United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on National Security, 

Emerging Threats, and International Relations, 

Committee on Government Reform, House of 

Representatives 

GLOBAL WAR ON 

TERRORISM 

Observations on Funding, 

Costs, and Future 

Commitments 

Statement of David M. Walker 

Comptroller General of the United States 

For Release on Delivery

Expected at 2:00 p.m. EDT

Tuesday, July 18, 2006

 

GAO-06-885T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

July 18, 2006

GLOBAL WAR ON TERRORISM 

Observations on Funding, Costs, and 

Highlights of GAO-06-885T, a testimony to Future Commitments 

the Chairman, Subcommittee on National 

Security, Emerging Threats, and 

International Relations, Committee on 

Government Reform, House of 

Representatives 

After the terrorist attacks of 

September 11, 2001, the President 

announced a Global War on

Terrorism (GWOT), requiring the 

collective instruments of the entire

federal government to counter the 

threat of terrorism. Ongoing 

military and diplomatic operations 

overseas, especially in Iraq and

Afghanistan, constitute a key part

of GWOT. These operations involve

a wide variety of activities such as

combating insurgents, civil affairs,

capacity building, infrastructure

reconstruction, and training

military forces of other nations. 

The U.S. has reported substantial 

costs to date for GWOT related 

activities and can expect to incur

significant costs for an unspecified

time in the future, requiring 

decision makers to consider 

difficult trade-offs as the nation 

faces increasing long-range fiscal

challenges. 

GAO has issued several reports on 

current and future financial

commitments required to support 

GWOT military operations, as well 

as diplomatic efforts to stabilize

and rebuild Iraq. This testimony

discusses (1) the funding Congress

has appropriated to the 

Department of Defense (DOD) and

other U.S. government agencies for 

GWOT-related military operations 

and reconstruction activities since

2001; (2) costs reported for these

operations and activities and the 

reliability of DOD’s reported costs, 

and (3) issues with estimating 

future U.S. financial commitments

associated with continued

involvement in GWOT. 

Since 2001, Congress has appropriated about $430 billion to DOD and other 

government agencies for military and diplomatic efforts in support of GWOT. 

This funding has been provided through regular appropriations as well as 

supplemental appropriations, which are provided outside of the normal 

budget process. Since September 2001, DOD has received about $386 billion 

for GWOT military operations. In addition, agencies including the 

Department of State, DOD, and the Agency for International Development 

have received since 2001 about $44 billion to fund reconstruction and 

stabilization programs in Iraq ($34.5 billion) and Afghanistan ($9 billion) and 

an additional $400 million to be used in both Iraq and Afghanistan. 

Since 2001, U.S. government agencies have reported significant costs 

associated with GWOT, but GAO has concerns with the reliability of DOD’s 

reported cost data. Through April 2006, DOD has reported about $273 billion

in incremental costs for GWOT-related operations overseas—costs that 

would not otherwise have been incurred. DOD’s reported GWOT costs and 

appropriated amounts differ generally because DOD’s cost reporting does 

not capture some items such as intelligence and Army modular force 

transformation. Also, DOD has not yet used funding made available for 

multiple years, such as procurement and military construction. GAO’s prior 

work found numerous problems with DOD’s processes for recording and 

reporting GWOT costs, including long-standing deficiencies in DOD’s 

financial management systems and business processes, the use of estimates 

instead of actual cost data, and the lack of adequate supporting 

documentation. As a result, neither DOD nor the Congress reliably know 

how much the war is costing and how appropriated funds are being used or 

have historical data useful in considering future funding needs. GAO made 

several recommendations to improve the reliability and reporting of GWOT 

costs. In addition to reported costs for military operations, U.S. agencies

have obligated about $23 billion of $30 billion received for Iraqi 

reconstruction and stabilization, as of January 2006. 

U.S commitments to GWOT will likely involve the continued investment of 

significant resources, requiring decision makers to consider difficult tradeoffs as the nation faces increasing fiscal challenges in the years ahead; 

however, predicting future costs is difficult as they depend on several direct 

and indirect cost variables. For DOD, these include the extent and duration 

of military operations, force redeployment plans, and the amount of 

damaged or destroyed equipment needed to be repaired or replaced. Future 

cost variables for other U.S. government agencies include efforts to help 

form governments and build capable and loyal security forces in Afghanistan 

and Iraq, and meet the healthcare needs of veterans, including providing 

future disability payments and medical services. www.gao.gov/cgi-bin/getrpt?GAO-06-885T.

To view the full product, including scope and 

methodology, click on the link above. For 

more information, contact Sharon L. Pickup at 

(202) 512-9619 or pickups@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss our work to date on the funding, 

reported costs,1

 and future commitments of the Global War on Terrorism 

(GWOT) overseas. I recently testified on the National Strategy for Victory

in Iraq, in which I stated that there are some positive attributes to the new 

strategy, including a clear purpose and scope.2

 The strategy also identifies 

U.S. involvement in Iraq as a “vital national interest and the central front in 

the war on terror.” However, among its deficiencies is the absence of 

current and future cost data for Iraq. After the terrorist attacks of 

September 11, 2001, the President announced a Global War on Terrorism, 

requiring the collective instruments of the entire federal government to 

counter the threat of terrorism. The United States and its partners are 

attacking terrorists both at home and abroad, denying terrorists sanctuary 

and sponsorship, disrupting the financing of terror, and building and 

maintaining a united global front against terrorism. Ongoing military and 

diplomatic operations overseas constitute a key part of GWOT and involve 

a wide variety of activities such as combating insurgents, civil affairs, 

capacity building, reconstruction operations, and training military forces 

of other nations. These operations are currently focused on Iraq and 

Afghanistan. Clearly, costs to the United States in financial terms in no 

way compare to the loss of human life. To date, over 2,800 military 

personnel have died as a result of GWOT operations and many more have 

been wounded in action.

As I have highlighted in previous testimony, our nation is not only 

threatened by external security threats, but also from within by growing 

fiscal imbalances due primarily to known demographic trends and rising 

health care costs.3

 These trends are compounded by the near-term deficits 

arising from new discretionary and mandatory spending as well as lower 

revenues as a share of the economy. If left unchecked, these fiscal 

imbalances will ultimately impede economic growth, have an adverse 

effect on our future standard of living, and in due course affect our ability 

 1

For purposes of this testimony, the term “costs” refers to the obligations that have been

incurred by U.S. agencies in support of GWOT. Obligations are incurred through actions

such as orders placed, contracts awarded, services received, or similar transactions made 

during a given period that will require payments during the same or a future period. 

2

 GAO, Rebuilding Iraq: More Comprehensive National Strategy Needed to Help Achieve

U.S. Goals and Overcome Challenges, GAO-06-953T (Washington, D.C.: July 11, 2006). 

3

GAO, Defense Management: Key Elements Needed to Successfully Transform DOD 

Business Operations, GAO-05-629T (Washington, D.C.: Apr. 28, 2005).

Page 1 GAO-06-885T 
to address key national and homeland security needs. These factors create 

the need to make choices that will only become more difficult and 

potentially disruptive the longer they are postponed. The United States’ 

commitment to GWOT will likely involve the continued investment of 

significant resources, requiring decision makers to consider difficult tradeoffs as the nation faces increasing fiscal challenges, including a growing 

debt burden and interest costs on such debt, in the years ahead. 

My testimony today will focus on the financial commitments required to 

support military operations associated with GWOT in Iraq and 

Afghanistan, as well as diplomatic efforts to stabilize and rebuild Iraq. 

Specifically, I will discuss (1) the funding Congress has appropriated to 

the Department of Defense (DOD) and other U.S. government agencies for 

GWOT-related military operations and reconstruction and stabilization 

activities since 2001, (2) costs reportedly incurred for these operations and 

activities and the reliability of DOD’s reported costs, and, (3) issues with 

estimating the future financial commitments associated with the United

States’ continued involvement in GWOT. 

In preparing this testimony, we have relied on previously issued GAO 

reports4

 and testimonies on the costs and other aspects of military 

operations and reconstruction and stabilization activities, as well as a 

large body of ongoing work on GWOT-related topics. We performed our 

work in accordance with generally accepted government auditing 

standards. 

Since the beginning of GWOT in 2001, Congress has appropriated about 

$430 billion to DOD and other U.S. government agencies for military and 

diplomatic efforts in support of GWOT. This funding has been provided 

through regular appropriations as well as supplemental appropriations, 

which are provided outside of the normal budget process. Since 

September 2001, DOD has received about $386 billion for GWOT military 

operations, including funding for homeland defense through Operation 

Noble Eagle. This $386 billion includes “bridge” funding in fiscal years 

2005 and 2006 to continue GWOT operations until supplemental 

Summary 

 4

For example, see GAO, Global War on Terrorism: DOD Needs to Improve the Reliability 

of Cost Data and Provide Additional Guidance to Control Costs, GAO-05-882

(Washington, D.C.: Sept. 21, 2005) and GAO, Rebuilding Iraq: Governance, Security, 

Reconstruction, and Financing Challenges, GAO-06-697T (Washington, D.C.: Apr. 25, 

2006). 

Page 2 GAO-06-885T 
appropriations could be enacted. In addition, U.S. government agencies, 

including the Department of State (State), DOD, and the United States 

Agency for International Development (USAID), have received about 

$44 billion since 2001 to fund reconstruction and stabilization programs in 

Iraq ($34.5 billion) and Afghanistan ($9 billion) with an additional $400 

million for the Commanders’ Emergency Response Program in Iraq and 

Afghanistan. For fiscal year 2007, DOD has requested another $50 billion in 

bridge funding for military operations and other U.S. government agencies 

have requested $771 million for reconstruction and stabilization activities. 

Since 2001, U.S. government agencies have reported hundreds of billions 

of dollars in costs associated with GWOT; however, we have previously 

reported on our concerns with DOD’s data reliability and cost reporting.5

DOD has reported incremental costs of about $273 billion for overseas 

GWOT-related activities through April 2006. This amount includes almost 

$215 billion for operations in Iraq and almost $58 billion for operations in 

Afghanistan, the Horn of Africa, the Philippines, and elsewhere.6

 These 

reported costs do not include obligations for intelligence and the Army’s 

modular force transformation. The difference between the amount 

appropriated and DOD’s reported costs through April 2006 can generally 

be attributed to unreported costs for intelligence and Army modular force 

transformation, as well as funding for procurement, military construction, 

and research, development, test, and evaluation, which can be obligated

over multiple years, that has not yet been obligated. However, our prior 

work has found numerous problems with DOD’s processes for recording 

and reporting costs for GWOT, including long-standing deficiencies in 

DOD’s financial management systems and business processes, the use of 

estimates instead of actual costs, and the lack of adequate supporting 

documentation. For example, we found inadvertent double counting in a 

portion of DOD’s reported costs amounting to almost $1.8 billion from 

November 2004 through April 2005. Furthermore, DOD’s reported costs for 

GWOT operations overseas have grown steadily in each fiscal year through 

fiscal year 2005—from about $105 million in fiscal year 2001, to begin 

preparation for operations in Afghanistan, to about $81.5 billion in fiscal 

year 2005. With this steady growth, it is important to ensure that all 

commands seek to control costs to the extent possible. In addition to 

 5

GAO-05-882. 

6

 In addition to the costs for overseas operations, DOD has also reported obligations of 

$27.7 billion through April 2006 for operations in defense of the homeland U.S., under 

Operation Noble Eagle. 

Page 3 GAO-06-885T 
reported costs for military operations, about $23 billion has been obligated 

for Iraqi reconstruction and stabilization, as of January 2006. However, 

U.S. government agencies, other than DOD, do not formally track all 

GWOT costs. This, along with DOD’s cost reliability and reporting 

problems, make it difficult for the decision makers to reliably know how 

much the war is costing, to determine how appropriated funds are being 

spent, and to use historical data to predict future trends. 

The United States’ commitments to GWOT will likely involve the 

continued investment of significant resources, requiring decision makers 

to consider difficult trade-offs as the nation faces increasing fiscal 

challenges in the years ahead. Predicting future costs will be difficult 

because they are dependent on several direct and indirect cost variables; 

however, they are likely to be in the hundreds of billions of dollars. Future 

cost variables for DOD include the extent and duration of military 

operations, the facilities that will be needed to support servicemembers 

overseas, force redeployment plans and the costs to repair and replace

damaged or destroyed equipment used during operations. Future cost 

variables for other U.S. government agencies include the efforts to help 

form national and provincial governments and build management capacity 

as well as capable and loyal security forces in both Afghanistan and Iraq.

There will also be further need for funding reconstruction activities to 

restore, sustain, and protect critical infrastructure. Another long-term cost 

associated with GWOT will be caring for veterans. The Department of 

Veterans’ Affairs (VA) estimated that more than 100,000 GWOT veterans 

are currently using VA facilities, and future healthcare costs will likely 

increase as more servicemembers require treatment from injuries and 

mental health conditions such as post-traumatic stress disorder. There will 

also be future commitments associated with payments to those veterans 

with long-term disabilities. With GWOT costs likely continuing for the 

foreseeable future, decision makers will have to carefully weigh priorities 

and make difficult financial decisions. In assessing trade-offs, we would 

encourage DOD to consider moving other GWOT costs into the baseline 

budget, as it has done with Operation Noble Eagle. This is consistent with 

our prior suggestion that, once an operation reaches a known level of 

effort and costs are more predictable, more funding should be built into 

the baseline budget. 

The United States is engaged in a comprehensive effort to protect and 

defend the homeland and defeat terrorism. Using all instruments of 

national power, the United States and its partners are attacking terrorists 

both at home and abroad, denying terrorists sanctuary and sponsorship, 

Background 

Page 4 GAO-06-885T 
disrupting the financing of terror, and building and maintaining a united 

global front against terrorism. After the terrorist attacks of September 11, 

2001, military operations began with Operation Noble Eagle, which is 

aimed at defending the U.S. homeland from terrorist attacks, and 

Operation Enduring Freedom, which takes place principally in and around 

Afghanistan, but also covers additional operations in the Horn of Africa, 

the Philippines, and elsewhere. In 2003, DOD began Operation Iraqi 

Freedom, which takes place in and around Iraq. DOD and the military 

services are responsible for carrying out these operations. Recently, DOD 

reported about 132,000 U.S. military personnel are deployed to Iraq and 

about 15,000 are deployed to Afghanistan. 

Diplomatic efforts are also underway to rebuild areas in and around Iraq 

and Afghanistan, as well as to assist these countries in rebuilding their 

governments and creating secure nations. State is responsible for all U.S.

activities in Iraq except security and military operations. Other U.S. 

government agencies also play significant roles in this reconstruction 

effort, including the USAID and the U.S. Army Corps of Engineers. The 

Multi-National Security Transition Command-Iraq, which operates under 

the Multi-National Force-Iraq, leads coalition efforts to train, equip, and 

organize Iraqi security forces. In Afghanistan, USAID manages the majority 

of reconstruction programs and operations. Other U.S. agencies provide 

additional assistance, including DOD. Members of the North Atlantic 

Treaty Organization also play a key role in training and equipping Afghan 

forces. 

Since 2001, DOD has prepared reports on the costs of its involvement in 

GWOT. The costs of military contingency operations are referred to as 

“incremental costs,” which are costs that are directly attributable to the 

operation and would not otherwise have been incurred, were it not for the

operation. Specifically, the costs are above and beyond baseline training, 

operations, and personnel costs. Incremental costs include the pay of 

mobilized reservists as well as the special pays and allowances for 

deployed personnel, such as imminent danger pay and foreign duty pay for 

those personnel serving in Operation Iraqi Freedom and Operation 

Enduring Freedom; the cost of transporting personnel and materiel to the 

theater of operation and supporting them upon arrival; and the operating 

cost of equipment, such as vehicles and aircraft, among many other costs. 

Costs that are incurred regardless of whether there is a contingency

operation, such as the base pay of active duty military personnel, are not 

considered incremental.

Page 5 GAO-06-885T 
DOD tracks the obligations incurred to support GWOT and produces a 

monthly cost report, which is distributed throughout the department and 

used by senior DOD leadership, along with other information, in 

discussing the cost of the war. It is also used in formulating future budget 

requests to fund GWOT. The report identifies the monthly and cumulative 

incremental GWOT obligations. DOD reports the costs by service, defense 

agency, contingency operation, and appropriation. On October 1, 1998, 

DOD implemented a standard contingency cost breakdown structure 

consisting of 55 cost categories to improve contingency cost reporting 

consistency between its multiple services and agencies. Examples of cost 

categories include facilities/base support and airlift. Furthermore, this cost 

breakdown structure was also to facilitate future efforts to understand and 

interpret differences between estimated and actual costs. DOD Financial 

Management Regulation 7000.14-R, volume 12, chapter 23, generally 

establishes financial policy and procedures related to DOD contingency 

operations. The regulation incorporates the common cost categories and

multiple subcategories, which were established in 1998 and updated in 

September 2005, that are used to report DOD’s monthly GWOT costs. 

Obligations are the foundation of all GWOT cost reporting. For example, 

operation and maintenance obligations in support of GWOT represent tens

of thousands, if not hundreds of thousands, of individual transactions 

ranging in value from one penny to millions of dollars. When obligations 

are incurred, the military services enter them into their accounting 

systems using accounting codes. Using the Army as an example, an Army 

budget activity, such as an installation or unit, initially obligates funds for 

acquired goods and services by using the Standard Army Accounting 

Classification Code. An obligation entry includes information on the 

funding source; the operational mission, such as Operation Iraqi Freedom; 

and the category of cost. The cost categories are established by the 

services. 

Since 2001, Congress has appropriated about $430 billion to DOD and 

other U.S. government agencies for military operations and reconstruction 

and stabilization activities supporting GWOT. Much of the funding has 

come in the form of supplemental appropriations. Some funding has also

come through the normal baseline budget appropriated to the 

departments. For example, in fiscal years 2005 and 2006, DOD was 

provided so-called “bridge” funding—$25 billion and $50 billion, 

respectively—through its regular appropriation, which was intended to 

fund operations from the beginning of the fiscal year until a supplemental

appropriation could be enacted. Also, funds are appropriated to the 

Funding for the 

Global War on 

Terrorism

Page 6 GAO-06-885T 
various appropriations accounts for each department and are not 

specifically designated for operations in Iraq or Afghanistan. Since 

September 2001, DOD has received about $386 billion to fund military 

operations supporting GWOT. In addition, about $44 billion has been made

available to U.S. agencies—including DOD, USAID, and State—for 

reconstruction and stabilization efforts in Iraq ($34.5 billion) and 

Afghanistan ($9 billion) with an additional $400 million for use in Iraq and 

Afghanistan through the Commander’s Emergency Response Program. 

These efforts include training and equipping of security forces and 

repairing critical infrastructure. (See table 1.) For fiscal year 2007, DOD 

has requested another $50 billion in bridge funding for military operations

and other U.S. government agencies have requested $771 million for 

reconstruction and stabilization activities. 

Table 1: Total GWOT Military Operations and Reconstruction and Stabilization Funding for Fiscal Years 2001 through 2006 

Budget authority in millions 

 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Total

Military operationsa16,623 17,749 73,546 61,400 100,888b116,022 386,228

Reconstruction and stabilizationc - 500 4,800 21,800 9,100 7,730 43,930 

Total 16,623 18,249 78,346 83,200 109,988 123,722 430,128

Source: GAO. 

a

GAO analysis based on congressional appropriations acts. 

b

Of this total, $25 billion was available to DOD in FY 2004 for military operations. 

c

GAO analysis for Iraq and Congressional Research Service reports for Afghanistan. Reconstruction 

and Stabilization funds are for Iraq and Afghanistan only.

The $386 billion DOD has received to fund military operations supporting 

GWOT also includes funding for homeland defense under Operation Noble 

Eagle. This operation was funded through supplemental appropriations for 

DOD until fiscal year 2005, when it was moved into DOD’s baseline budget.

This movement is consistent with our prior suggestion that, once an 

operation reaches a known level of effort and costs are more predictable,

more funding should be built into the baseline budget. This $386 billion 

also includes funding for DOD’s intelligence programs, as well as other 

DOD initiatives, such as the Army’s efforts to transform its traditional 

division-based force into a more rapidly deployable modular force that is 

better able to conduct joint and expeditionary operations. Beginning in 

fiscal year 2007, the Army’s modular transformation will be included in 

DOD’s regular baseline appropriation. Prior to passage of the most recent 

supplemental appropriation, military service officials told us that they had 

already spent the $50 billion bridge that was included in the fiscal year 

Page 7 GAO-06-885T 
2006 defense appropriations act and had started to use baseline 

appropriations for GWOT activities, as well as undertake cost-cutting 

measures until the supplemental was enacted.7

 DOD has requested another 

$50 billion in bridge funding as part of its fiscal year 2007 budget. 

In addition to the funding provided to support military operations, 

Congress has appropriated about $44 billion to DOD and other U.S. 

government agencies to support important reconstruction and 

stabilization activities in Iraq and Afghanistan since 2001. These activities 

support GWOT objectives because they help train and equip local security

forces, and help establish the foundations of a sound economy with the 

capacity to deliver essential services, such as clean water and reliable 

electricity. A growing economy also provides employment opportunities as 

an alternative to recruitment efforts made by insurgents. Since 2003, about 

$34.5 billion8

 has been provided to support these types of activities in Iraq 

and, since September 2001, about $9 billion to support these activities in 

Afghanistan. The recent supplemental appropriation also provided an

additional $400 million for the Commander’s Emergency Response 

Program for use in Iraq and Afghanistan. This would bring total 

reconstruction and stabilization funding to over $44 billion. 

Funding for reconstruction and stabilization efforts has supported the 

following activities, among others: 

• Training and equipping of Iraqi security forces. Since fiscal year 

2003, about $11.7 billion has been made available for U.S. security and 

justice programs in Iraq, including funds to train and equip the Iraqi 

security forces. Over the past several months, the Secretaries of State 

and Defense have cited progress in developing Iraqi security forces, 

and reported that the numbers of operational army personnel and 

trained and equipped police have increased from about 142,000 in 

March 2005 to about 266,000 in June 2006. However, as we have 

previously reported, the number of trained and equipped forces does 

 7

Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and 

Hurricane Recovery, 2006, Pub. L. No. 109-234 (2006). 

8

The $34.5 billion includes funding for the following activities and programs: security and 

justice; restoring essential services such as oil, electricity, and water; other sectors; and 

administrative costs. 

Page 8 GAO-06-885T 
not provide reliable information on their capabilities.9

 In addition, the 

administration received $3.0 billion in the recent fiscal year 2006 

supplemental appropriation to continue moving the Iraqi security 

forces toward stand-alone operational capacity. 

• Restoring Iraq’s essential services. Since fiscal year 2003, about 

$10.5 billion has been made available for restoring essential services in 

Iraq, specifically activities in the oil, water, health, and electricity 

sectors. U.S. reconstruction efforts have helped increase electricity 

generation capacity, restart crude oil production, and restore some 

water treatment plants. However, key reconstruction goals in the oil, 

electricity, and water sector have yet to be achieved due to security, 

management, and sustainment challenges in U.S.-funded projects. The 

administration received an additional $1.5 billion in the recent

supplemental appropriation for reconstruction assistance to Iraq, 

including $50 million to USAID’s Iraq Community Action Program and 

$50 million for democracy, rule of law, and reconciliation programs. 

• Training and equipping the Afghan national army. The United 

States led the international effort to train and equip the Afghan national

army, which is crucial to both long-term security and U.S. counterterror efforts. About 26,500 troops have been trained and equipped and 

the defense force is projected to reach up to 70,000 military and civilian 

personnel, according to State reporting. The administration has 

received $1.9 billion in the fiscal year 2006 supplemental appropriation 

to further prepare Afghan security forces to operate without U.S. 

support. 

The U.S. government also funds a variety of other programs that indirectly

support GWOT. For example, Congress provides funding for security 

assistance on a worldwide basis to help train or equip foreign security 

forces (military and police). In fiscal year 2006, Congress provided an

estimated $4.5 billion for two security assistance programs, the 

International Military Education and Training program and Foreign 

Military Financing program. In addition, the U.S. government reported 

costs of $1.2 billion on worldwide public diplomacy programs in fiscal 

year 2005. 

 9

GAO, Rebuilding Iraq: Preliminary Observations on Challenges in Transferring 

Security Responsibilities to Iraqi Military and Police, GAO-05-431T, (Washington, D.C.,

Mar. 14, 2005). 

Page 9 GAO-06-885T 
The U.S. Has 

Reported Hundreds of 

Billions in Costs of 

Ongoing Military and 

Reconstruction and 

Stabilization 

Operations, but Data 

Weaknesses Make It 

Difficult to Reliably 

Know Cost of Military 

Operations 

Since GWOT began in 2001, U.S. government agencies have reported 

hundreds of billions of dollars in costs for overseas military and 

reconstruction operations; however, as we have previously reported, data

reliability and reporting concerns make it difficult to know DOD’s total 

GWOT costs. Since 2001, DOD has reported costs of about $273 billion on 

overseas GWOT military operations through the end of April 2006. The 

department’s reported costs have grown steadily from a reported about 

$105 million in fiscal year 2001, to begin preparations for operations in 

Afghanistan, to over $81.5 billion in fiscal year 2005. U.S government 

agencies have reported costs of about $23 billion for Iraqi reconstruction 

and stabilization. However, U.S. government agencies, other than DOD, do 

not formally track all GWOT costs. This, along with DOD’s cost reliability 

and reporting problems, make it difficult for the decision makers to 

reliably know how much the war is costing, to determine how 

appropriated funds are being spent, and to use historical data to predict 

future trends. 

DOD’s Reported Costs for 

Military Operations

Since the attacks of September 11, 2001, DOD has reported cumulative 

incremental costs of about $273 billion, through the end of April 2006, on

military operations overseas in support of GWOT. This amount includes

almost $215 billion for operations in Iraq and almost $58 billion on 

operations in Afghanistan, the Horn of Africa, the Philippines, and 

elsewhere. This does not include obligations for intelligence activities and 

the Army’s modular force transformation. The difference between the 

amount appropriated and DOD’s reported costs through April 2006 can 

generally be attributed to these unreported obligations for intelligence and 

Army modular force transformation, as well as funding for procurement, 

military construction, and research, development, test, and evaluation,

which can be obligated over multiple years, that has not yet been 

obligated. In addition to the costs for overseas operations, DOD has also 

reported obligations of $27.7 billion through April 2006 for operations in 

defense of the homeland U.S., under Operation Noble Eagle. 

To date, the largest reported costs for the overseas GWOT operations have

typically been associated with two of DOD’s appropriations accounts—

operation and maintenance and military personnel. Operation and 

maintenance expenses cover a number of things, such as operational 

support for housing, food, and services; transportation to move people and

supplies and equipment into the theaters; and the repair of equipment. 

Military personnel expenses include military pay and allowances for 

mobilized reservists, as well as the special payments or allowances, such 

as imminent danger pay and the family separation allowance that all 

Page 10 GAO-06-885T 
qualifying military personnel receive. While expenses for operation and 

maintenance, and military personnel have tended to be among the highest, 

DOD has also reported incurring costs for procurement of equipment and 

other items. 

As we have reported in the past, we have significant concerns about the 

overall reliability of DOD’s reported cost data. As a result, neither DOD 

nor Congress can reliably know how much the war is costing. As we 

reported in September 2005, we found numerous problems with DOD’s 

processes for recording and reporting costs for GWOT.10 Factors affecting 

the reliability of DOD’s reported costs include long-standing deficiencies 

in DOD’s financial management systems and business processes, the use 

of estimates instead of actual costs, and the lack of supporting 

documentation. In at least one case, our work showed that some reported 

costs may have been materially overstated. Specifically, reported 

obligations for mobilized Army reservists in fiscal year 2004 were based 

primarily on estimated rather than actual information and differed from 

related payroll information by as much as $2.1 billion, or 30 percent of the

amount DOD reported in its cost report. In addition, we found inadvertent 

double counting in a portion of DOD’s reported costs amounting to almost 

$1.8 billion from November 2004 through April 2005. 

In our September 2005 report, we made several recommendations to the 

Secretary of Defense to (1) undertake a series of steps to ensure that the 

services’ reported GWOT costs are accurate and reliable; (2) direct the 

Office of the Under Secretary of Defense (Comptroller) to oversee the 

services’ efforts and to develop a systematic process to review and test the 

reliability of the overall GWOT reports; (3) expand the department’s 

financial management regulation for contingency operations to include 

contingencies as large as GWOT; and (4) establish guidelines to control 

costs and require the services to keep the Comptroller’s office informed of 

their efforts in this area.

Since the time of our report, we know that DOD has taken some measures

in response to our recommendations intended to improve the reliability 

and accuracy of its cost reports, such as requiring the military services to 

identify variances in reported costs from month to month, and determine 

the causes. However, our initial review suggests that DOD and the services 

have yet to take sufficient action to fully implement these measures and 

 10GAO-05-882. 

Page 11 GAO-06-885T 
that certain weaknesses in cost reporting continue to exist. Without 

aggressive action on the part of DOD and the services, the reliability of 

cost reports will remain in question. Also, there has been an ongoing issue 

with the timeliness of DOD’s cost reporting. For example, the cost reports 

for October through December 2005 were not issued until March 2006. To

address this long-standing problem, Congress, in the National Defense 

Authorization Act for Fiscal Year 2006, directed that DOD provide the cost 

reports to GAO no later than 45 days after the end of the month being 

reported.11 DOD has now provided GAO with the March and April cost 

reports on schedule. 

DOD’s Reported Costs 

Have Steadily Grown 

DOD’s reported costs for GWOT operations have grown steadily in each 

fiscal year through fiscal year 2005—from about $105 million in fiscal year 

2001 to about $81.5 billion in fiscal year 2005. For fiscal year 2006, as of 

April 2006, DOD has reported obligations of about $49 billion; about $41.9 

billion for Iraq and about $7.5 billion for Afghanistan. These amounts 

include about 

• $22.5 billion in operating support, which pays for transportation, fuel, 

maintenance, housing, food, services, and other items; 

• $5.3 billion for procurement of equipment and other items; 

• $9.9 billion in military personnel costs, including special pays and 

allowances for deployed military personnel; 

• $2.9 billion for personnel support, including clothing and medical 

support; 

• $4.0 billion for transportation, including airlift and sealift; 

• $2.6 billion in support for the Iraq Security Forces; 

• $813 million for the Afghanistan Security Forces; and, 

• $474 million in support of coalition forces. 

Costs for the remainder of fiscal year 2006 are expected to be higher than

DOD anticipated, in part because the Army has been unable to follow 

through with plans to close a number of forward operating bases and 

consolidate troops at some of the larger locations. Also, savings resulting 

from a United States and coalition hand-off of operations in Afghanistan to

troops from nations representing the North Atlantic Treaty Organization is

not expected to be realized until after fiscal year 2007. Furthermore, the 

 11Pub. L. No. 109-163, §1221(c) (2006). 

Page 12 GAO-06-885T 
rising cost of fuel is likely to push costs even higher than envisioned at the 

start of the fiscal year. 

In examining the historical growth of reported overseas GWOT costs, the 

largest increase has been in operations and maintenance expenses. For 

example, between fiscal year 2002 and fiscal year 2005, DOD has reported 

increases in these expenses from about $7.6 billion to about $48.7 billion.

According to DOD, some of this increase is attributable to higher fuel 

costs and increased operational support costs for contracts to provide 

housing, food, and services for the military locations in Iraq and 

Afghanistan. For the same time frames, reported obligations for military 

personnel have increased from about $3.4 billion to about $14.9 billion,

and reported procurement obligations have increased from $0 to about 

$16.5 billion.

With the steady growth in reported GWOT costs, we believe there is a need

to ensure that all commands seek to control costs to the extent possible. 

As we reported in September 2005, individual commands have taken steps 

to control costs and DOD policy generally advises its officials of their 

financial management responsibilities to ensure the prudent use of 

contingency funding.12 However, DOD has not established guidelines that 

would require commands to take steps to control costs and keep DOD 

informed of these steps as we recommended in our prior report. In the 

absence of such guidelines and reports, DOD cannot be sure that enough 

is being done to control costs. 

U.S. Government Agencies 

Have Reported Obligating 

Most of Their 

Reconstruction and 

Stabilization Program 

Funding 

U. S. government agencies have reported obligating $23 billion for Iraqi 

reconstruction and stabilization, as of January 2006. However, U.S. 

government agencies, other than DOD, do not formally track all GWOT 

costs. Among other uses, these funds have been used for infrastructure 

repair of the electricity, oil, water, and health sectors; training and 

equipping of Iraqi security forces (military and police); and administrative 

expenses. 

State reports that the remaining funds will not be used for large 

reconstruction projects, but to sustain the projects that have already been 

built and to build greater capacity at the national, provincial, and 

municipal levels for better and more responsive governments. 

 12GAO-05-882. 

Page 13 GAO-06-885T 
Global War on 

Terrorism Costs Will 

Likely Continue for 

the Foreseeable 

Future 

It appears the United State’s military and diplomatic commitments in Iraq 

and Afghanistan will continue for the foreseeable future and are likely to 

be in the hundreds of billions of dollars. However, costs are difficult to 

predict because they depend on several direct and indirect cost variables. 

DOD’s future costs will likely be affected by the pace and duration of 

military operations, the types of facilities needed to support troops 

overseas, force redeployment plans, and the amount of damaged or 

destroyed equipment that will need to be repaired or replaced. Other 

future costs to the U.S. government include nation-building and 

reconstruction efforts and treating injured GWOT veterans. These costs 

will require administration decision makers and Congress to consider 

difficult trade-offs as the nation faces increasing fiscal challenges in the 

years ahead.

Future DOD Costs The future costs associated with DOD’s commitments to GWOT depend on 

several variables, including (1) the extent and duration of operations, (2) 

the types of facilities that will be required to support troops overseas, and 

(3) the amount of equipment that will need to be restored or replaced. As 

DOD has done with Operation Noble Eagle, we would encourage the 

department to consider moving other GWOT costs into the baseline 

budget. This is consistent with our prior suggestion that, once an 

operation reaches a known level of effort and costs are more predictable,

more funding should be built into the baseline budget.13 Doing so will 

assist decision makers in determining investment priorities and making 

trade-offs among funding needs. 

It is uncertain how long DOD will be engaged in a high pace of military 

operations associated with GWOT, making it difficult to predict costs 

associated with future troop levels and mission requirements. There has 

also been some discussion of reducing the number of troops in Iraq and 

Afghanistan. However, DOD officials have not announced information 

about the level or timing of any troop reduction or redeployment plans. 

While it would appear that reducing the number of troops in theater could

lower costs for these operations, we have seen from previous operations 

in Bosnia and Kosovo that costs may rise due to the increased use of 

contractors to replace the military personnel. Bases still have to be 

maintained, even with fewer military members in them. Also, if the pace of

Extent and Duration of Military 

Operations 

 13GAO, Bosnia: Costs Are Exceeding DOD’s Estimate, GAO/NSIAD-96-024BR (Washington,

D.C.: July 25, 1996). 

Page 14 GAO-06-885T 
operations remains high because of security concerns or hostilities, costs 

for force protection, fuel, and other items could remain high.

The United States does not currently have any basing agreements with 

Iraq. DOD has constructed facilities in Iraq and neighboring countries 

supporting missions in both Iraq and Afghanistan. Examples of facilities 

funded by military construction funds and other appropriations funding 

include force protection, airfield and road improvements, fuel handling, 

power and water distribution, and support facilities. The Secretary of 

Defense recently testified that already some 30 U.S. military bases have 

been returned to Iraqi control or closed altogether.14 If the United States 

decides to enter into agreements with the new governments in Iraq and 

Afghanistan to have an enduring presence in these countries, costs to 

make our temporary bases into more permanent facilities could be 

significant. 

Facilities to Support Overseas 

Troops 

Sustained GWOT operations have and will continue to take a toll on the 

condition and readiness of military equipment. The United States faces 

short-and long-term costs to maintain and restore equipment in theater, as 

well as reequip units as these missions end and the units return to their 

home stations. The uncertainties of how long ongoing operations will 

continue make it difficult to estimate future costs of maintaining and 

replacing this large amount of equipment. 

Equipment Restoration and 

Replacement 

The Army and Marine Corps will have the largest reset costs of the 

services. DOD has reported Army equipment usage rates have averaged 

two to eight times those of peacetime rates, while senior Marine Corps 

officials testified that the ground equipment used by the Corps in ongoing 

operations has experienced usage rates four to nine times that of 

peacetime rates. We recently testified that the services are currently 

funding their reset programs through the use of supplemental

appropriations and plan to rely on supplemental appropriations for reset 

funding through at least fiscal year 2007.15 According to recent testimony, 

the Army requirement for reset in fiscal year 2007 is $17.1 billion. The 

Army expects the requirement beyond fiscal year 2007 to be $12 billion to

 14“Senate Armed Services Committee Holds Hearing on Defense Authorization”, a speech 

presented by Secretary of Defense, Donald Rumsfeld at the Senate Armed Services

Committee, Feb. 7, 2006. 

15GAO, Defense Logistics: Preliminary Observations on Equipment Reset Challenges and

Issues for the Army and Marine Corps, GAO-06-604T (Washington, D.C.: Mar. 30, 2006).

Page 15 GAO-06-885T 
$13 billion per year through the end of the conflict and for a minimum of 

two to three years thereafter. In recent testimony, the Marine Corps stated 

that $11.9 billion is needed to manage the equipment in Operation Iraqi 

Freedom and Operation Enduring Freedom for fiscal year 2007 and an 

estimated additional requirement of $5.3 billion for each year that the 

conflict continues. The uncertainties of pace and duration of ongoing 

operations as well as the overall condition of major equipment items make

it difficult to estimate future equipment reset costs. Equipment used in 

operations in Iraq will eventually require more intensive repair and 

overhaul than what is typically expected in peacetime. While the services

are working to refine overall requirements, the total requirements and 

costs are unclear. 

In addition to resetting a large number of major equipment items, the 

Army and Marine Corps must also plan to replace active, National Guard,

and Reserve equipment left in theater to support ongoing operations. As 

we previously testified, in late 2003 the Army began to direct redeploying 

National Guard and Reserve units to leave their equipment in theater for

use by deploying forces.16 DOD policy requires the Army to replace 

equipment transferred to it from the Reserve Component including 

temporary withdrawals or loans in excess of 90 days,17 yet at the time of 

our report in October 2005, the Army had neither created a mechanism in 

the early phases of the war to track Guard equipment left in theater nor 

prepared replacement plans for this equipment, because the practice of 

leaving equipment behind was intended to be a short-term measure. As of 

June 2006, only 3 replacement plans have been endorsed by the Secretary 

of Defense, all to replace National Guard equipment, while 22 plans are in 

various stages of approval. While the exact dollar estimate for these 

replacements will not be known until operations in Iraq cease, it will likely 

cost billions of dollars. 

Future Nation-Building 

Costs 

Future cost variables for other U.S. government agencies include the 

efforts to help form national and provincial governments and build 

management capacity in both Afghanistan and Iraq and build capable and

loyal Iraqi and Afghani security forces. Also, there will be further need for 

funding to restore, sustain, and protect infrastructure. The new Iraqi 

 16GAO, Reserve Forces: Army National Guard’s Role, Organization, and Equipment Need

to be Reexamined, GAO-06-170T (Washington, D.C.: Oct. 20, 2005).

17Department of Defense Directive 1225.6, Equipping the Reserve Forces (Apr. 7, 2005). 

Page 16 GAO-06-885T 
government will need significant help in building the procurement, 

financial management, and accountability systems needed to govern and

provide basic services to millions of its citizens. In addition, the 18 

provincial governments will also require assistance in building 

management capacity and delivering results to the Iraqi people that make 

a difference in their daily lives. The costs of sustaining an Iraqi force of 

266,000 personnel may require the Iraqi government to spend more money 

on personnel, maintenance, and equipment than originally anticipated. In

addition, the new Iraqi security forces will have recurring training needs, 

and will need additional assistance in replacing lost or stolen equipment, 

and in developing improved logistical and sustainment capabilities. 

While most of the reconstruction money for Iraq has been obligated,

additional funds will be needed to finance remaining reconstruction needs, 

and to restore, sustain, and protect the infrastructure that has been built to 

date. For example, 

• Iraqi needs are greater than originally anticipated. In the next 

several years, Iraq will need an estimated $30 billion to reach and 

sustain oil capacity of 5 million barrels per day, according to industry 

experts and U.S. officials. For electricity, they will need $20 billion 

through 2010, according to the Department of Energy’s Energy

Information Administration. Iraqi budget constraints and limited 

government managerial capacity limit its ability to contribute to future 

rebuilding efforts. 

• There is widespread corruption in Iraq. Reconstruction efforts 

have not taken the risk of corruption into account when assessing the 

costs of achieving U.S. objectives in Iraq. The International Monetary 

Fund, the World Bank, Japan, and the European Union officials cite 

corruption in the oil sector as a special problem. In addition, according 

to State officials and reporting documents, about 10 percent of refined 

fuels are diverted to the black market, and about 30 percent of

imported fuels are smuggled out of Iraq and sold for a profit.

• Future international contributions for Iraq may be limited. Most 

of the U.S. funds have been obligated and about 70 percent of the $13.6 

billion in international pledges are in the form of loans. 

• The new U.S. embassy will be costly. The embassy is projected to 

cost about $592 million, but the full cost of establishing a diplomatic 

presence across Iraq is still unknown. 

Page 17 GAO-06-885T 
• Additional funds are needed to train and equip Afghan security 

forces. The United States, other donors, and the new Afghan 

government face significant challenges to establishing viable Afghan 

army and police forces.18 Although DOD and State have not yet 

prepared official cost estimates, the army and police programs could 

cost up to $7.2 billion to complete and about $600 million annually to 

sustain. Moreover, slow progress in resolving other Afghan security 

problems—the lack of an effective judiciary, the substantial illicit 

narcotics industry, and the continued presence of armed militias—

threaten to undermine overall progress made toward providing 

nationwide security and ensuring the stability of the Afghan 

government.

Future Costs for Veterans Lastly, one of the variables that can influence how much these efforts will 

cost the United States is the long-term cost of caring for our veterans. Both 

improvements in medical care in the field and in body armor have 

increased the survival rate of those who are seriously injured in combat.

However, seriously injured survivors will likely require substantial longterm medical care from the VA, and may require extensive inpatient and

home and community-based support services to assist those with 

traumatic brain injury, spinal cord injury, and other severely disabling 

conditions. We also know that many servicemembers have been exposed 

to intense and prolonged combat, which research has shown to be 

strongly associated with the risk of developing post-traumatic stress 

disorder. This disorder can occur after experiencing or witnessing a lifethreatening event and is the most prevalent mental health disorder 

resulting from combat. Mental health experts predict that 15 percent or 

more of the servicemembers returning from operations in Iraq and 

Afghanistan will develop post-traumatic stress disorder.19 In addition to an 

influx of more severely injured patients, the VA health care system will be 

required to serve large numbers of returning veterans with shorter term, 

more routine, health care needs. 

 18GAO, Afghanistan Security: Efforts to Establish Army and Policy Have Made Progress,

but Future Plans Need to be Better Defined, GAO-05-575 (Washington, D.C.: June 30, 2005). 

The estimates in this report have not been updated. 

19GAO, Post-Traumatic Stress Disorder: DOD Needs to Identify the Factors Its Providers 

Use to Make Mental Health Evaluation Referrals for Servicemembers, GAO-06-397

(Washington, D.C.: May 11, 2006). 

Page 18 GAO-06-885T 
VA has estimated that a little more than 100,000 veterans from operations 

in Iraq and Afghanistan are currently using VA health care services. VA 

originally underestimated by 77,000 the number of returning veterans who 

would use its health care, which in part required the VA to request 

additional appropriations in both fiscal years 2005 and 2006. Long-term 

estimates of how many returning veterans will use VA health care and the 

costs of that care are imprecise for a variety of reasons, including 

uncertainty about the duration of operations in the theaters as discussed 

above. But, current levels of usage by returning servicemembers indicate a 

growing VA health care workload and costs. Furthermore, while we have 

no clear idea of the magnitude, there will undoubtedly be long-term 

financial commitments associated with payments to veterans with longterm disabilities. 

Mr. Chairman, this concludes my prepared statement. I would be happy to

answer any questions you and the subcommittee members may have. 

Page 19 GAO-06-885T (350879) 
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