Overseas Contingency Operations
Funding and Cost Reporting for the Department of Defense Gao ID: GAO-10-288R December 18, 2009This report formally transmits the briefing on work performed under the authority of the Comptroller General to conduct evaluations on his own initiative.
GAO-10-288R, Overseas Contingency Operations: Funding and Cost Reporting for the Department of Defense
This is the accessible text file for GAO report number GAO-10-288R
entitled 'Overseas Contingency Operations: Funding and Cost Reporting
for the Department of Defense' which was released on December 18, 2009.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
GAO-10-288R:
December 18, 2009:
Congressional Committees:
Subject: Overseas Contingency Operations: Funding and Cost Reporting
for the Department of Defense:
This report formally transmits the enclosed briefing on work performed
under the authority of the Comptroller General to conduct evaluations
on his own initiative.
We are sending copies of this report to the appropriate congressional
committees. We are also sending copies to the Secretary of Defense and
the Under Secretary of Defense (Comptroller) and the Secretaries of the
Army, Air Force, and Navy. The report also is available at no charge on
the GAO Web site at [hyperlink, http://www.gao.gov].
Should you or your staff have any questions concerning this report,
please contact Sharon L. Pickup at (202) 512-9619 or pickups@gao.gov or
Asif A. Khan at (202) 512-9869 or khana@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report.
Key contributors to this report include Ann Borseth, Assistant
Director; Mary Ellen Chervenic, Assistant Director; Jehan Abdel-Gawad;
Robert Brown; Maxine Hattery; LaShawnda Lindsey; Lonnie McAllister II;
Sheila Miller; James Moses; Marcus Lloyd Oliver; Charles Perdue; Laura
Pacheco; Richard Powelson; and Arian Terrill.
Signed by:
Sharon L. Pickup:
Director:
Defense Capabilities and Management:
Signed by:
Asif A. Khan:
Director:
Financial Management and Assurance:
Enclosure:
List of Committees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Howard McKeon:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable John P. Murtha:
Chairman:
The Honorable C. W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
[End of section]
Enclosure:
Overseas Contingency Operations: Funding and Cost Reporting for the
Department of Defense:
Briefing for Congressional Committees:
December 16, 2009:
Introduction:
Since the September 11, 2001, terrorist attacks, the Department of
Defense (DOD) has been engaged in domestic and overseas military
operations in support of Overseas Contingency Operations (OCO).
These operations include Operation Iraqi Freedom, which focuses
principally on Iraq, and Operation Enduring Freedom, which focuses
principally on Afghanistan but also includes operations in the Horn of
Africa, the Philippines, and elsewhere.
Obtaining an accurate picture of OCO costs is of critical importance
given the need to evaluate trade-offs and make more effective use of
defense dollars in light of the nation's long-term fiscal challenges.
In the past, we have reported on the need for DOD to become more
disciplined in its approach to developing plans and budgets, including
building more OCO costs into the base defense budget.
Objectives:
Under the Comptroller General‘s authority, GAO evaluated:
1) the impact of changes to OCO funding guidance on DOD‘s fiscal year
2010 OCO funding request,
2) factors that could affect fiscal year2010 OCO estimates for reducing
troop levels in Iraq and increasing troop levels in Afghanistan, and,
3) the extent of internal controls in DOD‘s process for producing its
monthly OCO cost report to help ensure reliability of reported data.
Summary of Findings:
The Office of Management and Budget (OMB) issued new criteria to be
used in developing DOD‘s fiscal year 2010 OCO funding request. To
implement these criteria, the Office of the Under Secretary of Defense
(OUSD) (Comptroller) and the services shifted some costs to the base
budget and cut some costs entirely. These actions, in conjunction with
other factors such as the need for less procurement funding,
contributed to significant decreases in the OCO funding request for
fiscal year 2010 compared to fiscal year 2009. To build more discipline
into the budget process, the administration should continue to look for
opportunities to move other OCO costs into the base budget.
A variety of factors could affect fiscal year 2010 OCO funding needs
for operations in Iraq and Afghanistan. Our analysis of Joint Staff
planning assumptions developed in February 2009 and used for the fiscal
year 2010 OCO funding request shows that the assumptions were
optimistic and inconsistent when compared with current rotational plans
for Army units in Iraq and Afghanistan. In addition to decisions on
troop levels, we also identified additional factors that could affect
funding, such as changes in the security situation and decisions yet to
be made on equipment disposition.
We found indications that DOD and certain military services did not
adequately document current control practices for reliably reporting
OCO costs.
Scope and Methodology:
To achieve our objectives, we:
* reviewed and analyzed OMB‘s Criteria for War/Overseas Contingency
Operations Funding Requests for fiscal year 2010 and the criteria for
prior years as well as other budget guidance issued by DOD;
* conducted interviews with officials from OMB, OUSD (Comptroller), the
military services, and the Defense Finance and Accounting Service;
* reviewed and analyzed the military services‘ fiscal year 2009 and
fiscal year 2010 budget justification documents and related data;
* compared the Joint Staff‘s planning assumptions used to develop the
fiscal year 2010 funding request with force rotational plans;
* compared policies and procedures against GAO‘s Standards for Internal
Control in the Federal Government; and;
* determined whether selected policies and procedures to help ensure
data reliability were in use by analyzing selected data in the October
2008 through July 2009 OCO cost reports.
We conducted our review from April 2009 to November 2009 in accordance
with all sections of GAO's Quality Control Assurance Framework that are
relevant to our objectives. The framework requires that we plan and
perform the engagement to obtain sufficient and appropriate evidence to
meet our stated objectives and to discuss any limitations in our work.
We believe that the information and data obtained, and the analysis
conducted, provide a reasonable basis for our findings and conclusions
in this product.
DOD provided technical comments on a draft of this product, which we
incorporated.
Background: OCO Funding since 2001:
Since 2001, Congress has provided DOD with about $893 billion, as of
November 2009, primarily for OCO. DOD has reported obligations of about
$789 billion for OCO from September 2001 through the end of fiscal year
2009 (September 30, 2009).
Prior GAO work has recommended that DOD shift certain contingency costs
into the annual base budget to allow for prioritization and trade-offs
among DOD‘s needs and to enhance visibility in defense spending.
[Footnote 1] The department concurred with this recommendation. In
February 2009, OMB issued new criteria for the development of DOD‘s OCO
funding requests that required DOD to move some OCO costs into the base
budget.
Background: Contingency Operations Cost Reporting:
Prior GAO work has also found numerous problems in DOD‘s processes for
recording and reporting obligations, raising significant concerns about
the overall reliability of DOD‘s reported obligations. In addition,
DOD‘s financial management has been on GAO‘s list of high-risk areas
since 1995.
In October 2008, DOD began using Contingency Operations Reporting and
Analysis Service (CORAS) to report OCO funding, obligations, and
disbursements in a new monthly OCO cost report.
Objectives for the CORAS system included:
* improving the accuracy of the OCO reporting process by electronically
capturing data from DOD accounting systems,
* providing a Web-based tool to allow users to manually input data not
readily available electronically from DOD accounting systems, and;
* producing OCO cost reports electronically.
Figure: Funding Available to DOD for OCO (Fiscal Years 2001 through
2009) and DOD‘s Fiscal Year 2010 OCO Funding Request:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year: 2001;
Emergency supplemental appropriation: $16 billion.
Fiscal year: 2002;
Emergency supplemental appropriation: $13 billion.
Fiscal year: 2003;
Emergency supplemental appropriation: $63 billion.
Fiscal year: 2004;
Emergency supplemental appropriation: $61 billion.
Fiscal year: 2005;
Emergency supplemental appropriation: $70 billion;
Title IX: $25 billion;
Total: $95 billion.
Fiscal year: 2006;
Emergency supplemental appropriation: $48 billion;
Title IX: $60 billion;
Total: $108 billion.
Fiscal year: 2007;
Emergency supplemental appropriation: $86 billion;
Title IX: $70 billion;
Total: $156 billion.
2008;
Emergency supplemental appropriation: $81 billion;
Title IX: $87 billion;
Total: $168 billion.
Fiscal year: 2009;
Emergency supplemental appropriation: $71 billion;
Title IX: $77 billion;
Total: $137 billion.
Fiscal year: 2010;
Fiscal year 2010 OCO request: $130 billion.
Source: DOD.
Notes: From fiscal year 2001 through fiscal year 2009, Congress
provided funds to DOD in emergency supplemental appropriations and
Title IX of DOD‘s regular annual appropriation. These appropriations
included funds that could be used for OCO. Except for fiscal year 2010,
the figures reflect DOD‘s calculations of amounts available for OCO
based on excluding funds that were appropriated for specific purposes,
such as hurricane assistance. For fiscal year 2010, the figure reflects
DOD‘s OCO funding request.
[End of figure]
Figure: DOD‘s Fiscal Year 2010 OCO and Base Budget Requests:
[Refer to PDF for image: stacked vertical bar graph and pie-chart]
FY 2010:
Base request: $533.8 billion;
OCO Request: $130.0 billion;
Total: $663.8 billion.
OCO Request breakdown:
Operations: $64.1 billion;
Force Protection: $15.2 billion;
IED Defeat: $1.5 billion;
Military Intelligence: $4.7 billion;
Afghan National Security Forces: $7.5 billion;
Pakistan COIN Capability: $0.7 billion;
Coalition Support: $1.9 billion;
CERP: $1.5 billion;
MilCon: $1.4 billion;
Reconstitution: $17.6 billion;
Non-DOD Classified: $3.98 billion.
Source: DOD.
Note: COIN refers to Counterinsurgency and CERP refers to the
Commander's Emergency Response Program.
[End of figure]
Objective 1: OMB Revised Criteria for Development of DOD‘s Fiscal Year
2010 OCO Funding Request:
In 2007, DOD revised its Financial Management Regulation, expanding the
definition of acceptable maintenance and procurement costs and
directing the military services to begin including ’longer war on
terror“ costs in their OCO funding requests.
GAO subsequently recommended that DOD issue guidance defining what
constitutes the ’longer war on terror,“ to identify what costs are
related to that longer war and to build these costs into the base
defense budget.[Footnote 2] The department concurred with this
recommendation. This provides greater opportunity and impetus for DOD
to assess priorities and make trade-offs within the base budget.
In February 2009, OMB issued new criteria specifying which costs
formerly considered OCO should be included in the baseline budget. OUSD
(Comptroller) plans to put the criteria in its Financial Management
Regulation by early 2010.
OMB Revised Criteria for Development of DOD‘s Fiscal Year 2010 OCO
Funding Request:
Significant changes in the criteria used to build the fiscal year 2010
OCO funding request include the following:
Table:
Area: Geographic Theater of Operations;
Current OCO Funding Guidance: Includes U.S. Central Command, the Horn
of Africa, the Indian Ocean, and the Philippines, among others;
Prior OCO Funding Guidance: Does not specify locations, which allowed
for funding such items as home station needs to support contingency
operations.
Area: Equipment;
Current OCO Funding Guidance: Specifies stricter definitions of
replacement, repair, modification, and procurement of equipment; new
criteria specify a 12-month time frame for obligating funds;
Prior OCO Funding Guidance: Does not specify obligation time frames.
Area: Research, Development, Test and Evaluation (RDT&E);
Current OCO Funding Guidance: Funding for research and development must
be for projects required for combat operations in the theater that can
be delivered in 12 months;
Prior OCO Funding Guidance: No time frame restrictions.
Area: Personnel;
Current OCO Funding Guidance: Excludes pay and allowances for end
strength above level requested in budget;
Prior OCO Funding Guidance: Included.
Area: Family Support Initiatives;
Current OCO Funding Guidance: Excludes family support initiatives that
would endure after U.S. forces redeploy to home stations;
Prior OCO Funding Guidance: Included.
Area: Base Realignment and Closure;
Current OCO Funding Guidance: Excluded;
Prior OCO Funding Guidance: Included.
[End of table]
Implementation of OMB Criteria Affected Fiscal Year2010 OCO Funding
Request:
To implement the new OCO criteria, OUSD (Comptroller) and the services
shifted some costs to the base budget and cut some costs entirely.
These actions, in conjunction with other factors such as the need for
less procurement funding in fiscal year 2010, contributed to
significant OCO funding request decreases in several appropriation
accounts in fiscal year 2010, particularly in procurement, RDT&E, and
military construction.
Table: Contingency Operations Related Requests by Account Title (Fiscal
Years 2009-2010) (Dollars in thousands):
Account title: Military Personnel;
FY 2009: $17,381,369;
FY 2010: $13,586,341;
Percentage change, FY09-10: -22%.
Account title: Operation and Maintenance;
FY 2009: $91,657,226;
FY 2010: $90,560,280;
Percentage change, FY09-10: -1%.
Account title: Procurement;
FY 2009: $31,464,438;
FY 2010: $23,741,226;
Percentage change, FY09-10: -25%.
Account title: RDT&E;
FY 2009: $1,197,725;
FY 2010: $310,254;
Percentage change, FY09-10: -74%.
Account title: Military Construction;
FY 2009: $2,113,032;
FY 2010: $1,404,984;
Percentage change, FY09-10: -34%.
Account title: Total;
FY 2009: $143,813,790;
FY 2010: $129,603,085;
Percentage change, FY09-10: -10%.
Source: DOD.
Note: Numbers may not add to totals due to rounding.
[End of table]
Applying the new criteria, OUSD (Comptroller) shifted about $7.8billion
in funding from OCO to the fiscal year 2010 base budget request.
Programs and initiatives that shifted to the base were overarching and
long term.
Table: DOD Funding Shifted to Base Budget due to New Criteria:
Program: Grow the Force;
Amount Shifted: $2.3 billion.
Program: Medical Support Costs;
Amount Shifted: $2.8 billion.
Program: Recruiting and Retention;
Amount Shifted: $0.6 billion.
Program: Joint Improvised Explosive Device Defeat Organization;
Amount Shifted: $0.6 billion.
Program: Family Support Initiatives;
Amount Shifted: $0.6 billion.
Program: Building Partnerships;
Amount Shifted: $0.6 billion.
Program: Intelligence, Surveillance, and Reconnaissance Enhancements;
Amount Shifted: $0.3 billion.
Total: $7.8 billion.
[End of table]
To accommodate these shifts, OMB raised DOD‘s annual base budget limit
by $8 billion. Therefore, DOD did not need to make trade-offs to stay
within the budget.
In addition to shifting costs, OUSD (Comptroller) and the services made
a number of cuts to the fiscal year 2010 OCO funding request because of
the new criteria:
* New restrictions on procurement resulted in a number of aircraft
funding requests being denied by OSD (Comptroller), including:
- Marine Corps request for 2 KC-130J tankers ($200 million).
- Navy request for 5 EA-18G Growlers ($300 million).
* New restrictions on the geographic area of operations resulted in a
number of military construction projects being denied by OSD
(Comptroller), including:
- Air Force request for construction and maintenance of runways in Guam
($80 million).
- Marine Corps request for docks and warehouse facilities at Blount
Island Command in Florida ($90 million).
OMB‘s new OCO criteria have resulted in DOD building a number of former
OCO costs into the base defense budget, as suggested by our prior
recommendation. To build more discipline into the budget process, the
administration should continue to look for opportunities to move other
OCO costs into the base budget.
OMB Waived New Criteria to Allow for End Strength Growth:
In July 2009, DOD decided to temporarily increase the Army‘s Active
Component by up to 22,000 personnel, the costs for 15,000 of which
would be funded in fiscal year 2010.
In August 2009, the administration submitted budget amendments to the
fiscal year 2010 OCO request, reallocating $1.0 billion in order to
provide funding for the additional personnel. The amendments reduced
Army funding for vehicles by about $700 million and reduced Navy and
Air Force procurement funding by about $310 million. This funding was
then shifted to military personnel and various operation and
maintenance accounts.
These amendments request pay and allowances for end strength above the
level requested in the President‘s budget. These types of costs are
specifically excluded by the new OMB criteria. OMB officials explained
that this increase is ’temporary“and is the Army‘s only alternative to
stop-loss for active duty personnel, and therefore OMB waived the
criteria. OMB expects Army force levels to return to the current active
end strength of 547,400 once demand for deploying units stabilizes.
[End of Objective 1]
Objective 2:
Fiscal Year 2010 OCO Funding Request Based on Joint Staff Planning
Assumptions:
The fiscal year 2010 OCO funding request assumed average force
structure levels of about 100,000 in Iraq and 68,000 in Afghanistan.
The request reflects plans for reducing troop levels in Iraq and
increasing troop levels in Afghanistan based upon Joint Staff Planning
Assumptions, developed in February 2009.
According to GAO analysis and confirmed by discussions with the Joint
Staff, the Planning Assumptions were optimistic (faster withdrawal of
troops) and inconsistent with current rotational plans for Army units
in Iraq and Afghanistan (more troops rotating in than planned).
According to both Comptroller and Joint Staff officials, it may become
necessary to seek additional funding in fiscal year 2010 through a
supplemental or other means because of deviations from the Planning
Assumptions.
Iraq: Additional Factors That Could Affect Fiscal Year 2010 Funding
Needs for the Troop Drawdown:
GAO has identified several additional factors that could affect funding
needs for the Iraq drawdown in fiscal year 2010 and beyond, including:
* Changes in the security situation in the area.
* Decisions on the disposition of vehicles and other items, including
what can and will be transferred to the Iraqi Government.
* DOD's ability to identify and move equipment from Iraq, including
the storage and transfer capability in Kuwait and the capacity to
receive and reset equipment in the continental United States.
* Further identification of drawdown-related contract services and a
lack of contract oversight personnel.
* Environmental cleanup costs associated with large base closures.
Afghanistan: Additional Factors That Could Affect Fiscal Year 2010
Funding Needs for the Troop Plus-Up:
GAO has identified several additional factors that could affect funding
needs for the Afghanistan plus-up in fiscal year 2010 and beyond,
including:
* Changes in the security situation in the area.
* Availability of U.S. forces, particularly for specialized
capabilities such as engineering, civil affairs, transportation, and
military police.
* DOD‘s ability to adjust its training capacity from Iraq to
Afghanistan.
* DOD‘s continued assessment of equipment requirements and availability
for Afghanistan‘s harsh operating environment.
* DOD‘s ability to transport personnel and equipment given
Afghanistan‘s limited infrastructure and topography, as well as its
strategic airlift capacity and regional staging base options.
* Requirements for additional contractors.
[End of Objective 2]
Objective 3: Preliminary Observations on Contingency Operations Cost
Reporting:
We found indications that DOD and certain military services did not
adequately document current control practices for reliably reporting
OCO costs, including:
* providing for effective oversight of implementation of our previous
recommendation concerning OCO cost allocations or,
* documenting the results of monthly OCO cost analyses, comparisons,
and reasonableness checks.
As appropriate, we plan to provide more detail on the extent and nature
of our findings with respect to these observations, along with related
recommended actions, in a separate report.
[End of Objective 3]
Related GAO Products:
Global War on Terrorism: DOD Needs to More Accurately Capture and
Report the Costs of Operation Iraqi Freedom and Operation Enduring
Freedom. [hyperlink, http://www.gao.gov/products/GAO-09-302].
Washington, D.C.: March 17, 2009.
Defense Budget: Independent Review Is Needed to Ensure DOD's Use of
Cost Estimating Tool for Contingency Operations Follows Best Practices.
[hyperlink, http://www.gao.gov/products/GAO-08-982]. Washington, D.C.:
September 15, 2008.
Supplemental Appropriations: Opportunities Exist to Increase
Transparency and Provide Additional Controls. [hyperlink,
http://www.gao.gov/products/GAO-08-314]. Washington, D.C.: January 31,
2008.
Global War on Terrorism: DOD Needs to Take Action to Encourage Fiscal
Discipline and Optimize the Use of Tools Intended to Improve GWOT Cost
Reporting. [hyperlink, http://www.gao.gov/products/GAO-08-68].
Washington, D.C.: November 6, 2007.
Global War on Terrorism: Fiscal Year 2006 Obligation Rates Are Within
Funding Levels and Significant Multiyear Procurement Funds Will Likely
Remain Available for Use in Fiscal Year 2007. [hyperlink,
http://www.gao.gov/products/GAO-07-76]. Washington, D.C.: November 13,
2006.
Global War on Terrorism: Observations on Funding, Costs, and Future
Commitments. [hyperlink, http://www.gao.gov/products/GAO-06-885T].
Washington, D.C.: July 18, 2006.
Global War on Terrorism: DOD Should Consider All Funds Requested for
the War When Determining Needs and Covering Expenses. [hyperlink,
http://www.gao.gov/products/GAO-05-767]. Washington, D.C.: September
28, 2005.
Global War on Terrorism: DOD Needs to Improve the Reliability of Cost
Data and Provide Additional Guidance to Control Costs. [hyperlink,
http://www.gao.gov/products/GAO-05-882]. Washington, D.C.: September
21, 2005.
[End of section]
Footnotes:
[1] GAO, Global War on Terrorism: DOD Needs to Take Action to Encourage
Fiscal Discipline and Optimize the Use of Tools Intended to Improve
GWOT Cost Reporting, [hyperlink, http://www.gao.gov/products/GAO-08-68]
(Washington, D.C.: Nov. 6, 2007).
[2] [hyperlink, http://www.gao.gov/products/GAO-08-68].
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO‘s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO‘s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
