disallowed or deferred: 3.29.
Date: May 04;
Pakistan request: 79,861,372;
Defense reimbursement: 77,287,372;
Disallowed or deferred: 2,574,000;
Percentage of claim disallowed or deferred: 3.22.
Date: June 04;
Pakistan request: 95,048,300;
Defense reimbursement: 327,033,276[B];
Disallowed or deferred: 3,097,000;
Percentage of claim disallowed or deferred: 3.26.
Date: July 04;
Pakistan request: 96,857,000;
Defense reimbursement: 90,345,700;
Disallowed or deferred: 6,511,300;
Percentage of claim disallowed or deferred: 6.72.
Date: Aug. 04;
Pakistan request: 115,104,000;
Defense reimbursement: 109,313,700;
Disallowed or deferred: 5,790,300;
Percentage of claim disallowed or deferred: 5.03.
Date: Sept. 04;
Pakistan request: 93,246,580;
Defense reimbursement: 92,784,580;
Disallowed or deferred: 462,000;
Percentage of claim disallowed or deferred: 0.50.
Date: Oct. 04;
Pakistan request: 89,067,574;
Defense reimbursement: 88,625,574;
Disallowed or deferred: 442,000;
Percentage of claim disallowed or deferred: 0.50.
Date: Nov. 04;
Pakistan request: 79,928,000;
Defense reimbursement: 79,856,000;
Disallowed or deferred: 72,000;
Percentage of claim disallowed or deferred: 0.09.
Date: Dec. 04;
Pakistan request: 75,478,500;
Defense reimbursement: 75,114,600;
Disallowed or deferred: 363,900;
Percentage of claim disallowed or deferred: 0.48.
Date: Jan. 05;
Pakistan request: 87,255,700;
Defense reimbursement: 85,661,800;
Disallowed or deferred: 1,593,900;
Percentage of claim disallowed or deferred: 1.83.
Date: Feb. 05;
Pakistan request: 80,535,500;
Defense reimbursement: 80,219,300;
Disallowed or deferred: 316,200;
Percentage of claim disallowed or deferred: 0.39.
Date: Mar. 05;
Pakistan request: 89,853,500;
Defense reimbursement: 86,698,400;
Disallowed or deferred: 3,155,100;
Percentage of claim disallowed or deferred: 3.51.
Date: Apr. 05;
Pakistan request: 67,431,200;
Defense reimbursement: 67,102,600;
Disallowed or deferred: 328,600;
Percentage of claim disallowed or deferred: 0.49.
Date: May 05;
Pakistan request: 70,048,300;
Defense reimbursement: 68,608,500;
Disallowed or deferred: 1,439,800;
Percentage of claim disallowed or deferred: 2.06.
Date: June 05;
Pakistan request: 70,072,000;
Defense reimbursement: 68,722,000;
Disallowed or deferred: 1,350,000;
Percentage of claim disallowed or deferred: 1.93.
Date: July 05;
Pakistan request: 73,036,600;
Defense reimbursement: 71,646,500;
Disallowed or deferred: 1,390,100;
Percentage of claim disallowed or deferred: 1.90.
Date: Aug. 05;
Pakistan request: 74,050,500;
Defense reimbursement: 72,467,600;
Disallowed or deferred: 1,582,900;
Percentage of claim disallowed or deferred: 2.14.
Date: Sept. 05;
Pakistan request: 82,246,400;
Defense reimbursement: 78,564,600;
Disallowed or deferred: 3,681,800;
Percentage of claim disallowed or deferred: 4.48.
Date: Oct. 05;
Pakistan request: 89,090,868;
Defense reimbursement: 88,856,000;
Disallowed or deferred: 234,868;
Percentage of claim disallowed or deferred: 0.26.
Date: Nov. 05;
Pakistan request: 75,446,693;
Defense reimbursement: 75,446,693;
Disallowed or deferred: 0;
Percentage of claim disallowed or deferred: 0.00.
Date: Dec. 05;
Pakistan request: 71,453,834;
Defense reimbursement: 71,453,495;
Disallowed or deferred: 339;
Percentage of claim disallowed or deferred: 0.00[C].
Date: Jan. 06;
Pakistan request: 80,939,674;
Defense reimbursement: 79,400,674;
Disallowed or deferred: 1,539,000;
Percentage of claim disallowed or deferred: 1.90.
Date: Feb. 06;
Pakistan request: 78,962,330;
Defense reimbursement: 78,406,260;
Disallowed or deferred: 556,070;
Percentage of claim disallowed or deferred: 0.70.
Date: Mar. 06;
Pakistan request: 89,039,426;
Defense reimbursement: 87,766,027;
Disallowed or deferred: 1,273,399;
Percentage of claim disallowed or deferred: 1.43.
Date: Apr. 06;
Pakistan request: 93,058,372;
Defense reimbursement: 92,032,823;
Disallowed or deferred: 1,025,549;
Percentage of claim disallowed or deferred: 1.10.
Date: May 06;
Pakistan request: 89,588,661;
Defense reimbursement: 86,283,491;
Disallowed or deferred: 3,305,170;
Percentage of claim disallowed or deferred: 3.69.
Date: June 06;
Pakistan request: 104,869,074;
Defense reimbursement: 100,877,374;
Disallowed or deferred: 3,991,700;
Percentage of claim disallowed or deferred: 3.81.
Date: July 06;
Pakistan request: 100,918,230;
Defense reimbursement: 99,607,230;
Disallowed or deferred: 1,311,000;
Percentage of claim disallowed or deferred: 1.30.
Date: Aug. 06;
Pakistan request: 99,609,440;
Defense reimbursement: 97,656,140;
Disallowed or deferred: 1,953,300;
Percentage of claim disallowed or deferred: 1.96.
Date: Sept. 06;
Pakistan request: 89,480,274;
Defense reimbursement: 83,249,465;
Disallowed or deferred: 6,230,809;
Percentage of claim disallowed or deferred: 6.96.
Date: Oct. 06;
Pakistan request: 95,299,466;
Defense reimbursement: 88,126,587;
Disallowed or deferred: 7,172,879;
Percentage of claim disallowed or deferred: 7.53.
Date: Nov. 06;
Pakistan request: 95,785,981;
Defense reimbursement: 90,183,688;
Disallowed or deferred: 5,602,293;
Percentage of claim disallowed or deferred: 5.85.
Date: Dec. 06;
Pakistan request: 91,370,854;
Defense reimbursement: 86,146,231;
Disallowed or deferred: 5,224,623;
Percentage of claim disallowed or deferred: 5.72.
Date: Jan. 07;
Pakistan request: 90,750,144;
Defense reimbursement: 85,535,351;
Disallowed or deferred: 5,214,793;
Percentage of claim disallowed or deferred: 5.75.
Date: Feb. 07;
Pakistan request: 89,482,052;
Defense reimbursement: 85,628,299;
Disallowed or deferred: 3,853,753;
Percentage of claim disallowed or deferred: 4.31.
Date: Mar. 07;
Pakistan request: 95,392,884;
Defense reimbursement: 71,899,270;
Disallowed or deferred: 23,493,614;
Percentage of claim disallowed or deferred: 24.63.
Date: Apr. 07;
Pakistan request: 92,914,150;
Defense reimbursement: 71,145,810;
Disallowed or deferred: 21,768,340;
Percentage of claim disallowed or deferred: 23.43.
Date: May 07;
Pakistan request: 90,265,124;
Defense reimbursement: 69,536,440;
Disallowed or deferred: 20,728,684;
Percentage of claim disallowed or deferred: 22.96.
Date: June 07;
Pakistan request: 84,353,540;
Defense reimbursement: 69,153,140;
Disallowed or deferred: 15,200,400;
Percentage of claim disallowed or deferred: 18.02.
Date: Totals;
Pakistan request: $3,597,488,897;
Defense reimbursement: $3,658,654,790[B];
Disallowed or deferred: $173,916,083;
Percentage of claim disallowed or deferred: [Empty].
Date: Prior to increased ODRP role.
Date: Jan. 2004-Aug. 2006 avg. monthly disallow/defer;
Disallowed or deferred: 2.15%;
Percentage of claim disallowed or deferred: [Empty].
Date: Jan. 2004-Aug. 2006 total disallow/defer;
Disallowed or deferred: $59,425,895;
Percentage of claim disallowed or deferred: [Empty].
Date: Post increased ODRP role.
Date: Sept. 2006-Feb. 2007 avg. monthly disallow/defer;
Disallowed or deferred: 6.02%;
Percentage of claim disallowed or deferred: [Empty].
Date: Sept. 2006-Feb. 2007 total disallow/defer;
Disallowed or deferred: $33,299,150;
Percentage of claim disallowed or deferred: [Empty].
Date: Mar.-June 2007 avg. monthly disallow/defer;
Disallowed or deferred: 22.26%;
Percentage of claim disallowed or deferred: [Empty].
Date: Mar.-June 2007 total disallow/defer;
Disallowed or deferred: $81,191,038;
Percentage of claim disallowed or deferred: [Empty].
Source: GAO analysis of Defense data.
Notes: GAO has not verified the accuracy of Defense Comptroller's data
processing.
[A] The last U.S. reimbursement to Pakistan covered March through June
2007 and was processed in February 2008.
[B] June 2004 reimbursement includes a one-time Bell helicopter
procurement totaling $235,081,976. The disallow/defer percentage for
June 2004 does not take into account this figure.
[C] Percent rounded to two decimal places.
[End of table]
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Charles Michael Johnson Jr., (202) 512-7331 or johnsoncm@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Steve Sebastian, Director;
Hynek Kalkus, Assistant Director; Roger Stoltz, Assistant Director;
Edward J. George; David W. Hancock; Claude Adrien; Cara Bauer; Janice
Friedeborn; Arthur James; Jeffrey S. Beelaert; Lynn Cothern; Mark
Dowling; and Jena Sinkfield made key contributions to this report.
[End of section]
Footnotes:
[1] CSF has funded a broad range of Pakistani military operations,
including navy support for maritime patrols and interdiction
operations; air force support for combat air patrol, reconnaissance and
close air support missions, airlift support, and air traffic control;
army military operations in the FATA; and increased management
requirements at the Pakistan Joint Staff Headquarters.
[2] According to U.S. embassy officials in Islamabad and unclassified
U.S. intelligence documents, since 2002, al Qaeda and the Taliban have
used Pakistan's FATA and the border region to attack Pakistani, Afghan,
U.S., and coalition troops; plan and train for attacks against U.S.
interests; destabilize Pakistan; and spread radical Islamist ideologies
that threaten U.S. interests.
[3] Reimbursements are made only after the Office of Management and
Budget is consulted, the Secretary of State concurs and the 15 day
notification to the appropriate congressional committees has taken
place.
[4] Department of Defense Inspector General, Financial Management:
Coalition Support Funds, D-200420045 (Washington, D.C., Jan. 16, 2004).
This is a classified report.
[5] See GAO, Combating Terrorism: The United States Lacks Comprehensive
Plan to Destroy the Terrorist Threat and Close the Safe Haven in
Pakistan's Federally Administered Tribal Areas, GAO-08-622 (Washington,
D.C.: Apr. 17, 2008); Preliminary Observations on the Use and Oversight
of U.S. Coalition Support Funds Provided to Pakistan, GAO-08-735R
(Washington, D.C.: May 6, 2008); and Combating Terrorism: U.S. Efforts
to Address the Terrorist Threat in Pakistan's Federally Administered
Tribal Areas Require a Comprehensive Plan and Continued Oversight, GAO-
08-820T (Washington, D.C.: May 20, 2008).
[6] Defense guidance defines incremental costs as those costs that are
above and beyond the partner country's normal operating costs.
[7] This example is based on our analysis of Pakistani army claims and
does not include the other service's claims. However, we found
generally that the navy claims' documentation was similar to the army's
and the other services' claims had less documentation.
[8] The Comptroller took the position that Pakistan likely incurred
some increased costs by using the radars to police the airspace over
the Northwest Frontier Province and provide air traffic control for
U.S. military support flights into Afghanistan. The Comptroller
nonetheless agreed that the claims lacked sufficient detail to
determine whether these charges were definitively incremental.
[9] Pub. L. 107-117, sec 301, January 10, 2002.
[10] Pub. L. 107-206, Operation and Maintenance, Defense-Wide, August
2, 2002.
[11] See, for example, Pub. L. 107-206; Pub. L. 108-11, sec 1310; Pub.
L. 110-161. Beginning in 2003, with the passage of the Emergency
Wartime Supplemental Appropriations Act, 2003 (Pub. L. 108-11),
Congress required that CSF payments be made with concurrence of the
Secretary of State and in consultation with the Director of OMB. The
Secretary of Defense's determination with respect to the documentation
supporting payments is final and conclusive.
[12] The goal of this operation was to combat al Qaeda, Taliban, and
other militants attempting to escape the U.S. invasion of Afghanistan
by fleeing into Pakistan. According to Defense, Pakistan has deployed
about 120,000 army and paramilitary troops in support of this
operation, incurred more than 1,400 casualties, and killed hundreds of
al Qaeda, Taliban, and other terrorists.
[13] This reimbursement claim received by Defense in December 2001
covered activity from October through December 2001.
[14] Pub. L. 110-181, sec 1232(b).
[15] Because a previous Defense Inspector General report led to new CSF
oversight guidance in December 2003, our assessment focused on
reimbursement claims submitted by Pakistan between January 2004 and
June 2007.
[16] This example is based on our analysis of Pakistani army claims and
does not include the other service's claims. However, we found
generally that the navy claims' documentation was similar to the
army's, and the other services' claims had less documentation. Payments
made to the Pakistani army constituted over 85 percent of total
payments made to Pakistan from January 2004 through June 2007.
[17] Army road construction costs were included as a specific line item
beginning in September 2004. These costs were claimed and paid each
month from September 2004 through February 2007.
[18] Army bunker construction costs were included as a specific line
item beginning in July 2006. These costs were claimed and paid each
month from July 2006 through February 2007.
[19] Average vehicle damage cost paid was calculated using claims in
which vehicle damage was listed as a specific category (September 2004
through June 2007).
[20] These figures include the $5,700 average navy cost per vehicle per
month for "vehicle damages" discussed previously. In addition, these
figures do not include claims prior to September 2004, as these claims
did not contain specific categories.
[21] This cost category was the largest for April 2006 based on the
percentage of total dollars claimed that was included in each category.
This cost category accounted for 28 percent of the entire claim for
April 2006.
[22] GAO used the IMF market rate, period average, by month, in our
analysis because this rate takes into account economic variables such
as gross domestic product (GDP), revenue, and wages.
[23] These claimed amounts did not fluctuate over the 12-month period
and were presented in U.S. dollars.
[24] See GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
[25] Defense reimbursed Pakistan approximately $55 million for
maintenance of the Pakistan army's MI-17 and AH-1 Cobra helicopter
wings in the border area from July 2006 through February 2007.
[26] See GAO/AIMD-00-21.3.1.
[27] Department of Defense Inspector General, Financial Management:
Coalition Support Funds, D-200420045 (Washington, D.C., Jan. 16, 2004).
This is a classified report.
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