```

-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-450						        

TITLE:     DEFENSE BUDGET: Need to Strengthen Guidance and Oversight of
Contingency Operations Costs

DATE:   05/21/2002 
				                                                                         
----------------------------------------------------------------- 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-02-450
     
A

Report to the Chairman and Ranking Minority Member, Subcommittee on Defense,
Committee on Appropriations, U. S. Senate

May 2002 DEFENSE BUDGET Need to Strengthen Guidance and Oversight of
Contingency Operations Costs

GAO- 02- 450

a

GAO United States General Accounting Office

Page i GAO- 02- 450 Contingency Operations Letter 1

Results in Brief 2 Background 4 Questionable Uses of Contingency Funds 6
Limited Guidance and Oversight Led to Questionable Uses of

Contingency Funds 18 Conclusions 23 Recommendations for Executive Action 24
Agency Comments and Our Evaluation 25

Appendix I Map of Overseas Contingency Operations as of January 2002 27

Appendix II Scope and Methodology 28

Appendix III Examples of Questionable Items Purchased by Air Force Units in
Southwest Asia in Fiscal Years 2000 and 2001 31

Appendix IV GAO Contact and Staff Acknowledgments 32

Related GAO Products 33

Tables

Table 1: Summary of Questionable Uses of Contingency Funds Made in Fiscal
Years 2000 and 2001 7 Table 2: Examples of Repetitive Purchases Made by Army
Units 12 Table 3: Examples of Questionable Purchases Made with

Contingency Operations Funds 14 Contents

Page ii GAO- 02- 450 Contingency Operations Figures

Figure 1: Contingency Operation and Maintenance Costs by Expense Categories,
Fiscal Years 2000 and 2001 5 Figure 2: 3rd Infantry Division Equipment
before Refurbishment 9

Page 1 GAO- 02- 450 Contingency Operations

May 21, 2002 The Honorable Daniel Inouye Chairman The Honorable Ted Stevens
Ranking Minority Member Subcommittee on Defense Committee on Appropriations
United States Senate

Since the end of the Persian Gulf War in February 1991, U. S. military
forces have been involved in overseas military contingency operations almost
without interruption. These operations- which include the enforcement of no-
fly zones, humanitarian assistance, and peace enforcement- had a reported
incremental cost of over $29 billion. The majority of these costs ($ 26
billion) were incurred in the Balkans (Bosnia and Kosovo) and in Southwest
Asia. In fiscal year 2002, U. S. military forces continue to participate in
such operations- the most recent being the efforts to combat terrorism 1 --
and, based on the experiences of the past decade, they will likely do so in
the future. (See app. I for a map of ongoing overseas contingency operations
as of Jan. 2002.)

In light of the billions of dollars the Department of Defense (DOD) spends
each year to support contingency operations, you asked us to examine those
costs and DOD?s oversight of them. As agreed with your office, we examined
(1) the appropriateness of the military services? expenditures of
contingency operations funds and (2) the effectiveness of DOD?s oversight of
these expenditures. We further agreed to confine our work to the Army and
the Air Force because these two services accounted for over 80 percent of
the contingency operations expenditures in fiscal year 2001.

DOD?s financial management regulation defines incremental costs as costs
that are above and beyond baseline training, operations, and personnel

1 As the current efforts to combat terrorism did not begin until the end of
fiscal year 2001, this report does not address the costs associated with
them or how the funds have been expended.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 450 Contingency Operations

costs. 2 The regulation goes on to say that incremental costs are additional
costs to the services that would not have been incurred had the contingency
operation not been supported. Our evaluation of contingency operations
expenditures covered costs incurred by selected Army and Air Force units
during fiscal years 2000 and 2001. To evaluate the appropriateness of these
costs, we analyzed whether costs claimed by selected deploying units were
incremental and whether they appeared to be reasonable for the contingency
mission. Because DOD?s guidance does not define ?reasonable? costs, we
applied a common sense judgment of reasonableness. To assess the
effectiveness of DOD?s oversight of contingency expenditures, we discussed
with DOD and service officials the adequacy of guidance and procedures in
place to oversee expenditures. For more details on our scope and
methodology, see appendix II.

While most contingency operations expenditures we looked at-- which totaled
about $2.2 billion- were appropriate, we found that as much as $101 million
dollars in contingency operations funds were spent on questionable
expenditures in fiscal years 2000 or 2001. As a result, budgetary resources
that could have been used for other needs were spent on questionable
expenditures. These expenditures fall into three categories:

 Expenses that did not appear to be incremental costs-- that is, costs that
would not have been incurred were it not for the operation. For example, one
unit completely rebuilt vehicles that were not used in support of a
contingency operation.

 Repetitive expenditures for items already available in theater. For
example, four successive Army units deploying to Bosnia spent a total of
$2.3 million on similar computer and office equipment without attempting to
share or reuse the equipment.

 Seemingly unneeded expenditures, including such items as cappuccino
machines, golf memberships, and decorator furniture.

2 It should be recognized that DOD?s financial systems cannot reliably
determine costs and that only the total obligations are captured by the
Department?s accounting systems. The services use various management
information systems to identify incremental obligations and estimate costs.
Although we use the term costs throughout this report as a convenience, we
are actually referring to DOD?s obligation of funds. Results in Brief

Page 3 GAO- 02- 450 Contingency Operations

We found that limited guidance and oversight combined with a lack of cost-
consciousness contributed to the questionable expenditure of contingency
funds. DOD?s financial management regulation does not provide sufficient
information on what types of costs meet DOD?s definition of incremental
costs, which has resulted in various interpretations among the services- and
even among units within a service- as to appropriate and proper
expenditures. Various units told us that DOD?s guidance was too vague to
judge whether some purchases were reasonable to use contingency operations
funds. Also, DOD?s regulation does not stipulate what units should do with
equipment purchased specifically for the contingency mission once the
mission is completed, resulting in successive units making repetitive
purchases for the same items. Perhaps most importantly, DOD?s financial
management regulation does not state that good financial management and cost
stewardship are imperatives in the expenditure of funds to support military
contingency operations.

Oversight over how contingency operations funds are used is also limited.
Because DOD and the service headquarters receive summarized cost reports
containing little detailed information concerning how contingency funds are
spent, it is difficult for them to exercise oversight. At major Army and Air
Force commands, which also have oversight responsibilities, little
information exists as to what is actually being purchased by the various
deploying units. We also found that DOD does not provide for periodic
reviews to analyze the reasonableness of items purchased with contingency
funds and does not have an overview of all contracts awarded in support of
operations in the Balkans. As a result, the lack of information makes it
difficult for DOD to conduct effective oversight on the appropriate use of
contingency operations funds.

Without more definitive guidance and increased oversight, the problems
identified in this report will likely continue in funding future
contingencies. Therefore, we are making a number of recommendations for
executive action to improve and strengthen assurances that contingency
operations funds are used more appropriately in the future. In commenting on
a draft of this report, DOD agreed with our recommendations, but stated that
it was premature to implement the two involving establishing sets of
equipment for units to use while training for their deployment. DOD stated
that it recognized the need to maintain and strengthen fiscal control over
contingency funds. A detailed discussion of DOD?s comments and our response
is contained in the body of this report.

Page 4 GAO- 02- 450 Contingency Operations

Over the past decade, DOD has reported over $29 billion in incremental costs
for its overseas contingency operations. From fiscal year 1992 through
fiscal year 2001, DOD?s operations in the Balkans cost $17.8 billion and its
operations in Southwest Asia cost $8.5 billion.

Operation and maintenance costs have accounted for the majority of all
contingency operation costs. Of the $8,555 million in contingency operations
costs for fiscal years 2000 and 2001, operation and maintenance costs
represented $7,483 million, or 87 percent of the total. Military personnel
accounted for the remaining $1, 072 million or 13 percent, which we did not
review. Within the operation and maintenance costs, DOD has established
several cost reporting categories. Our assessment included only selected
operation and maintenance expenses incurred by the Army and Air Force during
fiscal years 2000 and 2001 for contingency operations. Because 30 percent of
the operation and maintenance costs are grouped into miscellaneous
categories that provide little insight into what units bought with
contingency funds, we primarily focused our evaluation efforts in these cost
categories. As such, we did not review other categories such as operating
tempo, airlift, and facilities and base support. We estimate that the
universe of contingency expenditures we looked at is about $2.2 billion. For
illustrative purposes, total operation and maintenance costs for contingency
operations covering fiscal years 2000 and 2001 are shown in figure 1.
Background

Page 5 GAO- 02- 450 Contingency Operations

Figure 1: Contingency Operation and Maintenance Costs by Expense Categories,
Fiscal Years 2000 and 2001

Dollars in millions Source: DOD contingency operations cost reports for
fiscal years 2000 and 2001.

DOD budgets for the costs of ongoing contingency operations. Between fiscal
years 1996 and 2001, the Congress appropriated funds for these operations to
the services? military personnel accounts and the Overseas Contingency
Operations Transfer Fund (the Transfer Fund). DOD transfers funds out of the
Transfer Fund to the DOD components? appropriations accounts as operations
unfold during the year. Any moneys remaining in the Transfer Fund at the end
of a fiscal year remain available until expended. In the case of new,
expanded, or otherwise unfunded operations, such as at the onset of
operations involving Kosovo, costs are not budgeted in advance. DOD?s
components request funds from the Transfer Fund as long as they are
available or 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 transfer of funds from other sources, the
components have to absorb the costs within their regular appropriations.

In its report on DOD?s fiscal year 2002 appropriations, the Senate
Appropriations Committee suggested that providing funds directly to the
services? accounts would lead to better accountability and the elimination
of redundant and questionable costs. Subsequently, the conference committee
on the fiscal year 2002 Department of Defense Appropriations

Page 6 GAO- 02- 450 Contingency Operations

Act provided funds for contingency operations in the Balkans and Southwest
Asia directly to the services? accounts.

We have been reviewing cost and funding issues associated with contingency
operations for the last several years, including making observations on the
positive and negative ramifications of appropriating funds for ongoing
operations directly to the services? appropriations accounts. 3 We have also
reviewed DOD?s management of contingency operations in the Balkans. 4 A
listing of related GAO work in this area can be found at the end of this
report.

DOD?s financial management regulation specifies financial policy and
procedures regarding contingency operations. Specifically, chapter 23,
volume 12, of DOD?s financial management regulation, dated February 2001,
addresses contingency operations. The primary focus of this financial
regulation is on developing cost estimates of contingency operations and
reporting those costs. By using a common cost structure, the actual
execution can easily be compared with the estimates. The cost categories
provide examples of types of incremental costs that can be included when
estimating contingency expenses. Service headquarters and their respective
subordinate commands, in turn, have issued memorandums that essentially
restate what DOD has set forth in chapter 23 of its financial management
regulation. Commands have established procedures for approving expenditures
and have been communicating the need to control costs.

Contingency funds appropriated to DOD are distributed to the services for
expenses directly related to the conduct of overseas contingencies.
According to DOD?s financial management regulation, the services can only be
reimbursed from the Transfer Fund for contingency expenses that are
incremental- that is, above and beyond routine requirements. Further, Office
of Management and Budget Circular A- 123 requires all managers of federal
funds to ensure that cost- effective controls are implemented for the
expenditure of appropriated funds.

3 U. S. General Accounting Office, Defense Budget: Need for Continued
Visibility Over Use of Contingency Funds, GAO- 01- 829 (Washington, D. C.:
July 6, 2001). 4 U. S. General Accounting Office, Contingency Operations:
Army Should Do More to Control Contract Cost in the Balkans, GAO/ NSIAD- 00-
225 (Washington, D. C.: Sept. 29, 2000). Questionable Uses of

Contingency Funds

Page 7 GAO- 02- 450 Contingency Operations

While most expenditures of contingency operations funds were appropriate, we
identified millions of dollars of questionable expenditures made by both the
Army and Air Force. These expenditures involved expenses that did not appear
to involve incremental costs, repetitive expenditures for items already
available in theater, and expenses that seemed to us to be, on their face,
of questionable need either because the purchase did not appear to support
the operation or was more expensive than needed. Table 1 summarizes these
expenditures.

Table 1: Summary of Questionable Uses of Contingency Funds Made in Fiscal
Years 2000 and 2001

Dollars in thousands

Types of questionable expenditures Amount

Vehicle refurbishment $17,000 Reconstitution costs 49,500 a Repetitive
purchases 9,876 Not clearly needed 24,585

Total $100,961

a Expenditures could have been as much as this amount. The services were not
able to provide sufficient cost detail to develop a specific figure. Source:
GAO developed from DOD data.

The services and their units are only allowed reimbursement from the
Transfer Fund for expenses directly related to preparing for and
participating in a contingency operation and repairing or replacing
equipment used in support of the operation. Therefore, allowable contingency
expenses are limited to only those costs that would not have been incurred
were it not for the contingency operation, i. e., incremental costs, and so
normal baseline training, operations, maintenance, and personnel costs are
not considered incremental costs. Despite the clear definition of
incremental costs, we found instances where units requested and received
reimbursement for expenses that did not appear to be incremental costs.

All the Army units we visited appropriately used contingency funds for the
routine maintenance of vehicles left at their home stations during the
unit?s deployment, but at least one unit went beyond routine maintenance and
refurbished vehicles that were used only minimally in support of contingency
operations. Contracts for performing routine vehicle maintenance while
soldiers are deployed, in use since at least 1998, reflect that the soldiers
were no longer available to perform routine maintenance Some Expenditures
Paid

with Contingency Funds Did Not Appear to Meet the Definition of Incremental
Costs

Vehicle refurbishment

Page 8 GAO- 02- 450 Contingency Operations

and, in our view, constitute an incremental cost. However, the 3rd Infantry
Division at Fort Stewart used contingency funds to completely refurbish
vehicles while its soldiers were deployed for contingency operations. This
division spent about $17 million in fiscal year 2001 to refurbish 2,317
vehicles.

Refurbishing vehicles differs from providing routine maintenance on
equipment that remained at the home station during deployment.
Refurbishment, in the case of the 3rd Infantry Division, meant rebuilding
all left behind equipment to ?like new? condition. In some instances
individual pieces of equipment required hundreds of parts because of their
condition. The following pictures show the poor condition of the equipment,
caused by years of routine training use and reduced maintenance budgets,
before refurbishment. (See fig. 2.)

Page 9 GAO- 02- 450 Contingency Operations

Figure 2: 3rd Infantry Division Equipment before Refurbishment

Army utility trailer Army armor recovery vehicle

Source: GAO.

The use of contingency funds for vehicle refurbishment as opposed to
maintenance should have been limited to (1) vehicles used in support of the
3rd Infantry Division?s Balkan deployment and (2) the portion of wear and
tear attributable to that use. None of the 2,317 vehicles that were
refurbished were taken on the Balkan deployment. Some of the vehicles
refurbished by the 3rd Infantry Division were used to support the division?s
pre- deployment training program, although neither the division

Page 10 GAO- 02- 450 Contingency Operations

nor its higher headquarters, the Army?s Forces Command, could provide us
with the exact number of vehicles used in training and the duration of their
usage. Forces Command examples of incremental costs in support of
contingency operations include the costs associated with the proportion of
equipment overhaul and maintenance costs- computed on a fractional use
basis- used in support of a contingency operation. Division units trained
for about 3 months to prepare for their Balkan deployment; however, the
equipment being refurbished had been in use for years. Therefore, in our
opinion, only a small proportion of the $17 million in refurbishment costs,
if the data existed to calculate that portion, could be viewed as a
legitimate contingency cost.

We discussed our views on refurbishment of these vehicles with contingency
funds with Forces Command. In a written response, Forces Command said that
it recognized the need to maintain equipment while a unit is deployed in
support of a contingency operation, particularly if the maintenance teams
are deployed as well. After reviewing our data, the Command wrote that it
agreed that rebuilding and upgrading vehicles not used in contingency
operations was not necessarily the best use of contingency funds. The
Command further wrote that, in the event the vehicles are used in the train-
up or reconstitution phases, the incremental costs of repair parts are
properly chargeable to contingency operations. We agree, as previously
discussed, that the part of maintenance and repair costs of equipment
attributable to the equipment?s use in training for a contingency operation
is a legitimate contingency cost.

DOD?s guidance on the use of contingency funds allows units to use these
funds for reconstitution purposes once they re- deploy from a contingency
mission. Reconstitution costs consist of those incremental expenses
associated with replacing supplies and repairing or restoring equipment used
during the mission to the condition it was in before the mission began.
Following guidance from higher headquarters, the 1st Armored Division in
Europe counted as reconstitution contingency expenses millions of dollars
that, in our view, did not appear to meet the definition of incremental
costs. For several years through fiscal year 2001, the Army?s V Corps in
Europe?s fiscal guidance to all its units directed that all unit costs
incurred in the first 270 days following a unit?s return to its home station
from the Balkans be counted as reconstitution costs, thus making all
expenses eligible for reimbursement from contingency funds. In essence, the
guidance allowed units to assume that all costs incurred in that 270- day
period would not have been incurred were it not for the unit?s Balkan
deployment. Reconstitution costs

Page 11 GAO- 02- 450 Contingency Operations

In the case of the 1st Armored Division, while the division incurred a
number of expenses directly related to recovering from the deployment, it
also incurred expenses that were not related to the deployment and, thus, do
not appear to be incremental costs. For example, in one instance the
division used contingency funds to replace small tools in the division at a
cost of about $1.7 million even though the replacement was part of a U. S.
Army Europe program that had nothing to do with contingency operations. The
$1.7 million in small tools is an example of a cost that the division would
have incurred regardless of its Kosovo deployment because the division would
have made the change as part of the Army in Europewide changeover to the new
tools.

The use of contingency funds to cover training costs following a Balkan
deployment also appears to be a questionable use of such funds. Upon
redeployment a unit returns to its normal training cycle, notwithstanding
that it may need to shift its training emphasis to skills that had degraded
during its Balkan deployment. DOD?s fiscal guidance on contingency
operations, contained in chapter 23 of its financial management regulation,
does not state that retraining is considered to be a contingency cost. The
DOD regulation only discusses equipment and supplies in its definition of
reconstitution costs. However, the previously mentioned V Corps guidance
also instructed units to treat training costs incurred in the first 270 days
following redeployment as an incremental cost. As a result, the 1st Armored
Division used contingency funds for all training for 9 months after its
return from Kosovo, even though the deployment did not increase the amount
of the division?s training. In fact, the division trained less in fiscal
year 2001- the year it returned from its deployment- than it did in fiscal
year 2000, due to factors beyond its control, such as the need to curtail
training in response to the outbreak of hoof and mouth disease. Two of the
division?s battalion commanders told us that their units returned to their
normal training schedule after redeployment. The division reported $47.8
million in training and reconstitution costs in fiscal year 2001, but could
not identify how much of the total was for retraining. V Corps changed its
guidance for fiscal year 2002 so that judgments on whether costs incurred
following redeployment are incremental costs are made on a case- by- case
basis.

In the past 2 years Army units we visited that had prepared for a
contingency deployment and Air Force units from which we obtained data that
were on deployment made repetitive purchases of similar items to Repetitive
Purchases

Page 12 GAO- 02- 450 Contingency Operations

facilitate mission training at home stations and/ or mission support in
theater. 5 These items included computers, computer accessories, video
cameras, and office equipment. Among the Army and Air Force units we
visited, we were unable to identify any concerted effort to reuse or share
items purchased with contingency funds among deploying units. As shown in
table 2, four successive Army units that deployed to Bosnia made repetitive
purchases totaling $2.3 million.

Table 2: Examples of Repetitive Purchases Made by Army Units Amount spent
for Deployment location Deployment dates Army unit Computers Office

equipment

Bosnia 03/ 2000 - 09/ 2000 49th Armor Division $273,859 $213,909 Bosnia 10/
2000 - 03/ 2001 3rd Infantry Division 177,389 584,164 Bosnia 04/ 2001 - 09/
2001 48th Infantry Brigade 171,450 247,521 Bosnia 10/ 2001 - 03/ 2002 29th
Infantry Division a 564,644 34,421 a The 29th Infantry Division had not
submitted all expenditures for reimbursement of contingency expenditures at
the time we completed our work. We expect the expenditures for this division
to be higher when all expenditures are settled.

Source: GAO developed based on Army data.

Air Force units deployed to Southwest Asia also made repetitive purchases.
During fiscal years 2000 and 2001, deployed units spent a total of more than
$7.3 million for computers and computer equipment and $276, 000 for digital
cameras.

For Army units, some of the equipment items purchased were used solely
during training at home station prior to deployment, while other items were
purchased to support the unit while deployed in- theater. The amount of
equipment purchased and deployed varied by unit. The rationale for
purchasing these items for deployment, however, is unclear because the Army
in Europe has placed much of the equipment needed to accomplish the Bosnia
mission in Bosnia so that each rotating unit does not have to bring its own
equipment. For example, according to the Army in Europe?s property book for
equipment in Bosnia, there are more than 2,000 computers, 865 printers, 91
copiers, and a multitude of other office equipment already in that country.
Moreover, 29th Infantry Division officials in Bosnia at the time we
conducted our work verified that the

5 The Army rotates units to the Balkans approximately every 6 months and the
Air Force rotates units to support air operations involving Iraq every 3
months.

Page 13 GAO- 02- 450 Contingency Operations

equipment listed in the property book was in fact there and in working
condition. Divisions preparing for their Bosnia deployment had ample
opportunity to ascertain the type of equipment that would be available to
them through reconnaissance trips key division personnel make to Bosnia well
in advance of the deployment, online access to the Bosnia property and
inventory database maintained by the Army in Europe that lists all available
equipment, and weekly telephone conference calls with personnel in Bosnia.
Thus, in our opinion the purchase of office equipment by units preparing for
Bosnia deployments for use in Bosnia is questionable. This matter has become
increasingly important because DOD is establishing similar equipment stocks
in Kosovo, where it also rotates units. It is also establishing bases in
Afghanistan and elsewhere in the region in support of its efforts to combat
terrorism and plans to rotate units at those bases.

For equipment purchased as training aids for the deployment or to facilitate
mission support, there is no organized effort to transfer such equipment
once a unit finishes its training or its deployment for the use of later
deploying units. For example, to facilitate their training, National Guard
units we visited purchased computer equipment to replicate the computer
systems they would use in Bosnia and digital cameras to record their
training. Army Forces Command officials told us that most of the equipment
purchased with contingency funds over the years was not transferred to a
contingency stock warehouse established at Fort Polk, Louisiana, in the mid-
1990s to receive equipment at the end of a contingency operation or that had
become excess to an operation?s needs. Units we visited did not know of the
warehouse and only a few had or planned to transfer equipment purchased with
contingency funds to later deploying units.

National Guard units also purchased, but did not share, numerous video
teleconferencing systems to be placed in multiple locations in the United
States so that families at home could better communicate with deployed
military members. The three largest Guard elements tasked with the Bosnia
mission- 49th Armor Division (Texas), 48th Armor Brigade (Georgia), and the
29th Infantry Division (Virginia)- have all purchased video teleconferencing
systems. However, we were unable to identify any sharing of the equipment
among the states or return of the systems when the mission was completed. In
the case of the Virginia National Guard, we were told that they had asked
the Texas?s 49th National Guard Division, which had purchased several video
teleconferencing sets to use during its Bosnia deployment, for their
equipment, but were told to go buy their own system because the 49th Brigade
considered the equipment to be theirs.

Page 14 GAO- 02- 450 Contingency Operations

Army Forces Command officials told us that they agreed more could be done to
share equipment items purchased with contingency funds for predeployment
training.

OMB Circular A- 123 requires management controls to ensure that agency
programs and resources are protected from waste, fraud, and mismanagement.
In concert with this requirement, the Air Force has issued guidance that
requires its commanders to ?? ensure the absolute necessity in incurring a
contingency expense ?.? Similarly, both the Army?s Forces Command and its
command in Europe have guidance dating back at least several years
addressing the need for effective stewardship over contingency expenditures.
Nevertheless, during fiscal years 2000 and 2001, the Army and Air Force used
more than $24.6 million for items and services that, in terms of supporting
contingency operations, appear unneeded because the purchase did not appear
to support the operation or was more expensive than needed. As shown in
table 3, which provides some examples, the list of questionable items is
varied.

Table 3: Examples of Questionable Purchases Made with Contingency Operations
Funds

Army Amount

Telephone switching system $60,600 Coin operated washers and dryers 31,000

Army total 91,600 Air Force

Corporate golf membership 16,000 Folding tool sets 49,500 Palm Pilots 36,100
Executive high- back chairs 48,500 Silver and china 45,800 Couches and
loveseats 88,100 Recliners 8,800 Decorative furnishings 5,000 Guided
recreational tours 65,000 Rental cars 1,034,000 Bingo console 49,500
Cappuccino machines 51,200

Air Force total 1, 497,500 Total $1,589,100

Source: GAO developed from DOD data.

Expenditures Not Clearly Needed

Page 15 GAO- 02- 450 Contingency Operations

Regarding Army expenditures, we identified some expenditures made in fiscal
year 2001 that were seemingly unneeded as follows.

 Telephone switching system. The 48th Infantry Brigade, a National Guard
unit, installed a telephone switching system in its Georgia headquarters to
benefit soldiers during their deployment in Bosnia. The $60,619 system
enables soldiers to call toll free to Georgia from Bosnia and using access
codes be automatically switched to any phone in the state. The purpose of
this system is to facilitate communication with families by providing
deployed soldiers with free telephone service. However, e- mail and free
long- distance telephone service was already available to soldiers deployed
in Bosnia. Brigade officials told us that, had they realized this capability
was already available, they would not have purchased the switching system.

 Coin- operated washers and dryers. The 48th Infantry Brigade spent $30,962
to purchase washers and dryers for use by its soldiers at no cost to them
while they were at their barracks at Fort Stewart, Georgia. Prior to the
purchase, brigade personnel went off- post to use coinoperated laundries.
Brigade officials believed it was appropriate to purchase the washers and
dryers because its personnel were spending more time at Fort Stewart while
preparing for their Bosnia deployment. However, there was an alternative
available to all personnel at Fort Stewart for getting laundry done. Fort
Stewart offers 1- day laundry service to all military identification card
holders. It is unclear why brigade personnel did not use this service rather
than purchase their own machines. Once having purchased the machines, the
Georgia Guard used them to generate revenue for its own use. Specifically,
Georgia personnel use the machines free with tokens, while all nonGeorgia
Guard personnel must use coins to operate the machines, with the proceeds
going to the Georgia National Guard. The revenues from the machines are
being used to purchase items for the Georgia- owned National Guard training
site at Fort Stewart. The items purchased include microwave ovens, coffee
pots, linens, and towels.

As noted earlier, Army units have a variety of means to ascertain the types
of equipment and facilities that are available in the Balkans. Army
officials told us that unit commanders can, and do, (1) conduct
reconnaissance trips, (2) review property and inventory books that list
various equipment and supply items already available in theater, (3) access
a comprehensive database system that details equipment and supplies already
in the Balkans, known as the Army?s Deployment Asset Visibility System, and

Page 16 GAO- 02- 450 Contingency Operations

(4) participate in weekly conference telephone calls that include discussion
of what equipment is available in the Balkans.

Regarding Air Force expenditures, we identified a number of contingency
operation expenditures made during fiscal years 2000 and 2001 that seemed to
be more geared toward the personal use of deployed personnel than necessary
to support the operation. Air Force officials were unable to provide us an
explanation for purchasing many of these items.

 Guided recreational tours. Deployed personnel staying in the contingency
dormitory at Aviano Air Base, Italy, were provided sightseeing trips to
Venice and other locations on the weekends. Personnel permanently stationed
at the base must use their own money to pay for the sightseeing trips. Both
the Air Force and Army use contingency funds for tours and recreation while
personnel are deployed in Southwest Asia and the Balkans, and we believe
this to be a valid use of the funds for the morale and welfare of the
personnel because they are only allowed off- post on official business.
However, it is unclear why personnel in Aviano, a non- combat zone where
people are free to travel about the area while off- duty, were provided this
service. Air Force officials advised us that they have since discontinued
the tours.

 Furniture and decorative furnishings. Air Force units purchased a wide
variety of home furnishing items during their deployments to Southwest Asia,
such as tables, chairs, and wall hangings. Some examples included a sofa and
armchair at $24,000, a designer table at $2,200, an executive pillow at
nearly $1,800, and four leather chairs at over $1,000 each. The purchases of
decorative accessories included lithographs, wall hangings, decorative rock
at nearly $19,000, and decorative knives costing hundreds of dollars each.

 Kitchenware. Air Force units purchased a variety of kitchenware items
during their deployments to Southwest Asia during fiscal years 2000 and
2001. These items included $51,000 for cappuccino machines, $1,000 for a
nacho cheese warmer, and thousands of dollars for china and silverware.

 Golf items. Air Force units purchased several golf items during their
deployments to Southwest Asia that included a golf cart for $35,000, a
corporate golf membership at $16,000, golf passes at $5, 333, and a golf
club/ bag set costing nearly $1, 500.

Page 17 GAO- 02- 450 Contingency Operations

 Folding tools. Designed to be a compact survival tool for the outdoors,
the folding tool opens to provide the user a knife, small pliers, scissors,
saw, and assorted screwdrivers. It retails for about $50, and various Air
Force units spent $49,510 to purchase about 1,000 of them in Southwest Asia.

 Palm Pilots. The Air Force units deployed to Southwest Asia purchased Palm
Pilots on at least 14 occasions at a total cost of $36,090.

 Rental cars. The Air Force in Europe approved the leasing of rental cars
for transient personnel at a cost of $3 million, as well as tens of
thousands of dollars in repair costs for those vehicles and $414 to pay
parking tickets incurred by the Air Force personnel driving those vehicles.
Some of these rental expenses appear valid because personnel are deployed to
remote sites, such as Moron Air Base in Spain, where transportation support
was unavailable. At Ramstein Air Base in Germany, however, the lack of
transportation support is not as obvious because there is a 24- hour
military bus service for transporting transient aircrews and support
personnel housed about 30 minutes from the base. The Air Force justified the
use of rented vehicles, costing $1 million, for transient personnel on the
basis that the personnel were on 24- hour call and no mess hall was open in
the housing area so personnel had to travel for their meals. Air Force
officials, however, told us that they did not do a transportation cost
analysis to see if there were more cost- effective ways for transporting
transient personnel other than leasing vehicles, or to determine the cost of
opening the mess hall rather than providing per diem and rental vehicles for
meals. While some transportation costs may be incurred in any case, the lack
of this analysis precludes any opportunity to provide transient personnel
with necessary services at a lower cost through alternative means and raises
questions about the Air Force?s stewardship of public funds.

The purchases that occurred in Southwest Asia were made with government
purchase cards. We have previously reported on the inappropriate use of such
cards at several Navy facilities 6 and are

6 U. S. General Accounting Office, Purchase Cards: Control Weaknesses Leave
Two Navy Units Vulnerable to Fraud and Abuse, GAO- 02- 32 (Washington, D.
C.: Nov. 30, 2001).

Page 18 GAO- 02- 450 Contingency Operations

separately examining the use of government purchase cards throughout the Air
Force.

Appendix III provides additional examples of similar items, totaling
hundreds of thousands of dollars, purchased by Air Force units while
deployed to Southwest Asia. Air Force officials were not able to tell us
where any of the items listed above and in appendix III were as of February
2002, that is, if these items were still at deployed locations, had been
brought back to the purchasing unit?s home station, or had simply
disappeared.

Limited guidance and oversight combined with a lack of costconsciousness has
contributed to questionable uses of contingency funds. Guidance and
oversight are two forms of controls that can better assure funds are spent
appropriately. We found that DOD?s guidance governing contingency
expenditures does not completely and clearly define reasonable costs. In
addition, there is limited oversight and a corresponding lack of visibility
over how contingency operations funds are used that has also contributed to
questionable uses of contingency funds. Moreover, we believe that
questionable expenditures exist because unit commanders did not have
financial incentives to minimize contingency costs. Because contingency
costs were not paid from the services? base budgets, unit commanders did not
have to make choices weighing what to fund for contingency operations
against competing budget priorities. We believe this situation created a
reduced level of cost consciousness for spending contingency operation
funds.

DOD and the services have not developed sufficient guidance to better ensure
that contingency operations funds are used appropriately. DOD?s financial
management regulation provides broad guidance on the definition, use, and
accounting for contingency funds. The services and their major commands in
turn have provided guidance to their units. While DOD?s regulation and the
service?s accompanying guidance cannot be expected to address every
conceivable situation, they currently do not (1) define what is a reasonable
expense in terms of goods and services that can be purchased with
contingency funds, (2) make clear that all personnel with the authority to
spend contingency funds have a responsibility to be cost conscious and good
stewards of the taxpayers? money, and (3) direct what should become of
equipment purchased with contingency funds following a unit?s deployment.
The lack of emphasis on the need for reasonableness and cost consciousness
has contributed, in Limited Guidance and

Oversight Led to Questionable Uses of Contingency Funds

DOD Has Limited Guidance Concerning Contingency Operations Costs

Page 19 GAO- 02- 450 Contingency Operations

our view, to some of the seemingly questionable expenditures using
contingency funds that we have described earlier in this report.

The lack of guidance and direction on what should become of equipment
following a unit?s deployment contributes to both duplicative and repetitive
purchases of equipment. As described earlier, these include millions of
dollars in computer and office equipment purchases. Lacking direction to the
contrary, units have retained equipment purchased for use during contingency
operations for their day- to- day use following their participation in
contingency operations. This, in turn, has led each successive deploying
unit to purchase similar equipment.

Limitations in DOD?s guidance have also led to contradictory interpretations
across the military services and even among units within a military service.
Various units told us that DOD?s guidance was too vague in some instances to
judge whether a purchase using contingency operation funds was reasonable.
For example, officials cited unit coins, china, shoulder holsters,
sunglasses, televisions, videocassette recorders, and backpack- type water
holders as items where current guidance is too vague as to whether it is
reasonable to purchase these items using contingency funds. Consequently, at
some units we visited, commanders denied requests to spend contingency funds
for sunglasses, coins, and televisions, whereas at other units these
requests were approved.

Very little visibility exists above the deploying unit level over how
contingency operations funds are used. DOD, service headquarters, and their
major commands receive summarized cost reports from their cost reporting
system that is aggregated into various cost categories described earlier.
The military services and their major commands do not receive detailed lists
of the goods and services actually purchased nor do they make periodic
visits to individual units and examine expenditure records. In addition, DOD
does not even have an overview of all contracts awarded in support of
contingency operations in the Balkans. As a result, higher commands that
have oversight responsibilities cannot fully assess whether deploying units
are making prudent purchases with contingency funds nor can they assess
support contracts for any possible duplication of services.

Major commands and service headquarters we visited were not aware of the
types of expenditures we have questioned, such as expensive furniture,
cappuccino machines, and repetitive purchases of computer and office
equipment. The following are several examples. Oversight of Contingency

Operations Funds Is Minimal

Page 20 GAO- 02- 450 Contingency Operations

 The 9th Air Force, which oversees units deployed to Southwest Asia, was
not aware that units spent contingency funds to buy expensive furniture,
holiday decorations, golf memberships, and kitchen items while deployed to
Southwest Asia.

 Army Forces Command did not know that several units that recently deployed
to Bosnia and Kosovo spent more for automation equipment than had been
approved. Army Forces Command, which has longstanding guidance concerning
the purchase of automation equipment, directs units not to purchase
automation equipment without receiving approval from the command. However,
we identified instances where purchases far exceeded approved budgets. For
example, Forces Command approved a $117,000 automation budget for mostly
truck radios, toll charges, cell phones, and postage for the 3rd Infantry
Division, but we found the division spent $177,000 on automation equipment.

 U. S. Army, Europe, which oversees units deployed to the Balkans, was not
aware that transportation costs had been obligated twice for the same
expense. This occurred because transportation costs were included in travel
orders although Army Europe directly paid the Air Force for airlifting units
from the United States to the Balkans. After we brought this issue to the
attention of U. S. Army, Europe, officials took corrective actions to
prevent such double obligations. Army Europe also reduced its budget for
fiscal year 2002 by $17.6 million to reflect eliminating the double
obligating and is working to identify and deobligate similar fiscal year
2001 funds.

In the Balkans, where billions of dollars have been spent for contractor
support, we also found that DOD does not have an overview of all contracts
awarded in support of operations. Contracts for mission support in the
Balkans are independently awarded by several Army commands as well as by
other DOD agencies. Contract employees can enter the Balkans at 17 different
locations. Consequently, they can receive their badges and authorization at
any of these locations, which then provides them access to all locations in
the Balkans. The Area Support Groups in the Balkans, which have a role in
contract oversight, are working to obtain an overview of all contractor
activity. Until this task is completed, no one in DOD will know (1) how many
contractors are located in the Balkans, (2) what the contractors have been
contracted to do, and (3) the government?s obligations to the contractors
under their contracts. The Area Support Groups? task has been complicated
because contractors sometimes decline to provide them with needed
information and the Area Support

Page 21 GAO- 02- 450 Contingency Operations

Groups lack the authority to require that the information be provided them.
As a result, DOD does not know if there is duplication of effort among the
contracts it has awarded and if contractors are receiving payments for
support when that support is already being provided by either the military
services or other contractors. For example, contractor employees can eat at
dining facilities in the Balkans at no direct cost to themselves. However,
some contracts may include an amount for food. In such a circumstance, DOD
would be paying for food twice, once through the contract under which the
employee is employed, and once again under another more general contract to
provide food and other services to military and eligible contractor
personnel. With the involvement of contractors in the efforts to combat
terrorism, the potential exists for a similar condition in Afghanistan and
the surrounding area.

Limited oversight was also seen at the 18th Airborne Corps, which oversees
operational expenses for Army National Guard units deploying to Bosnia. Our
analysis of contingency cost data maintained at the corps showed that Army
National Guard units are reimbursed with contingency funds without timely
backup information as to what the unit actually purchased. Although the
corps conducts oversight by reviewing and approving the Guard units?
requests for items that the units expect to purchase, the corps generally
reimburses units without really knowing if the approved items were actually
purchased. For example, the corps reimbursed units for items and services
such as video cameras, telephone expenses, and office supplies before
receiving supporting documentation from the units.

DOD has not required that a program be established for conducting periodic
site visits or reviews to examine expenditures in support of contingency
operations. Consequently, DOD and services? review of contingency
expenditures have been limited. Although the Army is conducting some
reviews, 7 its scope is limited and maintaining enough auditing staff to
conduct reviews has been a problem. The Army, for example, does not have an
ongoing program to assess before and after deployment expenditures made by
units based in the United States.

7 The Army?s command in Europe and the Army Audit Agency conduct some
auditing efforts in the Balkans and these audits focus on the reasonableness
of items and services purchased to support Army forces in the Balkans. In
Southwest Asia, the Army?s Central Command headquarters conducts quarterly
site visits to its units deployed to Southwest Asia and these reviews focus
on the various internal controls in place covering expenditures made in
support of contingency operations.

Page 22 GAO- 02- 450 Contingency Operations

Further, according to Army officials in Europe, their audit coverage and
effectiveness is hampered by the difficulty they are having in recruiting
audit personnel. Officials at both the Army?s Forces Command and its command
in Europe stated that audit coverage of these expenditures should be
increased. The Air Force relies on financial managers who are deployed at
its camps in Southwest Asia rather than auditors to monitor contingency
expenditures. One or more financial managers are assigned to each of the Air
Force?s camps to be advisors to the commander on the appropriate use of
funds. All managers must attend a standardized training program designed to
prepare them for the specific policies and procedures used in the theater
prior to deployment. Nearly all of the managers deployed to Southwest Asia
are enlisted personnel or junior officers. As a result, more senior officers
deployed to the theater on flying missions sometimes ignore their judgments
and advice, according to Air Force officials.

We believe that questionable expenditures also exist because prior to fiscal
year 2002 unit commanders did not have financial incentives to minimize
contingency costs. Through fiscal year 2001, contingency costs were not paid
from the base budgets of the service commands, thus unit commanders did not
have to make choices as to what to fund. This situation reduces the
financial incentive to minimize costs because, as we have previously
reported, commanders do not have to weigh funding for contingency operations
against competing budgetary priorities. 8

We believe that this resulted in a reduced level of cost consciousness
because units that made the questionable purchases described earlier did not
have to forgo making other purchases. For example, Air Force officials in
Europe told us they leased rental cars for transient personnel at a cost of
$3 million without any transportation cost analysis to determine if there
were more cost- effective ways for transporting transient personnel other
than leasing vehicles. However, they also told us that the command would
have explored alternative transportation options if the transportation costs
had been paid from the command?s base budget.

In its report on DOD?s fiscal year 2002 appropriations, the Senate
Appropriations Committee suggested that providing funds directly to the

8 U. S. General Accounting Office Defense Budget: Need for Continued
Visibility Over Use of Contingency Funds, GAO- 01- 829 (Washington, D. C.:
July 6, 2001). Lack of Cost

Consciousness Contributes to Questionable Purchases

Page 23 GAO- 02- 450 Contingency Operations

services? accounts would lead to better accountability and the elimination
of redundant and questionable costs. This approach was adopted by the
conference committee on the fiscal year 2002 Department of Defense
Appropriations Act so that funds for contingency operations in the Balkans
and Southwest Asia were provided directly to the services? accounts.

Questionable expenditures result from limited guidance and oversight. DOD?s
guidance does not do enough to define reasonable costs, stipulate what
should be done with equipment purchased with contingency funds once a unit
completes its contingency mission, and explicitly state that all personnel
responsible for expending contingency funds have a responsibility to do so
prudently. The Office of the Secretary of Defense, Army and Air Force
service headquarters, and their major commands provide only minimal
oversight of contingency fund expenditures, resulting in limited knowledge
of how contingency funds are being used and the kinds of questionable
expenditures we identified. Current oversight does not uniformly provide for
periodic detailed audits, centralized collection of contracts data, and unit
submissions of detailed purchase lists. Furthermore, little is being done to
centrally procure and then pass on equipment needed by each successive
deploying unit, resulting in repetitive purchases of similar equipment.

Action by the conference committee on the DOD Appropriations Act for Fiscal
Year 2002 to provide funds for Balkan and Southwest Asia contingency
operations directly to the services? accounts should provide more of an
incentive for the services to use the funds for their most important needs.
Nevertheless, the matters addressed in this report remain important for two
reasons. First, continuing operations in the Balkans and Southwest Asia can
be made more efficient and any funds saved would be available for other
pressing needs. Second, the United States is engaged in combating terrorism
in Afghanistan, in other countries around the world, and within the United
States. Funding for combating terrorism is being provided through
appropriations separate from the services? direct appropriations, with rules
and restrictions similar to those for the Transfer Fund. Without adequate
guidance and oversight, coupled with increased emphasis on the prudent use
of funds, the potential for questionable uses of contingency funds in
current and future operations will continue. Conclusions

Page 24 GAO- 02- 450 Contingency Operations

To provide better guidance regarding the use of contingency funds, we
recommend that the secretary of defense:

 Expand DOD?s financial management regulation (vol. 12, ch. 23) to include
more comprehensive guidance governing the use of funds appropriated for
contingency operations. At a minimum, more complete guidance should detail
(1) examples of what contingency funds can and cannot be used to purchase,
(2) what units should do with equipment procured with contingency funds when
the equipment is no longer needed by the unit to support the mission, that
is, guidance for the disposition of equipment to include what items can be
stored at a central location for use by other deploying units, transferred
directly to other units, or retained by the unit, and (3) the importance of
cost consciousness and proper stewardship in the use of contingency funds.

To improve oversight of the expenditure of contingency funds, we recommend
that the secretary of defense:

 Conduct periodic reviews of expenditures in support of contingency
operations. Specific review areas should include (1) an analysis of the need
for items purchased to support pre- deployment training, (2) a comparison of
items purchased by various units to identify opportunities for sharing
arrangements or the need for centralized procurement, (3) the reasonableness
of items purchased during all phases of the contingency operation to include
a review of purchases made with government credit cards, and (4) an
assessment of whether items purchased with contingency funds are properly
accounted for and handled once the contingency mission is completed.

 Direct all components of DOD to forward to the executive agent for
operations in a geographical area such as the Balkans a copy of all existing
and future contracts and modifications to those contracts that directly
support U. S. operations and that the executive agent for that area review
all contracts to (1) identify possible duplication of services and (2)
ensure that contractors receive only those services from the government to
which they are contractually entitled.

 Direct the secretary of the army to require Army National Guard units to
submit detailed lists of expenditures in support of requests for
reimbursement of costs claimed in support of contingency operations.

To minimize the number of repetitive and questionable purchases, we further
recommend that the secretary of defense direct: Recommendations for

Executive Action

Page 25 GAO- 02- 450 Contingency Operations

 The secretary of the army to discontinue the practice of allowing
individual units to purchase all items needed for training during the pre-
deployment phase of a contingency operation. Instead, several training sets
consisting of items needed for training should be assembled and controlled
by a single Army entity such as the Training and Doctrine Command. These
sets could be issued in support of the training, returned for inspection and
repair when the unit deploys, and then reissued to subsequent units
preparing for deployment.

 The secretary of the army to require the National Guard Bureau to assemble
and control equipment training sets purchased with contingency funds for its
units. The Bureau should also establish video conferencing sets to be
rotated among the states for use when its units are deployed.

 The secretaries of the army and the air force to require that major
commands designate a single entity to procure all items required by rotating
units while deployed to a contingency base or camp, except for individual-
and unit- owned items.

In official oral comments on a draft of this report, DOD stated that it
recognized the need to maintain and strengthen fiscal control over
contingency funds. It also stated that it would more closely monitor the
execution of funds in order to avoid the situations found in our report.

DOD concurred with our recommendations but stated that it was premature to
implement the two involving (1) the Army?s establishing several training
sets of equipment that would be issued in support of units? pre- deployment
training and that would be assembled and controlled by a single Army entity
and (2) the National Guard Bureau?s establishing training sets of equipment
purchased with contingency funds as well as video conferencing sets. In
commenting on both those recommendations, DOD stated that, while it agreed
with them, it was not feasible at this time to establish, maintain, and
administer a multitude of training sets due to different types of units and
different levels of training. DOD noted that the improved oversight measures
to which it agreed would provide the control necessary to limit questionable
purchases. In addition, DOD stated that the Army would assess the
feasibility of establishing training sets in the future.

We agree that there are unique items that would not be suitable for being
placed in training sets. At the same time, we have also found that there are
a number of common items that most if not all units have purchased in
support of their pre- deployment training, including computers, cameras,
Agency Comments

and Our Evaluation

Page 26 GAO- 02- 450 Contingency Operations

and office equipment such as copiers, facsimile machines, and laminating
equipment that would be suitable for training sets. We have also found that
video conferencing sets are commonly purchased and used by National Guard
units so that families at home can better communicate with deployed military
members and believe that these sets could be rotated among the states for
use when units are deployed. In future assessments of the feasibility of
establishing training sets, we believe that the Army should focus on items
that are common across units. Therefore, we have retained the
recommendations as stated in our draft report.

DOD described its proposed amendments to its financial management
regulation, which are phrased in the context of funds appropriated to the
Overseas Contingency Operations Transfer Fund. Beginning in fiscal year
2002, however, military contingency operations are being funded through the
services? accounts instead of the Transfer Fund. Therefore, we believe that,
in amending its financial management regulation, DOD can strengthen its
control over the use of funds provided to support military operations by not
limiting its changes to funds appropriated to the Transfer Fund.

We are sending copies of this report to the Chairman and Ranking Minority
Member, Subcommittee on Defense, House Committee on Appropriations; the
Chairmen and Ranking Minority Members, Senate and House Committees on Armed
Services; 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,
the 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. Another contact and major contributors to this report are listed
in appendix IV.

Neal P. Curtin, Director Defense Capabilities and Management

Appendix I: Map of Overseas Contingency Operations as of January 2002

Page 27 GAO- 02- 450 Contingency Operations

Appendix I: Map of Overseas Contingency Operations as of January 2002

Appendix II: Scope and Methodology Page 28 GAO- 02- 450 Contingency
Operations

Our evaluation of contingency operations expenditures covered costs incurred
by selected Army and Air Force units during fiscal years 2000 and 2001. We
confined our work to the Army and the Air Force because these two services
accounted for over 80 percent of the contingency operations expenditures in
fiscal year 2001.

To examine the appropriateness of the services? expenditures of contingency
operations funds, our analyses focused on whether (1) costs claimed by
selected deploying units were incremental to the contingency mission, thus
meeting DOD?s definition of an incremental expense to be reimbursed from the
Overseas Contingency Operation Transfer Fund, and (2) expenses incurred were
for items and services that appeared to be reasonable for the contingency
mission. Because we believe that DOD does not sufficiently define what is a
reasonable expense for goods and services that can be purchased with
contingency operation funds, we applied a common sense judgment on whether
the costs appeared to be reasonable based on our experience reviewing
contingency operations and discussions with DOD and service officials. We
then discussed with unit officials those items we believed were questionable
to obtain their views. Contingency costs that we looked at differed for the
two services because Army units incur significant expenses prior to or
following a contingency deployment whereas Air Force units do not. Instead,
most of the Air Force?s contingency expenses are incurred while deployed.
Because of the differences in which the Army and the Air Force incur
contingency operation incremental costs, our approach differed for each
service as follows.

 For the Army, we used a case study approach to examine the appropriateness
of the Army?s expenditures of contingency operations funds. We examined cost
reports and supporting documentation for four sequential unit rotations in
Bosnia (known as Stabilization Forces rotations 7 through 10) and two
sequential unit rotations in Kosovo (known as Kosovo Forces rotations 1 and
2). Our assessment of contingency costs included costs to train for the
contingency mission prior to deployment and the costs incurred by the units
after returning from the mission.

 For the Air Force, we looked at purchases made by selected units deployed
to Southwest Asia during fiscal years 2000 and 2001 to examine the
appropriateness of the expenditures using contingency operation funds. We
analyzed service records to identify the types of items purchased for
military forces to include credit card purchases. Appendix II: Scope and
Methodology

Appendix II: Scope and Methodology Page 29 GAO- 02- 450 Contingency
Operations

We discussed the appropriateness of certain questionable expenditures with
Air Force command and monitoring officials.

Our findings regarding expenditure appropriateness varied among the units
selected. Consequently, our findings cannot be projected to all units that
participated in contingency operations during this period.

To assess the effectiveness of DOD?s and the services? oversight of
contingency expenditures, we discussed with DOD and service officials the
availability and adequacy of guidance and procedures in place to oversee
these expenditures. We reviewed existing written guidance that was provided
to us by a variety of organizations, including the offices of the Under
Secretary of Defense (Comptroller); Defense Finance and Accounting Service;
U. S. Army and U. S. Air Force Headquarters; and U. S. Army and U. S. Air
Force major commands, divisions, and wings. We also examined DOD and service
regulations governing such expenditures to assess controls over contingency
operation purchases. We did not validate accounting systems of the commands
providing the data nor did we verify the Defense Finance and Accounting
Service?s data used in its contingency operation cost reports.

Locations we visited during our review were: Office of the Secretary of
Defense, Washington, D. C. U. S. Central Command

U. S. Central Command, Air Force, Shaw Air Force Base, South Carolina; and
U. S. Central Command, Army, Fort McPherson, Georgia.

Department of the Army, Headquarters U. S. Army Forces Command, Fort
McPherson, Georgia; 18th Airborne Corps, Fort Bragg, North Carolina; 3rd
Infantry Division, Fort Stewart, Georgia; 10th Mountain Division, Fort Drum,
New York; 29th Infantry Division, Fort Belvoir, Virginia; U. S. Army,
Europe, Heidelberg, Germany; 1st Armored Division, Wiesbaden, Germany; and
1st Infantry Division (Mechanized), Wurzburg, Germany.

Appendix II: Scope and Methodology Page 30 GAO- 02- 450 Contingency
Operations

Department of the Air Force, Headquarters U. S. Air Force Europe, Ramstein
Air Base, Germany; Air Combat Command, Langley Air Force Base, Virginia; and
9th Air Force and 20th Fighter Wing, Shaw Air Force Base, South Carolina.

National Guard, Headquarters Air National Guard Headquarters, Washington, D.
C.; Army National Guard, Headquarters, Washington, D. C.; Georgia Army
National Guard, 48th Infantry Brigade (Mechanized), Atlanta and Macon,
Georgia; Mississippi Army National Guard, Jackson, Mississippi; and Virginia
Army National Guard, Fort Pickett, Virginia.

We performed our work from July 2001 to February 2002 in accordance with
generally accepted government auditing standards.

Appendix III: Examples of Questionable Items Purchased by Air Force Units in
Southwest Asia in Fiscal Years 2000 and 2001

Page 31 GAO- 02- 450 Contingency Operations

Location Item Description Cost

Al Dhafra Air Base Cappuccino machine $7,933 White beach sand 4,638 Designer
coffee table 2, 205 Golf club set with bag 1, 478 Genie lamp with Riyadh
stone 432 Escan Village Golf passes 5, 333

Silver knife mounted on Riyadh stone 864 King/ Queen comforter sheet sets
2,080 Al Jaber Air Base Cappuccino machine 3, 092

Manager?s chair 1, 795 Maple pool cues (13) 2,352 White china plates 3,868
Leather executive chairs (4) 4, 262 Computer tutorial ?The Intelligent
Investor? 2, 987 Cowboy hats 4, 896 Decorative river rock 18,980 Executive
high back pillow 1, 775 Nacho cheese warmer 1, 039 Prince Sultan Air Base
Loveseat and arm chair 23,989

Cappuccino machine 16,758 Corporate golf membership 16,000 Sumo wrestling
suit 3,395 Cappuccino machine 9, 200 Halloween decorations 9,825 Nostalgic
juke box 14,835 Executive desk set 2, 451 Palm trees and bar stools 2,076
Ali Al Salem Air Base Artificial plants 11,598

Bingo console 49,462 Three compartment lunch boxes 8,212 Valentines day
decorations 328 Mardi Gras decorations 1,147 Remote control cars 3,766

Appendix III: Examples of Questionable Items Purchased by Air Force Units in
Southwest Asia in Fiscal Years 2000 and 2001

Appendix IV: GAO Contact and Staff Acknowledgments

Page 32 GAO- 02- 450 Contingency Operations

Steven H. Sternlieb (202) 512- 4534 In addition to the contact named above,
Ray S. Carroll, Laura Talbott, Lester Ward, Janine Cantin, and Jim Lewis
made key contributions to this report. Appendix IV: GAO Contact and Staff

Acknowledgments GAO Contact Acknowledgments

Related GAO Products Page 33 GAO- 02- 450 Contingency Operations

U. S. General Accounting Office, Defense Budget: Need for Continued
Visibility Over Use of Contingency Funds, GAO- 01- 829 (Washington, D. C.:
July 6, 2001).

U. S. General Accounting Office, Quality of Life for U. S. Soldiers Deployed
in the Balkans, GAO- 01- 201R (Washington, D. C.: Dec. 14, 2000).

U. S. General Accounting Office, Contingency Operations: Army Should Do More
to Control Contract Cost in the Balkans, GAO/ NSIAD- 00- 225 (Washington, D.
C.: Sept. 29, 2000).

U. S. General Accounting Office, Contingency Operations: Providing Critical
Capabilities Poses Challenges, GAO/ NSIAD- 00- 164 (Washington, D. C.: July
6, 2000).

U. S. General Accounting Office, Defense Budget: Fiscal Year 2000
Contingency Operations Costs and Funding, GAO/ NSIAD- 00- 168 (Washington,
D. C.: June 6, 2000).

U. S. General Accounting Office, Defense Budget: Fiscal Years 1999 and 2000
Contingency Operations Costs and Funding, GAO/ NSIAD- 00- 100R (Washington,
D. C.: Feb. 28, 2000).

U. S. General Accounting Office, Military Operations: Some Funds for Fiscal
Year 1999 Contingency Operations Will Be Available for Future Needs, GAO/
NSIAD- 99- 244BR (Washington, D. C.: Sept. 21, 1999).

U. S. General Accounting Office, Military Operations: Impact of Operations
Other Than War on the Services Varies, GAO/ NSIAD- 99- 69 (Washington, D.
C.: May 24, 1999).

U. S. General Accounting Office, Bosnia: Cost Estimating Has Improved, but
Operational Changes Will Affect Current Estimates, GAO/ NSIAD- 97- 183
(Washington, D. C.: July 28, 1997). Related GAO Products

(350100)

The General Accounting Office, the 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.

The fastest and easiest way to obtain copies of GAO documents at no cost is
through the Internet. GAO?s Web site (www. gao. gov) contains abstracts and
fulltext files of current reports and testimony and an expanding archive of
older products. The Web site features a search engine to help you locate
documents using key words and phrases. You can print these documents in
their entirety, including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as ?Today?s Reports,? on its Web
site daily. The list contains links to the full- text document files. To
have GAO e- mail this list to you every afternoon, go to www. gao. gov and
select ?Subscribe to daily E- mail alert for newly released products? under
the GAO Reports heading.

The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:

U. S. General Accounting Office 441 G Street NW, Room LM Washington, D. C.
20548

To order by Phone: Voice: (202) 512- 6000 TDD: (202) 512- 2537 Fax: (202)
512- 6061

Contact: Web site: www. gao. gov/ fraudnet/ fraudnet. htm E- mail: fraudnet@
gao. gov Automated answering system: (800) 424- 5454 or (202) 512- 7470

Jeff Nelligan, managing director, NelliganJ@ gao. gov (202) 512- 4800 U. S.
General Accounting Office, 441 G Street NW, Room 7149 Washington, D. C.
20548 GAO?s Mission

Obtaining Copies of GAO Reports and Testimony

Order by Mail or Phone To Report Fraud, Waste, and Abuse in Federal Programs

Public Affairs
*** End of document. ***
```