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entitled 'Defense Budget: Contingency Operations in the Balkans May 
Need Less Funding in Fiscal Year 2003' which was released on September 
27, 2002.



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Report to the Subcommittee on Defense, Committee on Appropriations, 

U.S. Senate:



United States General Accounting Office:



GAO:



September 2002:



DEFENSE BUDGET:



Contingency Operations in the Balkans May Need Less Funding in 

Fiscal Year 2003:



Defense Budget:



GAO-02-1073:



Contents:



Letter:



Results in Brief:



Background:



Balkans and Southwest Asia Funding for Fiscal Year 2002:



Plans to Further Reduce Balkans Force Levels May Reduce Fiscal Year 

2003 Funding Needs:



Conclusion:



Agency Comments and Our Response:



Scope and Methodology:



Appendix I: Location of the Department of Defenses Major Contingency 

Operations in Fiscal Year 2002:



Tables:



Table 1: Comparison of Services Operation and Maintenance Budget 

Estimates and Funding Provided for Southwest Asia Operations, Fiscal 

Year 2002:



Table 2: Comparison of the Army in Europes Budget Estimates for Fiscal 

Years 2002 and 2003:



Abbreviations:



DOD: Department of Defense



GAO: General Accounting Office



NATO: North Atlantic Treaty Organization



OCOTF: Overseas Contingency Operations Transfer Fund:



September 27, 2002:



The Honorable Daniel K. Inouye

Chairman

The Honorable Ted Stevens

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate:



From the end of the Persian Gulf War in February 1991 through 

May 2002, the Department of Defense (DOD) reported over $43.9 billion 

in incremental costs for its overseas contingency operations.[Footnote 

1] These operations include the enforcement of no-fly zones, 

humanitarian assistance, and peace enforcement operations, as well as 

combating terrorism beginning in late fiscal year 2001. The majority of 

these costs ($29.7 billion) were incurred in the Balkans (Bosnia and 

Kosovo) and Southwest Asia. In fiscal year 2002, U.S. military forces 

are continuing to participate in a number of contingency operations, 

primarily in the Balkans, Southwest Asia, and a number of locations 

that involve combating terrorism. Appendix I contains a map depicting 

the location of DODs operations for fiscal year 2002.



You asked us to review the administrations request for funding 

overseas contingency operations. In response to your request, we 

examined (1) the funding for continued operations in the Balkans and 

Southwest Asia for fiscal year 2002 and (2) the outlook for funding 

operations in the Balkans during fiscal year 2003.



To accomplish this review, we interviewed DOD and service officials who 

are responsible for preparing budgets and estimating costs and force 

levels. We also met with officials at the U.S. Mission to the North 

Atlantic Treaty Organization (NATO) to discuss force levels in the 

Balkans.



Results in Brief:



The military services received a combination of funding provided in the 

DOD appropriations act for fiscal year 2002 and money remaining in 

previously funded contingency fund accounts. The services also took 

steps to reduce costs in order to keep them in line with available 

funding. The Army in Europe, which had the largest share of the Balkan 

operations costs, took a number of steps to reduce costs. Its 

estimated costs for fiscal year 2002 fell by more than $500 million 

between the time its original estimate was developed and July 2002. 

This reduction was achieved through decisions to reduce the amount of 

personnel and equipment in both Bosnia and Kosovo and other cost-

cutting measures, including reductions in contract costs under the 

Armys Balkan Support Contract through improved contract management and 

oversight. In the Balkans, the Air Force--which had the second largest 

share of costs in the Balkans--reduced its expected costs by 

$49 million, bringing costs to within $2 million of the funding 

provided. In Southwest Asia, the services continue to estimate costs 

above available funding. The Air Force and the Navy will each have to 

absorb about $11 million in costs while the Army will have to absorb 

less than $1 million within their respective overall fiscal year 2002 

appropriation for operation and maintenance (which funds these costs). 

These amounts represent less than 1 percent of those appropriations.



Both NATO and DOD plan to reduce troop levels in the Balkans during 

fiscal year 2003, which may reduce funding needs during the year. The 

Army in Europe anticipates an overall reduction of 1,160 troops during 

fiscal year 2003. The Army in Europes fiscal year 2003 cost estimate 

of $1.251 billion is based on a troop strength of 6,140 soldiers. This 

estimate is slightly higher than the Army in Europes fiscal year 2002 

cost estimate of $1.227 billion, which was based on 7,300 troops. Army 

in Europe officials recognize that their $1.251 billion estimate for 

fiscal year 2003 is too high and are working on a revised estimate. 

Army headquarters has told the Army in Europe to expect $1.059 billion 

in funding. Army in Europe officials have told us--and we agree--that a 

decline in troop strength does not necessarily correspond to an equal 

reduction in costs, but given the large anticipated reduction in troop 

levels, we would expect a decrease in estimated costs for fiscal year 

2003. According to the Army, the fiscal year 2003 budget request was 

developed from an already reduced fiscal year 2002 appropriation level 

and that any further reduction in the fiscal year 2003 level would pose 

a funding challenge. Army headquarters and Army in Europe officials are 

working to narrow the difference between the planned funding level and 

estimated costs.



In official oral comments on a draft of this report, DOD concurred with 

the facts presented in our report. However, the Army noted that its 

fiscal year 2003 budget proposal is already constrained and expressed 

concern that the report suggests that the Army plans to migrate any 

available contingency operations funds to cover other Army budget 

needs. We are not suggesting that the Army plans to migrate any 

available Balkan funds. However, since Balkan funding is included in 

the Armys overall operation and maintenance budget, should savings 

from reduced troop levels materialize in excess of the Armys Balkan 

budget needs, any such savings could be used to address other needs 

within the Armys operation and maintenance budget. A detailed 

discussion of DODs comments and our response is contained in the body 

of this report.



Background:



During fiscal year 2002, U.S. military forces participated in a number 

of contingency operations, and Congress appropriated funds to cover 

DODs costs. Contingency operations for fiscal year 2002 included 

efforts to combat terrorism as well as contingency operations in the 

Balkans and Southwest Asia. Operations in these latter two areas 

accounted for 17 percent of DODs reported contingency costs for 

fiscal year 2002 through May 2002, the latest available data. The bulk 

of the costs have been incurred in combating terrorism.



In the Balkans, the United States was first engaged in Bosnia and then 

in the Yugoslavian province of Kosovo. U.S. involvement in Bosnia began 

in July 1992 as part of humanitarian relief efforts. Then, in April 

1993, the United States began to participate in NATOs enforcement of a 

no-fly zone over Bosnia and Herzegovina in support of United Nations 

peacekeeping. In December 1995, the United States deployed military 

personnel in and around Bosnia to assist in implementing the General 

Framework Agreement (also known as the Dayton Agreement). Since then, 

the number of U.S. military personnel stationed in Bosnia has steadily 

declined from about 18,000 troops in February 1996 to about 

2,500 troops in July 2002.



In March 1999, the United States provided military forces in support of 

NATOs combat operations against Yugoslavia following the failure of 

peace talks and escalating violence against ethnic Albanians in Kosovo. 

Combat operations officially ended on June 20, 1999. With Yugoslavias 

acceptance of a peace plan and the United Nations endorsement of a 

plan, the United States began providing troops for the NATO-led Kosovo 

force, whose mission is peace enforcement in Kosovo. The United States 

is currently providing 5,000 troops as part of the NATO force. In 

addition, the United States has about 400 troops in the Republic of 

Macedonia to operate a staging base for U.S. troops entering and 

departing Kosovo. From the inception of operations through May 2002, 

Balkan costs have totaled $19.5 billion.



U.S. forces have been involved in enforcing the no-fly zone over parts 

of Iraq since the end of the Persian Gulf War in 1991. The U.S. force 

involved has on average comprised about 20,000 troops, many of them 

Navy and Marine Corps personnel deployed on ships. Beginning in 

December 1998, the United States conducted low-level air strikes 

against Iraq, first in support of the United Nations weapons of mass 

destruction inspection efforts and then in response to Iraqi attempts 

to target allied aircraft enforcing the no-fly zones. From the 

inception of operations through May 2002, Southwest Asia costs have 

totaled $10.2 billion.



Following the terrorist attacks of September 11, 2001, U.S. military 

forces began military operations to combat terrorism. These operations 

fall into two categories--defense of the United States and overseas 

operations, principally in Central Asia to date. More than 148,000 

military personnel were involved in these operations as of July/

August 2002. Through May 2002, DODs reported costs for these efforts 

totaled $11.1 billion.



Within budget and appropriations accounts, operation and maintenance 

costs account for the majority of all contingency operations costs. In 

fiscal years 2000 and 2001 combined, operation and maintenance costs 

accounted for 87 percent of the total; military personnel costs 

accounted for the remaining 13 percent. During fiscal year 2002 through 

May 2002, operation and maintenance costs accounted for 65 percent of 

the total; military personnel costs accounted for the balance of the 

costs.[Footnote 2] Operation and maintenance funds are used for a 

variety of purposes, including the transportation of personnel, goods, 

and equipment; unit operating support costs; and intelligence, 

communications, and logistics support. Military personnel accounts fund 

the pay and allowances of mobilized reservists as well as special 

payments or allowances for all qualifying military personnel, such as 

Imminent Danger Pay and Family Separation Allowance.



The method for funding operations in the Balkans and Southwest Asia 

changed in fiscal year 2002. Prior to fiscal year 2002, Congress 

appropriated funds both directly to the services appropriations 

accounts and to the Overseas Contingency Operations Transfer Fund 

(OCOTF).[Footnote 3] DOD transferred funds in the OCOTF to the 

services appropriations accounts as operations unfolded during the 

year. Any funds remaining in the fund at the end of the fiscal year 

were carried over to the next fiscal year. We reported in May 2002 that 

limited guidance and oversight, combined with a lack of cost-

consciousness, contributed to some questionable expenditures of 

contingency funds.[Footnote 4] Beginning in fiscal year 2002, DOD 

proposed that the funding for its Southwest Asia operations be provided 

directly to the services appropriations accounts. Congress not only 

directly appropriated funds to the services appropriations accounts 

for the U.S. operations in Southwest Asia, but directly appropriated 

funds for the operations in the Balkans as well. Congress also 

significantly reduced funding for contingency operations to encourage 

the services to spend funds more efficiently and effectively.



In the case of new, expanded, or otherwise unfunded operations, costs 

are not budgeted in advance. DOD must use funds appropriated for other 

activities that are planned for later in the fiscal year. If these 

funds are not replenished through supplemental appropriations or the 

reprogramming of funds from other sources, the services have to absorb 

the costs within their regular appropriations.



Balkans and Southwest Asia Funding for Fiscal Year 2002:



The military services received a combination of funding provided by the 

DOD appropriations act for fiscal year 2002 and funds that remained in 

the OCOTF. For Balkan operations, the amount that Congress appropriated 

was $650 million less than the amount requested in the Presidents 

budget. For Southwest Asia operations, requested funding was included 

in the military services overall accounts. The services collectively 

received about $24 million less in funding than they had estimated was 

needed. In response to the reduction in funding, the military services 

took steps to reduce costs in order to keep costs in line with 

available funding, although they will have to absorb some costs related 

to operations in both the Balkans and Southwest Asia. The proportion of 

costs that will have to be absorbed represents less than 1 percent of 

each of the services appropriation for operation and maintenance.



Cost Cutting Played an Important Role in Managing Balkan Costs:



The services took important cost-cutting steps to meet reduced funding 

levels in fiscal year 2002. Funding for Balkan operations was reduced 

by $650 million in fiscal year 2002 and was appropriated directly into 

the services military personnel and operation and maintenance 

accounts. The services were generally funded at the amounts requested 

for military personnel and less than requested for operation and 

maintenance.[Footnote 5] The Senate Appropriations Committee, in its 

report on DODs appropriations for fiscal year 2002, suggested that 

providing funds directly into the services accounts would lead to 

better accountability and the elimination of redundant and questionable 

costs.[Footnote 6] Subsequently, Congress appropriated funds for 

contingency operations directly into the services accounts as part of 

their base programs.



The Army, which had the largest share of Balkan costs, received the 

largest funding reduction. Within the Army, the Army in Europe, which 

is responsible for paying the bulk of the Balkan operations costs, 

started fiscal year 2002 with a large gap between its estimated cost 

and the funding that the Department of the Army told it to expect. 

Specifically, prior to the beginning of fiscal year 2002 (in 

July 2001), the Army in Europe estimated that its Balkan operations 

would cost $1.458 billion, but it was told to expect funding of 

$1.152 billion with a promise of an additional $150 million later in 

fiscal year 2002.



To address the reduced funding, the Army in Europe took a number of 

steps to reduce costs. We previously reported that the Army in Europe 

in April 2001 provided us with its revised cost estimate for 

fiscal year 2002, which reflected as much as a $284 million decline in 

costs from DODs initial budget estimate because of a variety of 

factors. The reduction reflected a reduction in the amount of personnel 

and equipment in both Bosnia and Kosovo, as well as declines in other 

costs, including those for contractors and airlift services in Kosovo. 

Additional troop and heavy-equipment reductions, and improved contract 

management and oversight of the Armys Balkan Support Contract, allowed 

the Army in Europe in July 2002 to further reduce its fiscal year 2002 

estimate for Balkan operations by $231 million from its July 2001 

estimate for fiscal year 2002. This included action on our previous 

report finding involving the Army in Europes counting airlift costs 

twice--directly paying the Air Force for airlift charges and including 

transportation costs on travel orders.[Footnote 7] Army in Europe 

officials stated that correcting this double obligation of airlift 

billing charges reduced costs.



The remaining $75 million difference between the Army in Europes 

July 2002 estimate of $1.227 billion and the $1.152 billion in funding 

it had initially been told to expect will have to be covered by using 

funds planned for other activities within existing Army programs. In 

early September 2002, an Army headquarters budget official told us that 

the Army was still working to identify a source for the needed funds.



The Armys Forces Command, which is responsible for Army units and 

facilities in the continental United States and Puerto Rico, also 

started fiscal year 2002 with a large gap between its estimated cost 

and the funding the Department of the Army told it to expect. 

Specifically, Forces Commands original fiscal year 2002 estimate for 

Balkan operations was $169 million, but it was told to expect funding 

of $65.7 million. By February 2002, Forces Command had reduced its 

estimate to $116.3 million on the basis of its cost experience. In 

August 2002, Forces Command told us that it would reduce its costs to 

the $65 million in available funding as a result of continued analysis 

of initial estimates and actual costs.



The Air Force, which had the second largest share of Balkan costs, 

received $51 million less than its estimated costs of about 

$174 million. In August 2002, the Air Force told us that it had reduced 

its cost estimate for fiscal year 2002 by $49 million. This brought the 

estimate closer to available funding. One example of cost reduction 

involves the Air Force in Europe, which told us that its cost estimate 

had fallen by about $6 million as a result of savings achieved from 

consolidating U-2 aircraft operations and closing San Vito Air Base in 

Italy.



Services Will Have to Absorb Some Southwest Asia Costs:



In fiscal year 2002, funds for Southwest Asia operations were also 

appropriated directly into the military services accounts as part of 

their base programs, and traditionally any shortfall in funding would 

have to be absorbed by the services. The services received less funding 

than they had originally estimated in costs, but the gap was not as 

great as that for the Balkans. Within the estimates, costs for military 

personnel were funded as requested, but funding for operation and 

maintenance was below the estimates, as shown in table 1.



Table 1: Comparison of Services Operation and Maintenance Budget 

Estimates and Funding Provided for Southwest Asia Operations, Fiscal 

Year 2002:



Dollars in millions.



Service: Army; Original estimate: $249.5; Funding provided: 

$207.4; Current estimate: $208.3; Difference between 

funding and current estimate: ($.9).



Service: Air Force; Original estimate: 657.5;Funding provided: 

636.1; Current estimate: 646.9; Difference between funding and 

current estimate: (10.8).



Service: Navy; Original estimate: 232.0; Funding provided: 

220.1; Current estimate: 232.0; Difference between funding and 

current estimate: (11.9).



Source: Developed by GAO from DODs data.



[End of table]



The services continue to estimate costs above available funding and in 

the past have had to absorb these costs within their overall operation 

and maintenance budget. The Army has reduced its estimated shortfall to 

less than $1 million, and the Air Force has reduced its estimated 

shortfall to $10.8 million. The Navy continues to estimate costs at its 

original level and so continues to have a shortfall of $11.9 million. 

The shortfalls represent less than 1 percent of the services operation 

and maintenance appropriations for fiscal year 2002.[Footnote 8]



Plans to Further Reduce Balkans Force Levels May Reduce Fiscal Year 

2003 Funding Needs:



Both NATO and DOD plan to reduce troop levels in the Balkans during 

fiscal year 2003, which may reduce funding needs to support Balkan 

operations during the year. The military services included funding for 

the Balkans in their base program funding input for the Presidents 

fiscal year 2003 budget, which was submitted to Congress in February 

2002. According to the budget justification data provided with the 

Presidents budget, the Army stated that there would be a $32.1 million 

decrease for Balkan operations, reflecting reductions in supplies, 

fuel, equipment, and contract support. The Air Force included an 

increase of $18.8 million for operations in Bosnia, including Operation 

Joint Forge (peacekeeping in Bosnia) and Operation Deliberate Forge 

(enforcement of the no-fly zone over Bosnia).



Since February 2002, when the Presidents budget was submitted, 

NATO has agreed to reduce force levels, which could reduce costs. In 

the spring of 2002, NATO approved a reduction in total multinational 

force troop strength in Bosnia to approximately 12,000 troops. This is 

a decline of about 4,700 from the approximately 16,700 troops that were 

stationed there as of July 23, 2002. The reduction is scheduled for 

completion by December 2002. NATO also approved a reduction in 

multinational troop strength in Kosovo to approximately 29,000 troops. 

This is a decline of about 3,800 from the approximately 32,800 troops 

that were stationed in Kosovo as of July 23, 2002. These changes will 

occur between August 2002 and June 2003. NATO has not made any 

decisions regarding troop reductions by donor countries. However, 

officials at the U.S. Mission to NATO told us that they expected 

U.S. force levels to decline as part of the overall reduction and that 

U.S. forces would remain at about 15 percent of the total NATO force. 

On the basis of the overall troop strength reduction, we estimate that 

this could translate into a reduction of about 1,269 U.S. military 

personnel during fiscal year 2003.



The Army in Europe was directed by the U.S. European Command[Footnote 

9] to reduce troop levels in the Balkans to levels slightly below those 

envisioned by our pro rata estimate of the U.S. share of the NATO-

directed reduction. However, on the basis of July 2002 information that 

we were provided with, the reduction does not appear to have lowered 

anticipated costs. As shown in table 2, the overall reduction totals 

1,160 troops (from 7,300 to 6,140 troops) and is to take place between 

September and November 2002. It also includes a reduction in heavy 

equipment, such as tanks, Bradley Fighting Vehicles, and helicopters. 

The Army in Europes budget estimate for its Balkan operations is 

$1.251 billion in fiscal year 2003 and is based on the reduced troop 

level. The decision to reduce force levels was made after submission of 

the Presidents budget for the fiscal year 2003 appropriation for DOD. 

The budget estimate for fiscal year 2003 is slightly higher than the 

Army in Europes July 2002 estimate of its fiscal year 2002 costs. 

However, the cost estimate for fiscal year 2002 is based on higher 

troop levels.



Table 2: Comparison of the Army in Europes Budget Estimates for Fiscal 

Years 2002 and 2003:



Dollars in billions.



Fiscal year: 2002; End of year troop level: 7,300; Budget estimate: 
$1.227.



Fiscal year: 2003; End of year troop level: 6,140; Budget estimate: 
1.251.



Source: Developed by GAO from the Army in Europes data.



[End of table]



In discussing the budget estimate with Army in Europe officials, we 

were told that they recognize that their $1.251 billion estimate for 

fiscal year 2003 is too high and that they are working on a revised 

estimate. These officials believe that their estimate for fiscal year 

2003 will fall below their estimate for fiscal year 2002. To complete 

their revised estimate, they are working with their planners on the 

timing of any troop reduction, the impact that the reduction will have 

on the number of base camps, whether any offsetting contracts will need 

to be awarded to maintain some mission capability, and the support and 

overhead that can be eliminated. Army in Europe officials told us--and 

we agree--that a decline in troop strength does not necessarily 

correspond to an equal reduction in costs. However, given the large 

anticipated reduction in troop levels, we would expect a decrease in 

estimated costs for fiscal year 2003.



Regarding funding, Army headquarters has told the Army in Europe to 

expect $1.059 billion in funding. Army headquarters and Army in Europe 

officials are working to narrow the difference between the planned 

funding level and estimated costs. An Army headquarters budget 

official told us that the fiscal year 2003 budget request was developed 

from the already reduced fiscal year 2002 appropriation level and that 

any further reduction in the fiscal year 2003 level would pose a 

funding challenge.



Conclusion:



Reductions in the number of troops in the Balkans, to the extent not 

reflected in the Presidents budget for fiscal year 2003, have the 

potential to reduce costs for fiscal year 2003 below the requested 

funding level. Army officials believe that their fiscal year 2003 

budget proposal is already constrained. However, to the extent that 

savings are realized from reduced troop levels, we believe any such 

savings could relieve that constraint or make additional funds 

available for other Army budget needs if Congress appropriates the full 

amount requested by the President.



Agency Comments and Our Response:



In official oral comments on a draft of this report, DOD concurred with 

the facts presented in our report. However, the Army noted that its 

fiscal year 2003 budget proposal is already constrained and expressed 

concern that the report suggests that the Army plans to migrate any 

available contingency operations funds to cover other Army budget 

needs. We noted in the report that the Armys fiscal year 2003 budget 

request was developed from the already reduced fiscal year 2002 

appropriation level. We further noted that the Army believes that any 

further reduction in the fiscal year 2003 level would pose a funding 

challenge. We have concluded that to the extent savings are realized 

from reduced troop levels, any such savings could relieve that 

constraint or make additional funds available for other Army budget 

needs. We agree that to the extent savings are realized from reduced 

troop levels it could and should relieve any overall Balkan budget 

constraints for fiscal year 2003. We are not suggesting that the Army 

plans to migrate any available Balkan funds. However, since Balkan 

funding is included in the Armys overall operation and maintenance 

budget, should savings from reduced troop levels materialize in excess 

of the Armys Balkan budget needs, any such savings could be used to 

address other needs within the Armys operation and maintenance budget.



Scope and Methodology:



To examine funding for Balkan and Southwest Asia operations in 

fiscal year 2002, we obtained records and conducted interviews at the 

Office of the Secretary of Defense, as well as at the Departments of 

the Army, Navy, and Air Force. We used the data obtained to compare 

original budget estimates, funding provided, and more current budget 

estimates. To ascertain steps taken to reduce costs, we held 

discussions with and reviewed data provided by officials in the 

Departments of the Army, Navy, and Air Force.



To examine the outlook for funding operations in the Balkans during 

fiscal year 2003, we (1) reviewed the Presidents fiscal year 2003 

budget request and supporting budget documentation and (2) obtained 

budget estimates from key service elements involved in Balkan 

operations, particularly the Army in Europe. We obtained information on 

any changes in force levels planned for fiscal year 2003 from both the 

Army in Europe and the U.S. Mission to NATO. We then compared the force 

levels used in preparing the Presidents budget request for fiscal year 

2003 with any subsequent decisions to reduce force levels since the 

Presidents budget was submitted to Congress.



We visited the following locations during our review:



* Office of the Secretary of Defense (Comptroller), Washington, D.C.



* Department of the Army, headquarters, Washington, D.C.



* U.S. Army Forces Command, Fort McPherson, Ga.



* U.S. Army Europe, Heidelberg, Germany.



* Department of the Air Force, headquarters, Washington, D.C.



* U.S. Air Force Europe, Ramstein Air Base, Germany.



* Air Combat Command, Langley Air Force Base, Va.



* Department of the Navy, headquarters, Washington, D.C.



* U.S. Mission to NATO, Brussels, Belgium.



We performed our work from February through September 2002 in 

accordance with generally accepted government auditing standards.



We are sending copies of this report to interested congressional 

committees; the Secretary of Defense; the Under Secretary of Defense 

(Comptroller); and the Director, Office of Management and Budget. 

Copies of this report will also be made available to others upon 

request. In addition, this report will be available at no charge on the 

GAO Web site at http://www.gao.gov.



If you have any questions regarding this report, please call me on 

(757) 552-8100. Principal contributors to this report were Steve 

Sternlieb, Donna Rogers, Frank Bowen, and Shamik Ghosh.



Sincerely yours,



Neal P. Curtin

Director, 

Defense Capabilities and Management:



Signed by Neal P. Curtin:



[End of section]



Appendix I: Location of the Department of Defenses Major Contingency 

Operations in Fiscal Year 2002:



[See PDF for image]



Source: Developed by GAO from the Department of Defenses data.



[End of figure]



FOOTNOTES



[1] Incremental costs means those directly attributable costs that 

would not have been incurred if it were not for the operation. It 

should be recognized that DODs financial systems capture total 

obligations only and that the services use various management 

information systems to identify incremental obligations and to estimate 

costs. Although we use the term costs throughout this report as a 

convenience, we are actually referring to DODs obligation of funds.



[2] Military personnel costs represented a larger share of the overall 

costs in fiscal year 2002 because of the large number of reservists 

(more than 75,000) activated to combat terrorism.



[3] OCOTF was established by the DOD appropriations act for fiscal year 

1997 to meet operational requirements in support of emerging 

contingency operations without disrupting approved program execution or 

force readiness. The OCOTF later became a no year transfer account in 

order to provide additional flexibility to meet operational 

requirements by transferring the funding to the military components on 

the basis of actual budget execution experience as events unfold during 

the year of execution.



[4] See U.S. General Accounting Office, Defense Budget: Need to 

Strengthen Guidance and Oversight of Contingency Operations Costs, GAO-

02-450 (Washington, D.C.: May 21, 2002).



[5] Subsequently the Office of the Secretary of Defense transferred 

$51.4 million from the OCOTF to the Army to cover higher reserve 

military personnel costs because of a decision to use more reserve 

soldiers in the Balkans.



[6] S. Rep. No. 107-109 at 53 (2001).



[7] See GAO-02-450.



[8] In the Fiscal Year 2002 Appropriation Act (P.L. 107-117), the Air 

Force was appropriated $26 billion for operation and maintenance; the 

Army, $22.3 billion; and the Navy, $26.9 billion.



[9] The European Command is the combatant command responsible for 

Balkan operations.



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