a

GAO

United States Government Accountability Office

Report to Congressional Committees

September 2005 GLOBAL WAR ON 

TERRORISM

DOD Needs to 

Improve the Reliability 

of Cost Data and 

Provide Additional 

Guidance to Control 

Costs

GAO-05-882
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-882.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Sharon Pickup 

at 202-512-9619 or pickups@gao.gov. 

Highlights of GAO-05-882, a report to 

congressional committees 

September 2005

GLOBAL WAR ON TERRORISM 

DOD Needs to Improve the Reliability of 

Cost Data and Provide Additional 

Guidance to Control Costs 

GAO found numerous problems in DOD’s processes for recording and 

reporting costs for GWOT, raising 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 and details on how 

appropriated funds are being spent, or have historical data useful in 

considering future funding needs. On the basis of GAO’s work, DOD is taking 

steps to improve its cost reporting. Factors affecting the reliability of DOD’s 

reported costs include long-standing deficiencies in DOD’s financial systems, 

the lack of a systematic process to ensure that data are correctly entered into 

those systems, inaccurately reported costs, and difficulties in properly 

categorizing costs. In at least one case, reported costs may be materially 

overstated. Specifically, DOD’s reported obligations for mobilized Army 

reservists in fiscal year 2004 were based primarily on estimates 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, GAO found inadvertent double counting in the Navy’s and Marine 

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

November 2004 through April 2005. Because it was not feasible to examine all 

reported costs and significant data reliability problems existed, GAO was not 

able to determine the extent that total costs were misstated. 

 

Further complicating the data reliability issue is the fact that DOD has not 

updated its policy to address GWOT spending. Instead, DOD is using its 

existing financial management regulation for funding contingency operations, 

although it was developed and structured to manage the costs of small-scale 

contingency operations. GAO has noted that specific provisions of the existing 

policy conflict with the needs of GWOT. One conflict concerns the use of 

supplemental funds for base support activities at home stations. DOD’s 

financial management regulation administratively precludes such use, but 

military service officials have spent billions of dollars in supplemental funds 

on these activities. Some of this spending appears to directly support the war, 

but some does not. DOD has updated its regulation on the basis of GAO’s 

work. 

While 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, DOD has not established 

guidelines that would require all commands involved in GWOT to take steps to

control costs and to keep DOD informed of those steps and their success. For 

example, the commander of coalition forces in Iraq has unilaterally set a 10 

percent cost reduction target for fiscal year 2005 but the details are not widely 

known outside the command. With the growth in GWOT costs, there is a need 

to ensure that all commands seek to control costs, including the need to 

review and rationalize related requirements. Until the department establishes 

guidelines on cost controls and is routinely informed about the types of 

controls and their impact on costs, it cannot be sure that all that can be done 

to control costs is being done. 

Since the attacks of September 11, 

2001, the Department of Defense 

(DOD) has reported spending $191 

billion through May 2005 to 

conduct the Global War on 

Terrorism (GWOT). On an ongoing 

basis, DOD compiles and reports 

information on the incremental 

costs of the war, and uses these 

data in preparing future funding 

requests. To assist Congress in its 

oversight of war spending, GAO 

assessed (1) whether DOD’s 

reported war costs are based on 

reliable data, (2) the extent to 

which DOD’s existing financial 

management policy is applicable to 

war spending, and (3) whether 

DOD has implemented cost 

controls as operations mature. 

GAO focused primarily, but not 

exclusively, on fiscal year 2004 

reported costs—the latest full year 

of data available at the time of 

GAO’s review. 

What GAO Recommends

GAO is making a number of 

recommendations to the Secretary 

of Defense to (1) undertake a series

of steps to ensure that reported 

GWOT costs are reliable, 

(2) expand its financial 

management regulation for 

contingency operations to include 

contingencies as large as GWOT, 

and (3) establish guidelines to 

control costs. In commenting on a 

draft of this report, DOD agreed 

with all but one of GAO’s 

recommendations and described 

steps it has taken to improve its 

cost reporting. 
Page i GAO-05-882 Global War on Terrorism

Contents

Letter 1

Results in Brief 3

Background 7

Reliability of DOD’s Reported Costs Is Unknown 10

DOD Is Using Regulations to Guide GWOT Budgeting, Reporting, 

and Spending That Were Not Designed for Wartime 

Operations 29

Cost Controls Can Be Strengthened As Operations Mature 33

Conclusions 38

Recommendations for Executive Action 39

Agency Comments and Our Evaluation 40

Appendixes

Appendix I: Scope and Methodology 46

Appendix II: Ineffective Reporting of Fiscal Year 2004 Army Military 

Personnel Global War on Terrorism Obligations 50

Appendix III: Comments from the Department of Defense 63

Appendix IV: GAO Contacts and Staff Acknowledgments 70

Tables Table 1: Comparison of Reported DOD-Wide Imminent Danger Pay 

and Implied Number of Deployed Personnel, April 

2004-April 2005 16

Table 2: DOD Military Personnel Obligations for GWOT Operations 

in Fiscal Years 2003 and 2004 52

Table 3: Army Military Personnel Obligations for GWOT Operations 

in Fiscal Years 2003 and 2004 53

Table 4: Army Obligation Plan and Reported Military Personnel 

Obligations for GWOT Operations in Fiscal Year 2004 55

Table 5: Army Obligation Plan and Reported Subsistence 

Obligations for GWOT Operations in Fiscal Year 2004 56

Table 6: Supplemental Budget Authority for Army GWOT Military 

Personnel in Fiscal Year 2004 57

Table 7: Estimated Army Obligations for “Reserve Components 

Called to Active Duty” and Related DOD Payroll Costs in 

Fiscal Year 2004 61

Figures Figure 1: Locations of DOD’s Fiscal Year 2004 Global War on 

Terrorism Operations 8
Contents

Page ii GAO-05-882 Global War on Terrorism

Figure 2: Growth in Reported and Projected GWOT Spending, 

Fiscal Years 2002-5 34

Figure 3: Supplemental Funding of DOD Military Personnel for 

GWOT Operations in Fiscal Years 2003 and 2004 51

Figure 4: Army Military Personnel Obligations for GWOT 

Operations in Fiscal Year 2004 58

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Page 1 GAO-05-882 Global War on Terrorism

United States Government Accountability Office

Washington, D.C. 20548

A

September 21, 2005 Letr

Congressional Committees

Following the terrorists attacks of September 11, 2001, the United States 

began military operations to combat terrorism both in the United States 

and overseas. Military operations to defend the United States against 

further attacks are known as Operation Noble Eagle. Ongoing military 

operations in Afghanistan and Iraq are known as Operation Enduring 

Freedom and Operation Iraqi Freedom, respectively. Together, these three 

military operations are identified as the Global War on Terrorism (GWOT). 

Since the attacks, the Department of Defense (DOD) reports that it has 

obligated $191 billion through May 2005 for conducting the war. Congress 

has enacted a series of supplemental appropriation acts to fund the war 

beginning in September 2001.

To assist Congress in its oversight role, we are continuing to undertake a 

series of reviews relating to the cost and funding of contingency operations 

in support of GWOT. In September 2003, we issued a report that discussed 

the funding outlook for fiscal year 2003.1

 We continued our analysis of 

fiscal year 2003 obligations and funding, and in May 2004 we issued a 

summary report comparing full-fiscal-year 2003 GWOT cost and funding.2

 

In July 2004, we reported on the funding outlook for fiscal year 2004.3 We 

are currently continuing our review series by examining full-fiscal-year 

2004 GWOT obligations and the availability of funding to cover those 

expenses and the funding outlook for the fiscal year 2005 GWOT 

supplemental appropriations for the war. We will report our results on 

these subjects separately.

This report contains our analyses of DOD’s reporting on the costs of GWOT. 

On the basis of the authority of the Comptroller General, we assessed (1) 

whether DOD’s reported war costs are based on reliable data, (2) the extent 

to which DOD’s existing financial management policy is applicable to war 

1

 GAO, Military Operations: Fiscal Year 2003 Obligations Are Substantial, but May Result 

in Less Obligations Than Expected, GAO-03-1088 (Washington, D.C.: Sept. 17, 2003).

2

 GAO, Military Operations: DOD’s Fiscal Year 2003 Funding and Reported Obligations 

in Support of the Global War on Terrorism, GAO-04-668 (Washington, D.C.: May 13, 2004).

3

 GAO, Military Operations: Fiscal Year 2004 Costs for the Global War on Terrorism Will 

Exceed Supplemental, Requiring DOD to Shift Funds from Other Uses, GAO-04-915

(Washington, D.C.: July 21, 2004).
Page 2 GAO-05-882 Global War on Terrorism

spending, and (3) whether DOD has implemented cost controls as 

operations mature. We focused our analysis primarily on fiscal year 2004 

obligations specifically for military personnel and operation and 

maintenance expenses, as they represent the largest amount of reported 

spending. Obligations are incurred by the Defense Department and the 

military services 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.4

To accomplish this review, we analyzed DOD’s fiscal year 2004 monthly 

Consolidated DOD Terrorist Response Cost Report, which was renamed 

the Supplemental and Cost of War Execution Report in January 2005, to 

determine reported obligations by operation and by appropriation account 

for the military services. That report is the source document used by the 

department in discussing the cost of the war. It is not used in the 

department’s funds or appropriations accounting. DOD’s cost report does 

not include obligations incurred by the intelligence community; therefore, 

we did not review those obligations. To assess the reliability of DOD’s data, 

we undertook a number of steps, including conducting limited testing on 

military personnel costs and operation and maintenance costs. At the unit 

level, we cross-checked data entries back to the reporting vehicle used to 

input the data into the GWOT cost report. We also conducted limited crosschecking of the U.S. Army Central Command’s (ARCENT) document 

register numbers against documentation controlled by the Defense Finance 

and Accounting Service (DFAS), Rome, New York. We discussed with 

Army financial managers the processes used to ensure that GWOT 

obligation data provided from Army units were accurate and reliable. We 

also reviewed Army Audit Agency, Air Force Audit Agency, and Naval Audit 

Service reviews of their respective service’s GWOT spending. To determine 

what guides GWOT spending, we focused our efforts on analyzing the fiscal 

year 2004 Defense Appropriations Act,5

 the fiscal year 2004 Emergency 

Supplemental Appropriations Act,6

 and DOD’s and the military services’ 

specific policies and guidance. We also met with officials from the Office 

of the Under Secretary of Defense (Comptroller) and the Army, Navy, and 

Marine Corps to discuss the sufficiency of DOD’s financial management 

4

 31 U.S.C. sec. 1501; See Department of Defense Financial Management Regulations, 

7000.14-R, vol. 1, Definitions, xvii.

5

 Pub. L. No. 108-87, 117 Stat. 1054 (Sept. 30, 2003).

6

 Pub. L. No. 108-106, 117 Stat. 1209 (Nov. 6, 2003).
Page 3 GAO-05-882 Global War on Terrorism

policies and procedures for contingency operations, including their 

applicability to GWOT conditions. To determine controls over spending 

and when they could be strengthened, we identified current controls and 

held discussions with resource management officials from major 

commands and units that had deployed to Iraq and Afghanistan on what 

benchmarks might be used to ascertain when controls could be 

strengthened as operations mature and what steps DOD has directed or 

implemented to control costs. We did limited work at the Air Force 

because the Air Force Audit Agency was undertaking a concurrent review 

of Air Force GWOT spending; instead, we drew upon that work as 

appropriate. As discussed below, we found that the reported cost data are 

not reliable because of long-standing deficiencies in DOD’s financial and 

accounting systems, the lack of a systematic process to ensure that data 

are properly entered into those accounting systems, the use of estimates 

rather than actual data for some of DOD’s reported costs, and the incorrect 

categorization of some reported costs due to the large number of cost 

categories and limited training on how to apply them.

We performed our work from August 2004 through August 2005 in 

accordance with generally accepted government auditing standards.

Results in Brief We found numerous problems with DOD’s processes for recording and 

reporting costs for the Global War on Terrorism, raising significant 

concerns about the overall reliability of DOD’s reported cost data. As a 

result, neither DOD nor Congress (1) can reliably know how much the war 

is costing and details on how appropriated funds are being spent or (2) 

have historical data useful in considering future funding needs. On the 

basis of our work, DOD is taking steps to improve its cost reporting. 

However, because it was not feasible to examine all reported costs and 

because significant data reliability problems existed, we were not able to 

determine the extent that total costs were misstated. Our examination of 

DOD’s reported costs in support of GWOT found a number of problems 

affecting the accuracy of reported costs. These problems included longstanding deficiencies in DOD’s financial management systems and business 

processes, reported military personnel obligations that did not match 

payroll records, incorrectly categorized operation and maintenance 

obligations, the use of estimates instead of actual information, and a lack of 

supporting documentation. Factors contributing to DOD’s challenges in 

reporting reliable GWOT cost data include the previously cited longstanding deficiencies in DOD’s financial management systems, the lack of a 

systematic process to ensure that data are correctly entered into those 
Page 4 GAO-05-882 Global War on Terrorism

accounting systems, inaccurately reported costs, and difficulties in 

properly categorizing costs. In at least one case, the reported costs may be 

materially overstated. Specifically, reported obligations for mobilized 

Army reservists in fiscal year 2004 were based primarily on estimates 

rather than actual information and differed from related DOD payroll 

information by as much as $2.1 billion, or 30 percent of the amount DOD 

reported in its cost report. Initially, the Army could not support this 

difference or its reported GWOT military personnel obligations. Over the 

next several months, the Army and the Office of the Under Secretary of 

Defense (Comptroller) provided us with several possible, though 

sometimes inaccurate, explanations for this difference. Some explanations 

appeared valid while others did not and, taken together, they failed to fully 

account for the difference. Regarding DOD’s accounting systems, over the 

years we and DOD have reported the following:

• We have testified on several occasions, including in November 2004 and 

June 2005, about long-standing weaknesses in DOD’s financial 

management and related business processes and systems. 

• In September 2004, DOD acknowledged that systematic deficiencies in 

its financial management systems and business processes result in its 

inability to collect and provide financial and performance information 

that is accurate, reliable, and timely. 

• Still, DOD’s Financial Management Regulation directs the services to 

capture contingency costs, which include GWOT costs, with their 

existing accounting systems and at the lowest possible level of 

organization. 

Because of these problems, we have identified DOD’s financial 

management as a high risk area since 1995. Regarding ensuring that the 

military services are correctly entering GWOT data into their accounting 

systems, for the most part the services and the Office of the Under 

Secretary of Defense (Comptroller) do not have a systematic process to 

review reported GWOT costs to ensure that they are accurate or to test 

their reliability. In one instance, we found that the Marine Corps and Navy 

were inadvertently double counting their reported costs each month from 

November 2004 through April 2005, totaling almost $1.8 billion. The two 

services are taking steps to provide correct information beginning with the 

May 2005 cost report. Regarding properly categorizing costs, in our 

transaction testing we found that improperly categorized costs ranged from 

5 to 30 percent of the dollar value of transactions that we and other audit 
Page 5 GAO-05-882 Global War on Terrorism

agencies reviewed. The large number of DOD cost categories—numbering 

in the thousands—and a lack of training for personnel coding the data 

contributed to incorrect categorizations. DOD has been responsive to 

recommendations that we and the Air Force Audit Agency have made in the 

past to improve cost reporting and has agreed to make a number of 

improvements. DOD has identified steps it plans to take to improve cost 

reporting on the basis of our current work. In discussing how the detailed 

cost data are used, the Office of the Under Secretary of Defense 

(Comptroller) told us that the detailed information is used for several 

purposes, including to make billion-dollar decisions in developing 

supplemental funding budget requests and to inform DOD leadership of 

detailed costs incurred for GWOT. However, as discussed above, as a result 

of the problems we identified in capturing and reporting GWOT costs, 

neither DOD nor Congress can (1) reliably know how much the war is 

costing and details on how appropriated funds are being spent or (2) have 

historical data useful in considering future funding needs.

Further complicating the data reliability issue is the fact that DOD has not 

updated its financial management policy to address GWOT spending. 

DOD’s existing contingency operations’ Financial Management Regulation 

(vol. 12, ch. 23) was developed and structured to manage the costs of smallscale contingencies and specifically excludes its use for wartime activities. 

Nonetheless, department and service officials are using this regulation to 

guide GWOT budgeting, cost reporting, and spending. Beginning in 1995, 

DOD’s Financial Management Regulation established policies and 

procedures for estimating and reporting contingency costs. Historically, 

the financial management regulation generally guided the military services’ 

spending on contingency operations7

 by defining what constituted the 

incremental costs of contingency operations and by providing examples of 

eligible incremental costs.8

 DOD’s regulation is broad and has been 

7

 Volume 12, chapter 23 of DOD’s Financial Management Regulation describes contingency 

operations as including, but not limited to, support for peace operations, major 

humanitarian assistance efforts, noncombatant evacuation operations, and international 

disaster relief efforts. DOD also refers to the operations in support of GWOT as contingency 

operations although, as discussed above, the regulation was developed and structured to 

manage the costs of small-scale contingencies and specifically excludes its use for wartime 

activities.

8

 The term “incremental costs” means those directly attributable costs that would not have 

been incurred if it were not for the operation. Sections 230406 and 230902 of DOD’s 

Financial Management Regulation 7000.14-R, vol. 12, ch. 23, Contingency Operations 

(January 2005) provide additional information on incremental costs.
Page 6 GAO-05-882 Global War on Terrorism

interpreted at all levels of DOD and the services in formulating budgets and 

determining what should be reported as GWOT obligations. Although this 

is the most currently available statement of DOD policy, we believe that 

some of its specific provisions conflict with the needs of GWOT. One 

conflict concerns limitations on the use of supplemental funds for base 

support activities at home stations. The services have spent billions of 

dollars in supplemental funds on these activities. In the case of the Army, 

its Installation Management Agency, which manages all Army installations, 

obligated $1.5 billion in fiscal year 2004 and has budgeted $2.1 billion in 

fiscal year 2005 expressly for GWOT-related “home station” base support 

activities. Although some home station costs appear to be directly related 

to the war, the provisions of chapter 23, as currently written, 

administratively limit such costs to be budgeted or reported as incremental 

costs. At the same time, we found a number of reported incremental base 

operations costs that appear, at best, tangential to the support of GWOT. 

The conflicting provisions in chapter 23 indicate confusion over what is the 

DOD policy that senior DOD officials and service resource managers or 

unit commanders should use to manage the costs of the war. Without an 

updated policy, the military services and other DOD agencies cannot make 

informed judgments on the appropriate use of GWOT funding authorities. 

In response to our work, DOD has updated its regulation to address GWOT 

spending.

While individual commands have taken steps to control costs and DOD 

policy advises its officials of their financial management responsibilities to 

ensure the prudent use of contingency funding, the Office of the Under 

Secretary of Defense (Comptroller) has not systematically called for all 

commands involved in GWOT to take steps to control costs, set general 

parameters to guide cost-control efforts, and keep the Office informed of 

those steps and their success. For example, the commander of coalition 

forces in Iraq has unilaterally set a 10 percent cost-reduction target for 

fiscal year 2005, but the details are not widely known outside the 

command. GWOT spending has risen steadily since the attacks of 

September 11, 2001, as operations have expanded. From fiscal year 2002 

through fiscal year 2004, reported costs rose from $11 billion to $71 billion 

annually and on the basis of reported fiscal year 2005 costs through May 

2005, we project that they could reach $71 billion again in fiscal year 2005. 

Current cost controls implemented by individual commands include 

acquisition review boards, command review of purchases, limits on some 

categories of spending, and a cost-reduction goal in Iraq. However, DOD’s 

policy does not go beyond advising DOD officials of their financial 

management responsibilities to ensure the prudent use of contingency 
Page 7 GAO-05-882 Global War on Terrorism

funding and provides no guidelines on steps that should be taken to control 

costs, particularly as operations mature, while ensuring mission 

accomplishment. Resource managers from a number of Army divisions 

that have deployed to Iraq or Afghanistan have told us that cost controls 

can be strengthened as operations mature. In discussing efforts to control 

costs with the Office of the Under Secretary of Defense (Comptroller), the 

view was expressed that, on the basis of varying combat situations, steps to 

control costs were best left to the individual commands. Currently, the 

Comptroller’s office has no direct knowledge of the commands’ costcontrol efforts and has not asked to be kept informed of cost-control steps. 

We believe that more can be done and that absent a DOD-wide policy 

calling for systematic cost-control efforts, there is no assurance that 

successive commanders will emphasize cost control and that each 

commands’ efforts will be equally comprehensive. 

We are making recommendations to DOD to (1) undertake a series of steps 

to ensure that reported GWOT costs are reliable, (2) expand its financial 

management regulation for contingency operations to include 

contingencies as large as the current Global War on Terrorism, and 

(3) establish guidelines to control costs. 

In official comments on a draft of this report, DOD agreed with all but one 

of our recommendations, stating that it generally agreed with the intent of 

the recommendations and outlined several immediate actions it has taken 

to improve procedures and strengthen the cost reports. DOD did not agree 

with our recommendation to have the Office of the Under Secretary of 

Defense (Comptroller) establish guidelines on cost controls, commenting 

that field commanders are the correct echelon to adopt and emphasize cost 

controls. We recognize that certain individual commands have done much 

to control costs and describe some of those efforts. However, other 

individual commands have done less to control costs. As a result, we 

continue to believe that more can be done and that absent DOD-wide 

guidelines on cost control efforts, there is no assurance that successive 

commanders will emphasize cost control and that each command’s efforts 

will be equally comprehensive. Therefore we have retained the 

recommendation. The department’s comments and our evaluation are 

discussed in detail in a later section of this report and the department’s 

comments are printed in their entirety in appendix III.

Background Following the terrorist attacks of September 11, 2001, the United States 

began military operations to combat terrorism both in the United States 
Page 8 GAO-05-882 Global War on Terrorism

and overseas. Operations to defend the United States from terrorist 

attacks are known as Operation Noble Eagle. Overseas operations to 

combat terrorism are known as Operation Enduring Freedom, which takes 

place principally in Afghanistan, and Operation Iraqi Freedom, which takes 

place in and around Iraq. Figure 1 shows the primary locations where U.S. 

forces conducted operations to support GWOT in fiscal year 2004.

Figure 1: Locations of DOD’s Fiscal Year 2004 Global War on Terrorism Operations

Since September 11, 2001, DOD reports that it obligated $191 billion 

through May 2005 to conduct GWOT. Factors that affect the cost of the war 

include the number of deployed personnel, the special pays and allowances 

that deployed personnel receive, the additional pay that mobilized 

reservists receive when on active duty, the pace of operations, the extent to 

which facilities have to be built to house and protect the deployed forces, 

and the distance to the theater. Congress has enacted a series of 

Philippines

Djibouti

Iraq Afghanistan

Source: GAO.
Page 9 GAO-05-882 Global War on Terrorism

supplemental appropriation acts, beginning in September 2001, to fund the 

war. These supplemental appropriation acts have included funding 

authority for operations in Afghanistan and Iraq, homeland security, and 

other global counterterrorism military and intelligence operations. 

The costs of contingency operations are referred to as “incremental costs” 

and are directly attributable costs that would not 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 of 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.

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 in discussing the cost of the war. It is also 

used in formulating future budget requests to fund GWOT. The monthly 

report, which, as noted earlier, was titled the Terrorist Response Cost 

Report until January 2005, when it was renamed the Supplemental and 

Cost of War Execution 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 to 

improve contingency cost reporting consistency between multiple services 

and DOD agencies. 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.9

 The regulation 

incorporates the common cost categories and multiple subcategories, 

9

 As discussed later in this report, chapter 23 states that it does not address wartime 

activities or the unique circumstances that require U.S. military forces to be placed on a 

wartime footing. Despite this express limitation, DOD and service officials are using 

chapter 23 to guide GWOT budgeting, cost reporting, and spending in the absence of other 

guidance.
Page 10 GAO-05-882 Global War on Terrorism

which were established in 1998 and updated in January 2005, that are used 

to report DOD’s monthly GWOT costs. 

We previously reported our concerns about the reliability of reported 

contingency operations cost data. Specifically, our 1996 report on the 

reliability of reported contingency operations costs found inaccuracies 

representing about 7 percent of the $4.1 billion in costs reported in fiscal 

years 1994 and 1995, which we believe was indicative of a material 

weakness in the accounting systems.10 These included the following:

• $104 million in overstated costs, primarily due to the failure of the Air 

Force ($67 million) and the Navy ($3 million) to adjust reported flying 

hour costs to reflect the value of free fuel being received at that time. 

• The services’ failure to adjust reported costs to reflect normal operating 

and training costs. For example, one Army command reported operating 

costs of $11 million that were not incurred because of deployments.

• The services’ failure to report or fully report $171 million in understated 

costs, including some military personnel costs such as imminent danger 

pay and family separation pay, munitions the Navy used, and Air Force 

mobility equipment and munitions.

We further reported that it was not feasible to examine all reported costs 

and supporting data and that our results were not statistically projectable. 

Consequently, we were unable to conclude, on the whole, if reported costs 

were overstated or understated. At that time, we recommended that DOD 

clarify existing guidance for reporting costs, which DOD agreed to do. 

Over the years DOD and the services have adopted a number of our 

recommendations to improve their guidance for spending on contingency 

operations.

Reliability of DOD’s 

Reported Costs Is 

Unknown 

We found numerous problems in DOD’s processes for recording and 

reporting costs for the Global War on Terrorism, raising significant 

concerns about the overall reliability of DOD’s reported cost data. As a 

result, neither DOD nor Congress (1) can reliably know how much the war 

is costing and details on how appropriated funds are being spent or (2) 

10 GAO, Contingency Operations: DOD’s Reported Costs Contain Significant Inaccuracies, 

GAO/NSIAD-96-115 (Washington, D.C.: May 17, 1996).
Page 11 GAO-05-882 Global War on Terrorism

have historical data useful in considering future funding needs. On the 

basis of our work, DOD is taking steps to improve its cost reporting. 

However, as was the case in our 1996 report, because it was not feasible to 

examine all reported costs and significant data reliability problems existed, 

we were not able to determine the extent that total costs were misstated. 

DOD policy requires that controls, accounting systems, and procedures 

provide, in financial records, the proper identification and recording of 

costs incurred in supporting contingency operations. However, our 

examination of DOD’s reported costs in support of GWOT found a number 

of problems affecting the accuracy of reported costs. These problems 

included long-standing deficiencies in DOD’s financial management 

systems and business processes, reported military personnel obligations 

that do not match payroll records, incorrectly categorizing operation and 

maintenance obligations, the use of estimates instead of actual 

information, and a lack of supporting documentation. Problems 

contributing to DOD’s challenges in reporting reliable GWOT cost data 

include the previously cited long-standing deficiencies in DOD’s financial 

management systems, the lack of a systematic process to ensure that data 

are correct, the failure to use actual data when available, and a large 

number of cost categories and little training on how to apply them. 

DOD’s Financial 

Management Regulation 

Addresses the Importance 

of Accurately Reporting 

Obligations

DOD’s Financial Management Regulation (FMR) emphasizes the 

importance of accurate cost reporting. Volume 6A, chapter 2 (sec. 020201) 

of DOD’s FMR establishes the general financial responsibilities for DOD 

components. Components are responsible for the following:

• ensuring the accuracy, completeness, timeliness, and documentary 

support for all data generated by the customer and input into finance 

and accounting systems; 

• or submitted to the Defense Finance and Accounting Service for input 

and/or recording in the finance and accounting systems and inclusion in 

financial reports; 

• establishing appropriate internal controls to ensure the accuracy of data 

provided to the DFAS; and

• reviewing all reports provided by the DFAS to assess the accuracy of the 

financial information being reported.
Page 12 GAO-05-882 Global War on Terrorism

Chapter 2 further states in section 020202 that DOD components must 

establish appropriate internal controls to ensure that data provided to the 

DFAS that are recorded in the accounting system and subsequently used in 

financial reports are accurate, complete, and supportable. Among the 

requirements, the regulation states that before submitting transactions, 

DOD components must edit all transactions, hard copy and electronic, for 

accuracy, e.g., so that the transaction is identified correctly in terms of the 

type of transaction, reported quantity, dollar amount, and other data.

In addition to volume 6A, chapter 2, volume 3, chapter 8 of the FMR has 

several provisions that require funds holders11 to take steps to ensure that 

transactions have been entered accurately. Section 080401 requires that 

funds holders conduct a triannual review of commitments and obligations. 

During these reviews, officials are to review commitment and obligation 

transactions for timeliness, accuracy, and completeness. The requirement 

applies to all appropriations and funds of all DOD components. Section 

080403 establishes the responsibility of conducting reviews of outstanding 

commitments and unliquidated obligations to funds holders. According to 

the FMR, this is true regardless of whether the funds holders or the 

accounting office actually records the commitments or obligations in the 

official accounting records. This responsibility is placed on the funds 

holders because the funds holder initiates those actions that result in 

commitments and obligations and, therefore, is in the best position to 

determine the accuracy and the status of such transactions. 

Finally, volume 12, chapter 23 of the FMR establishes policies and 

procedures for budgeting and cost reporting for contingency operations 

and states that DOD policy requires that controls, accounting systems, and 

procedures provide, in financial records, proper identification and 

recording of costs incurred in supporting contingency operations. 

Concerns Regarding the 

Reliability of Reported 

GWOT Costs Stem from a 

Variety of Factors

Our work has identified a number of concerns regarding the reliability of 

reported GWOT costs. These include deficiencies in DOD’s financial 

management systems, discrepancies between some reported military 

personnel obligations and DOD payroll information, incorrectly 

categorized operation and maintenance costs, the use of estimates instead 

of actual information, and a lack of supporting documentation. 

11 Funds holders are DOD officials who receive a documented administrative subdivision of 

funds through their funding chain of command or other government departments.
Page 13 GAO-05-882 Global War on Terrorism

DOD Uses Its Existing Financial 

Management Systems and 

Business Processes to Record 

GWOT Costs, but These Systems 

Have Long-standing Deficiencies 

Because DOD’s accounting systems cannot directly capture GWOT costs, 

the department’s overall GWOT cost reporting is based on the military 

services’ reports of obligations. Volume 12, chapter 23 of the FMR requires 

that the DOD components collect and report applicable costs related to 

contingency operations. Chapter 23 also requires that the services capture 

their obligations in their existing accounting systems and at the lowest 

possible level of organization. 

However, DOD has long-standing deficiencies in its existing financial 

management systems and business processes. As recently as September 

2004, DOD acknowledged that agencywide financial statements were not 

completely reliable as a result of inadequately designed systems. The 

department reported that systemic deficiencies in its financial management 

systems and business processes result in its inability to collect and report 

financial and performance information that is accurate, reliable, and timely. 

In March 2004, the Under Secretary of Defense (Comptroller) stated in a 

memo that DOD’s fiscal year 2004 agencywide financial statements would 

not substantially conform to generally accepted accounting principles. The 

department acknowledged that although it has made progress in its efforts 

to resolve financial management shortfalls, its financial management 

systems currently do not fully comply with the applicable requirements. 

For years we have reported on DOD’s financial management deficiencies. 

In 1995 we first designated DOD financial management as an area of high 

risk. We concluded that DOD’s financial management deficiencies 

adversely affect the department’s ability to control costs, ensure basic 

accountability, anticipate future costs and claims on the budget, measure 

performance, maintain funds control, prevent fraud, and address pressing 

management issues.12 From 1995 through 2005, we continued to report on 

deficiencies in DOD’s financial management processes. In November 2004, 

we testified that recent audits and investigations by our and DOD’s auditors 

continue to confirm the existence of pervasive weaknesses in DOD’s 

financial and related business processes and systems.13 We found that 

adverse conditions included discrepancies in military pay, logistical 

support such as duplicate supply requisitions, and data reliability needed 

by Congress and DOD to make sound sourcing decisions. Most recently, in 

12 GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January 2005).

13 GAO, Department of Defense: Further Actions Are Needed to Effectively Address 

Business Management Problems and Overcome Key Business Transformation Challenges, 

GAO-05-140T (Washington, D.C.: Nov. 18, 2004).
Page 14 GAO-05-882 Global War on Terrorism

June 2005 we testified that long-standing weaknesses in DOD’s financial 

management and related business processes and systems have (1) resulted 

in a lack of reliable information needed to make sound decisions and report 

on the status of DOD activities, including the accountability of assets, 

through financial and other reports to Congress and DOD decision makers; 

(2) hindered its operational efficiency; (3) adversely affected mission 

performance; and (4) left the department vulnerable to fraud, waste, and 

abuse.14

Some Reported Military 

Personnel Obligations Are Not 

Consistent with Related Payroll 

Information

The Army did not have a reasonable and reliable process to identify and 

report almost $12 billion of GWOT military personnel obligations in fiscal 

year 2004. Instead of using related DOD payroll information, the Army 

based the GWOT military personnel obligations used in the GWOT cost 

report primarily on its fiscal year 2004 obligation plan and, in the end, 

forced, or “plugged,” obligations to match available supplemental budget 

authority. Effectively, the Army was reporting back to Congress exactly 

what it had appropriated. Army officials were unable to readily explain the 

process for identifying and reporting GWOT military personnel obligations. 

Specifically, the Army Budget Office lacked formal procedures to guide the 

monthly reporting of GWOT military personnel obligations to DOD and a 

process to ensure management’s review of the reported amounts. Army 

Budget Office officials stated that these problems were exacerbated by 

staff losses in the September 11 terrorist attack on the Pentagon, personnel 

turnover, and hiring difficulties.

Our analysis showed that obligations associated with Army military 

personnel in the monthly GWOT cost report were not consistent with 

related DOD payroll information, and the use of planned obligations 

instead of actual payroll information might have resulted in reported Army 

military personnel GWOT obligations being materially overstated. For 

fiscal year 2004, our analysis of the more than $7.1 billion in incremental 

military personnel obligations listed in the GWOT cost report category for 

mobilized Army reserve-component soldiers identified as much as $2.1 

billion of reported obligations in excess of related DOD payroll 

information. Initially, the Army could not support this difference or its 

reported GWOT military personnel obligations. Over the next several 

months, the Army and the Office of the Under Secretary of Defense 

14 GAO, DOD Business Transformation: Sustained Leadership Needed to Address Longstanding Financial and Business Management Problems, GAO-05-723T (Washington, D.C.: 

June 2005).
Page 15 GAO-05-882 Global War on Terrorism

(Comptroller) provided us with several possible, though sometimes 

inaccurate, explanations for this difference. Some explanations appeared 

valid while others did not and, taken together, they failed to fully account 

for the difference. For example, the Army Budget Office stated that a 

portion of the difference was attributable to retirement pay and retirement 

health care accruals. We found that the retirement health care accrual did 

not result in incremental costs and, therefore, was not a valid explanation 

for the difference. However, mobilized reserve-component personnel 

receive an increase in retirement pay benefits over nonmobilized reservists 

and, therefore, DOD incurs incremental costs related to this benefit. 

According to the Army, the retirement pay accrual represents part of the 

difference, and it reported this amount at $824 million. This information 

was provided too late in our audit to assess its accuracy and completeness. 

Further details on our review of GWOT obligations for Army military 

personnel are included in appendix II.

In addition to examining the obligations for mobilized Army reservists, we 

also examined reported imminent danger pay and found wide monthly 

swings and little correlation with the numbers of deployed personnel. 

Imminent danger pay relates directly to the number of military personnel 

deployed to eligible areas. Beginning on October 1, 2002, all military 

personnel—both Active and Reserve Component—in areas designated as 

eligible for imminent danger pay receive $225 per month for each month for 

which they qualify for such pay. Eligible areas include, but are not limited 

to, the countries of Iraq, Afghanistan, Kuwait, Qatar, Bahrain, and Saudi 

Arabia. The monthly amount is payable in full without being prorated or 

reduced, for each month, during any part of which a service member 

qualifies and regardless of the actual period of time served on active or 

inactive duty during that month. 

Month-to-month changes in reported imminent danger pay obligations for 

GWOT should be consistent with the number of deployed forces in eligible 

areas. However, as shown in table 1, which depicts the amounts reported 

for DOD as a whole and the implied number of people who should be 

receiving the pay on the basis of dividing the amount per month—$225—

into the reported obligations, there are wide monthly swings in the number 

of deployed personnel, based on the amount of reported imminent danger 

pay, that do not seem to correlate to the actual numbers of deployed 

personnel. For example, the reported imminent danger pay suggests that 

173,000 personnel were deployed to support GWOT in July 2004 and that 

the number of personnel rose to more than 1 million in August 2004 and 

then declined to 264,000 in September 2004 and 61,000 in October 2004. 
Page 16 GAO-05-882 Global War on Terrorism

According to DOD, about 221,300 personnel from all the military services 

were deployed throughout the region in December 2004 to support 

Operation Enduring Freedom and Operation Iraqi Freedom, including 

deployed personnel in Iraq, Afghanistan, and Kuwait. 

Table 1: Comparison of Reported DOD-Wide Imminent Danger Pay and Implied 

Number of Deployed Personnel, April 2004-April 2005

Source: GAO’s analysis of DOD’s GWOT data.

In continuing discussions of our analysis, Army Budget Office officials 

provided additional detail on the Army’s reported imminent danger pay 

obligations, which comprise the bulk of DOD-wide reported imminent 

danger pay obligations. With respect to the August 2004 reported imminent 

danger pay, which was by far the largest reported amount from April 2004 

through April 2005, Army Budget Office officials said that their reported 

portion—$217 million—of the DOD-wide $231 million was in error owing to 

a misplaced decimal and that the Army’s August 2004 imminent danger pay 

should have been reported as $21 million. These officials attributed the 

month-to-month fluctuations in reported imminent danger pay to the lack 

of timeliness and consistency in adjusting costs between those baseline 

and GWOT amounts. Beginning in June 2005, the Army said that it adopted 

a new process that uses accounting data, with the actual count of deployed 

forces as a validation checkpoint. 

Month

Reported imminent danger pay

(dollars in thousands)

Implied number of

deployed personnel

(numbers in thousands)

April 2004 $38,186 170

May 2004 46,106 205

June 2004 37,054 165

July 2004 38,893 173

August 2004 231,090 1,027

September 2004 59,500 264

October 2004 13,713 61

November 2004 69,699 310

December 2004 33,228 148

January 2005 41,499 184

February 2005 127,769 568

March 2005 48,659 216

April 2005 (933) (4)
Page 17 GAO-05-882 Global War on Terrorism

Operation and Maintenance 

Obligations Are Not Always 

Properly Categorized 

Obligations are the foundation of all GWOT cost reporting. Operation and 

maintenance obligations in support of GWOT represent tens of thousands, 

if not hundreds of thousands, of individual transactions ranging in value 

from 1 penny to millions of dollars. When obligations are incurred, the 

services enter them into their accounting systems using accounting codes. 

For 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. In the Army, the cost category is called the 

element of resource (EOR). 

Because DOD’s Financial Management Regulation volume 12, chapter 23 

requires that the services capture costs within their existing accounting 

systems and report them in a common cost format known as the costbreakdown structure, the services must translate—or “cross-walk”— their 

obligations into 1 of 55 cost categories in the cost breakdown structure 

established by the Office of the Under Secretary of Defense (Comptroller) 

and used in the monthly GWOT cost reports. For the Army, this involves 

translating obligations recorded by EOR into the chapter 23 GWOT cost 

categories. To meet DOD’s reporting requirements, each month Army 

resource management officials must cross-walk costs in the EOR 

categories into the GWOT cost categories, sometimes manually. For 

example, in fiscal year 2004, ARCENT resource management officials 

manually cross-walked 266 EORs into 14 GWOT cost categories. 

If obligations are not identified in the correct cost category in the services’ 

accounting system, they can affect the overall reliability of DOD’s GWOT 

cost reporting. In the Army, ARCENT resource management officials told 

us that on the basis of their reviews of GWOT obligations, they had 

confidence in the accuracy of the total dollar obligations as identified in the 

GWOT cost report but felt that obligations were being incorrectly 

categorized. At two Army divisions, we observed obligations being 

assigned to the wrong EOR. In our limited testing of transactions at one of 

the divisions, which deployed to Iraq as part of Operation Iraqi Freedom, 

we found errors in assigning costs to the correct EOR, which resulted in 

overstated costs in some categories and understated costs in others. We 

reviewed 31 transactions valued at $15 million and found coding errors in 

11, or 35 percent of the transactions, valued at $770,134, or 5 percent of the 

amount we reviewed. One example of an error we found involved $383,147 

in obligations for communications services, which was entered into the 
Page 18 GAO-05-882 Global War on Terrorism

division’s financial management systems under an EOR that corresponded 

with DOD’s GWOT cost report’s category of Other Services and 

Miscellaneous Contracts. A senior division resource management official 

stated that it would have been better to use an EOR that corresponded with 

the Facilities/Base Support category. As a result, the Other Services and 

Miscellaneous Contracts category was overstated by $383,147 while the 

Facilities/Base Support cost category was understated by the same 

amount. At the other Army division, which deployed to Afghanistan as part 

of Operation Enduring Freedom, we also found errors in assigning costs to 

the correct EOR that resulted in overstated costs in some categories and 

understated costs in others. We reviewed 146 of 237 transactions valued at 

more than $14 million and found coding errors in 32 transactions, or 22 

percent of the transactions, valued at more than $4 million, or 30 percent of 

the amount we reviewed. For example, the division obligated $6,995 for a 

printer, which it originally coded with the EOR for automated dataprocessing equipment. However, once the purchase request reached the 

contracting office, it was recoded as general supplies and not as automated 

data-processing equipment. After reviewing this example and others, a 

senior resource management official at the division concurred with our 

assessment of these coding errors.

In related reporting,15 we have raised concerns about reported equipment 

reconstitution costs.16 Reconstitution is one of the cost categories in 

DOD’s GWOT cost report. We reported that DOD has not accurately 

tracked and reported its reconstitution costs because the services are 

unable to segregate equipment reconstitution from other maintenance 

requirements, as required. In the case of the Air Force, we reported that it 

does not break out its equipment reconstitution obligations from other 

GWOT obligations in the cost report and was reporting no reconstitution 

costs. In further discussions Air Force officials told us that their 

reconstitution costs were being captured in their flying hour (operating 

tempo) costs. Regarding the Army and the Navy, we reported that 

equipment reconstitution obligations reported by those two services are 

likely overstated because (1) the Army includes costs other than those 

required for reconstitution and (2) the Navy is unable to segregate regular 

15 GAO, Defense Management: Processes to Estimate and Track Equipment Reconstitution 

Costs Can Be Improved, GAO-05-293 (Washington, D.C.: May 5, 2005).

16 Reconstitution is the process of returning equipment after a deployment is completed to a 

condition that enables the unit to perform required missions and achieved required 

readiness levels.
Page 19 GAO-05-882 Global War on Terrorism

maintenance from reconstitution maintenance for ship overhauls. We 

recommended and DOD agreed to direct the services to develop 

comprehensive and consistent methods for tracking and reporting 

equipment reconstitution obligations. In agreeing with our 

recommendation, the Office of the Under Secretary of Defense 

(Comptroller) said that the office had already revised its financial 

management regulation to improve the reporting of equipment 

reconstitution, but we observed that until additional actions are taken, 

such as improving the services’ financial management systems’ ability to 

track obligations, our recommendation will not be fully implemented. 

Beginning in October 2004, DOD revised its reconstitution cost category to 

include four subcategories, and the Air Force is reporting reconstitution 

obligations in two of those categories.

In addition to the concerns with properly categorizing costs that we 

identified, officials from the Army Budget Office believe that the Army’s 

operating support obligation data are reliable at the broad category levels 

(personnel support, operating support, and transportation), but 

distribution within categories is likely to contain errors.17 These officials 

said that the Army is taking two immediate actions. First, it has refined its 

EOR to cost breakdown structure code cross-walk. The Army has 

specifically identified approximately 135 EORs that directly associate with 

the cost breakdown structure. Additionally, Army officials said that they 

have added an additional data element (the Functional Cost Account code, 

which describes the programmatic function), which will provide one more 

reference point to validate entries. This revision was effective with the 

June 2005 reporting cycle. Second, Army officials said that the Army is 

developing a standard operating procedure with a follow-on “train the 

trainers” program for Army-wide distribution. It will prescribe the 

methodology for capturing GWOT execution data from the accounting 

systems and source documents. This is a longer-term solution that the 

Army believes should contribute materially to improved data entry at the 

originating organizational levels.

The Air Force Audit Agency, in a June 2005 report on Air Force GWOT 

spending, also identified errors in properly categorizing GWOT costs.18 

17 Personnel support, operating support, and transportation costs are subcategories in the 

DOD GWOT cost reports.

18 Air Force Audit Agency, Global War on Terrorism Funds Management, F2005-0011-

FB1000 (June 20, 2005).
Page 20 GAO-05-882 Global War on Terrorism

Specifically, the audit agency found that in fiscal year 2003, 159 of 923 

transactions it reviewed, or about 17 percent of GWOT transactions valued 

at more than $163 million, were inaccurately recorded in the Air Force’s 

accounting system. The report stated that this condition occurred because 

resource management officials were uncertain of which costs were GWOT 

related and because reported costs were not compared with 

documentation as required by DOD’s financial management regulation. 

The audit agency concluded that inaccurate cost reporting may lead to 

questionable cost-of-war information, distorted command resource 

allocation and spending plans, and unreliable summary DOD financial 

reports. The audit agency made several recommendations, including one 

that cognizant Air Force officials review transaction data and notify 

accounting liaison office personnel of inaccurate entries monthly, and one 

that the liaison office personnel request data correction from appropriate 

accounting offices. The Air Force agreed with the recommendations and 

stated that it would make the recommended changes. In advance of the 

report’s issuance, in a March 2, 2005, memo, the Assistant Secretary of the 

Air Force, Financial Management and Comptroller, addressed and agreed 

to revise guidance to emphasize increased management oversight over 

transaction approval, accuracy, and documentation completeness.

Some GWOT Cost Data Are 

Based on Estimates

Because ships at sea incur the same types of costs whether in normal 

forward-deployed operations or in support of GWOT, the Navy allocates the 

costs between normal and GWOT operating costs. The Navy’s major 

commands use a variety of approaches for allocating these costs. For 

example, we found that the Atlantic and Pacific surface commands, which 

are responsible for managing the Navy’s surface ships, use two different 

approaches in order to allocate a portion of each ship’s normal operating 

costs to GWOT for those ships that have been used to support GWOT 

missions. The Atlantic Fleet uses an approach whereby the portion of a 

ship’s normal operating costs becomes GWOT costs when (1) the ship has 

been engaged in a GWOT mission during that month and (2) the ship 

exceeds its monthly baseline budget. Once the baseline budget has been 

exceeded, the additional cost above that baseline is considered 

incremental and is recorded as a GWOT cost. The Pacific Fleet uses a 

different approach, which utilizes a model that has evolved over many 

years. This model takes a number of factors into consideration in order to 

calculate how much of a ship’s costs should be allocated to GWOT. These 

factors include a running 3-year average of the costs of operating each 

individual ship, the cost of maintaining that general class of ships, and 

whether the ship has performed GWOT missions. This model calculates an 

amount for each ship that should be recorded as a GWOT cost.
Page 21 GAO-05-882 Global War on Terrorism

Documentation Is Not Always 

Available

Documentation related to goods and services purchased in support of the 

Global War on Terrorism is not always available. Without documentation, 

one cannot attest to the reliability and applicability of reported costs to 

GWOT. At one of the Marine Expeditionary Forces, we were able to link 

reported costs to the supporting documentation for contractual purchases. 

However, when we compared a limited number of documents from the 

ARCENT document register with documentation controlled by DFASRome, New York, we found instances where (1) document register 

descriptions did not match invoices maintained by DFAS and (2) invoices 

did not match dollar amounts associated with the ARCENT documentation 

number. For example, one item we identified was listed in the document 

register as a purchase of unit coins for $200,000. However, we found no 

evidence indicating that the $200,000 was actually obligated for the 

purchase of unit coins. The EOR listed in the document register indicated 

that the item was for furniture. When we reviewed the invoices, we found 

that the documentation supported the purchase of furniture for $18,959 but 

nothing for unit coins or for $200,000. In another example, a purchase was 

listed in the document register for $21,900 toward an operational fund. 

When we reviewed the invoice, we found that the documentation 

supported the purchase of translator services for $3,950.

Several audit agencies also had mixed success with linking reported GWOT 

costs to supporting documentation. In many cases, documentation was not 

available or the available documentation was not sufficient enough to 

determine the applicability of costs, as shown in the following examples: 

• The Air Force Audit Agency, in its previously cited June 2005 report on 

Air Force GWOT funds management, reported that financial managers 

could not provide documentation to support approximately 14 percent 

of 1,037 fiscal year 2003 transactions reviewed. The transactions had an 

absolute value of more than $16 million. The audit agency reported that 

the inability to provide documentation occurred for three primary 

reasons: (1) Air Force financial managers did not require funds holders 

and resource advisors to maintain supporting documents for a minimum 

of 24 months, (2) comptrollers did not provide funds holders and 

resource managers with documentation requirements training, and (3) 

Air Force organizations did not always comply with records 

management guidance. The agency concluded that maintaining 

documentation provides an audit trail and assurance that Air Force 

personnel properly expended these funds. The agency made several 

recommendations to strengthen controls over documentation, which 

the Air Force agreed to implement. In the previously cited March 2, 
Page 22 GAO-05-882 Global War on Terrorism

2005, memo issued in advance of the issuance of the Air Force Audit 

Agency’s report, the Assistant Secretary of the Air Force, Financial 

Management and Comptroller also addressed this finding and agreed to 

revise Air Force guidance to require funds holders and resource 

advisors to maintain supporting documentation for a minimum of 24 

months for all financial transactions, modify the Web-based Resource 

Advisor Tutorial to highlight the need for funds holders and resource 

advisors to maintain documentation for financial transactions, and to 

require comptroller personnel to include documentation requirements 

in all funds holders’ training and resource advisor training.

• The Naval Audit Service reported that it could not find supporting 

documentation for 11 percent of the reported fiscal year 2002 Operation 

Enduring Freedom costs for the 14 units it reviewed.19 The Naval Audit 

Service found that more than half of these unsupported costs resulted 

from one unit’s not retaining documentation over a 2-month period. 

This same unit’s costs for other months reviewed were well 

documented; so, overall, the audit service was not overly concerned 

with the 2-month gap. For the other units reviewed, documentation was 

available, but the units could not always identify the portion of those 

items reported as being incremental costs of Operation Enduring 

Freedom. The Naval Audit Service concluded that internal controls 

were adequate and that an expanded review was not warranted at that 

time. It made no recommendations.

• The U.S. Army Audit Agency found that 58, or about 2 percent, of the 

2,751 transactions it reviewed for fiscal year 2003 valued at $37.4 million 

lacked supporting documentation.20 As a consequence, the agency was 

unable to determine if the transactions were valid. The Army Audit 

Agency also discovered documentation problems involving government 

purchase cards. These problems included a lack of documentation 

authorizing purchases and inadequate justification of purchases to 

ensure that they were related to contingency operations. The agency 

concluded that without adequate justifications and support to ensure 

that the transactions are related to contingency operations, these types 

of obligations appear questionable. The agency recommended that 

19 Department of the Navy, Naval Audit Service, Purchase Justifications at Department of 

the Navy Shore Activities (Washington Navy Yard, D.C.: 2003).

20 U.S. Army Audit Agency, FY 03 Supplemental Funds and Cash Flow (Alexandria, Va.: 

2004).
Page 23 GAO-05-882 Global War on Terrorism

Army financial management leadership emphasize the consistent 

application of guidance for justifying and documenting contingency 

operations requirements, and the Army financial management 

leadership said that it would emphasize the need to fully justify and 

document expenditures as related contingency operations and that it 

had already completed or will complete action through the distribution 

of additional guidance by December 2005.

Several Factors Contribute 

to Data Reliability Concerns

Data reliability is affected by the previously discussed long-standing 

deficiencies in DOD’s financial management systems, which affect the 

ability to capture costs in a completely systematic manner. This is 

compounded by the lack of a systematic process for ensuring that the data 

in the GWOT cost reports are accurate, less-than-adequate management 

oversight on the preparation and accuracy of the reports, the failure to use 

actual data when available, and a large number of cost categories and little 

training on how to apply them. 

There Is No Systematic Process 

to Ensure That GWOT Data Are 

Accurately Recorded and Ensure 

Adequate Management Oversight

For the most part, DOD does not have a systematic process to review 

reported GWOT costs to ensure that they are accurate. To ensure the 

accuracy of DOD’s GWOT cost reports, the military services and the Office 

of the Under Secretary of Defense (Comptroller) compare each new 

month’s cost report with previous months’ reports to ascertain if there are 

large variances from previous reports and, if so, determine what caused 

them and make revisions as appropriate. For GWOT cost reporting, 

individual obligation data that are coded as being in support of GWOT are 

aggregated at successively higher command levels and sent through the 

services’ chain of command. At each command level, financial 

management officials review costs for large anomalies. The services take 

different approaches to ensure that GWOT obligation data are correctly 

recorded. For example, the Army gains assurance that reported obligations 

are accurate by reviewing the monthly obligation data provided by units. 

However, the Army does not follow specific guidelines to determine the 

extent to which obligations are accurately reported. For example, U.S. 

Army Forces Command and ARCENT financial management officials 

ensure that reported obligations are correct by using historical knowledge 

of cost trends to review obligation reports for large anomalies. If a large 

anomaly is identified, it is further investigated to determine the cause and 

resolve any differences. However, the two commands do not have specific 

criteria to determine how large an anomaly has to be before it is 

investigated. As a result, financial management officials at the commands 

use their judgment to determine which anomalies to investigate. The Navy 
Page 24 GAO-05-882 Global War on Terrorism

also reviews GWOT cost data for anomalies but lacks a systematic method 

for gaining assurance that the data are reliable. According to the Financial 

Management and Budget official who manages the process, there is no 

systematic approach for reviewing the submissions received from each of 

the claimants. 

The Marine Corps has adopted additional measures to gain further 

assurance that its GWOT obligations are accurately reported. For example, 

resource management officials at one Marine Expeditionary Force told us 

that they periodically visit subordinate units to reaffirm that these units are 

following Marine Corps standard operating procedures for entering and 

recording obligation data. During these visits, officials use a checklist that 

highlights areas that the visiting officials should emphasize. These areas 

include assessing the unit’s knowledge of Marine Corps policies and 

procedures, reviewing purchases made by the unit, and checking to ensure 

that the unit correctly entered obligations into the Marine Corps’ 

accounting system. Marine Expeditionary Force resource management 

officials told us that this process plays an important role in ensuring that 

GWOT obligation data are reliable. 

Once the services complete their review of GWOT obligations they submit 

their obligation reports to DFAS,21 which aggregates the individual 

submissions into the monthly GWOT cost report. The Office of the Under 

Secretary of Defense (Comptroller) gains assurance that the services’ 

reported obligations are reliable by reviewing the monthly DFAS cost 

reports for anomalies. If a discrepancy is identified, the Comptroller’s 

office contacts the responsible DOD component, attempts to determine 

reasons for the discrepancy, and directs that necessary corrections be 

made before distributing the cost report within DOD.

Despite the efforts to review reported costs, there is less-than-adequate 

management oversight on the preparation and accuracy of the reports. We 

found instances where the services did not identify wide swings in monthly 

costs, such as the swings discussed earlier in imminent danger pay in the 

GWOT cost reports for DOD as a whole, as well as errors in the overall 

GWOT cost reports that amounted to hundreds of millions of dollars 

monthly. Specifically, in reviewing the Navy’s and Marine Corps’ fiscal year 

2005 operation and maintenance and investment GWOT obligations as part 

21 DFAS is responsible for consolidating all DOD contingency costs and for the billing and 

reimbursement distribution functions in support of contingency operations. 
Page 25 GAO-05-882 Global War on Terrorism

of a separate effort, we found that the obligations reported in DOD’s 

summary GWOT cost report were inadvertently being overstated by 

hundreds of millions of dollars monthly between the November 2004 and 

the April 2005 cost reports. In total, we found that the two services 

overstated their obligations during that period by almost $1.8 billion—$1.5 

billion in the case of the Marine Corps and $300 million in the case of the 

Navy. Each month DOD prepares a separate report for each of the 

appropriations acts that are used to provide funding authority to support 

GWOT and an overall summary cost report. In discussions with Marine 

Corps and Navy budget officials, it was determined that operation and 

maintenance and investment obligations associated with funding authority 

provided through title IX of the fiscal year 2005 Defense Appropriations Act 

were inadvertently being double counted in the GWOT cost report: once in 

the title IX report and once again in the report on funding authority 

provided in other fiscal year 2005 appropriations acts, resulting in inflated 

figures in the summary report. These reporting problems were present in 

all of the GWOT cost reports from November 2004 through April 2005. 

Once this matter came to light, Navy and Marine Corps officials took action 

to reflect the accurate obligations for the title IX and other fiscal year 2005 

appropriations reports. The May 2005 report reflects the corrected 

cumulative obligations through May 2005. 

Volume 3, chapter 8 of DOD’s Financial Management Regulation requires 

that steps be taken to verify that transactions are correctly entered into the 

services’ accounting systems by comparing financial transactions with 

supporting documents. However, as discussed earlier, in a detailed review 

of fiscal year 2003 GWOT obligations, the Air Force Audit Agency found 

that in addition to not properly categorizing costs, officials at 16 of 29 

locations visited failed to verify that 159 of 923 transactions, or 17 percent 

of the transactions the agency reviewed, were accurately entered into the 

Air Force’s financial accounting system. The audit agency said that this 

condition occurred because funds holders were uncertain of which costs 

should be coded as GWOT expenditures and did not compare financial 

transactions with supporting documents as required by DOD’s financial 

management regulation. The audit agency concluded that as a result, 

financial managers may inadvertently provide questionable “cost of war” 

information when data are inaccurately processed in the system. 

Furthermore, command resource allocation and spending plans may be 

distorted by faulty data. Finally, summary DOD financial reports may be 

unreliable. The audit agency made recommendations to the Air Force to 

review transaction data; correct inaccurate data; and develop, publish, and 
Page 26 GAO-05-882 Global War on Terrorism

implement guidelines on the appropriate use of GWOT cost codes, which 

the Air Force agreed to do. 

Estimated Obligations Are Used 

Instead of Actual Payroll 

Information

As previously discussed, in reviewing the Army’s military personnel GWOT 

obligations for fiscal year 2004, we found that the reported amounts for 

mobilized Army reservists were inconsistent with related DOD payroll 

information. We found that the Army’s military personnel GWOT 

obligations reported in the GWOT cost report were based primarily on 

monthly estimates in the Army obligation plan rather than actual payroll 

information. 

The practice of using estimates in reporting military personnel costs 

related to contingency operations rather than payroll data has been 

ongoing for almost a decade. In our previously cited 1996 report on the 

reliability of contingency operations costs, we reported that the services 

used estimates rather than actual data to derive incremental personnel 

costs for reservists called to active duty in contingency operations. We also 

reported that the services used estimates in reporting the special pays and 

allowances, such as imminent danger pay, which all military personnel 

become eligible for during deployments, and that they did not reconcile 

those costs to actual payroll data. At that time, we reported that DOD had 

plans under way to link its payroll and personnel systems, which would 

allow the extraction of actual cost data. Until the two systems were linked, 

we reported that it would not be possible to test the accuracy of estimated 

costs. As of June 2005, more than 9 years after our earlier report, at least 

one service, the Army, was still not using actual payroll information to 

report its GWOT military personnel obligations. Army officials advised us 

in July 2005 that, on the basis of our findings on reported military personnel 

obligations, they will now use related DOD payroll information where 

applicable.

Assigning Correct EORs Are 

Complicated by a Number of 

Factors

As also discussed earlier, if obligations are not categorized in the correct 

cost categories in the services’ accounting system, it can affect the overall 

reliability of DOD’s GWOT cost reporting. The large number of EORs used 

by Army units to assign costs to categories, literally in the thousands, 

complicates properly categorizing GWOT obligations. We found that the 

large number of EORs encourages Army units to adopt shortcuts to 

simplify categorization, which can result in incorrectly categorizing 

obligations. For example, a resource management official in one Army 

division indicated that the division used one particular EOR as a catch-all 

category. This EOR corresponded with DOD’s GWOT cost-reporting 

category of “Other Services and Miscellaneous Contracts.” Placing costs in 
Page 27 GAO-05-882 Global War on Terrorism

this category inflates this cost category. At another Army division, 

resource management officials reviewed the EOR list in order to streamline 

the number of EORs that the division used. After reviewing about 3,700 

EORs, resource management officials concluded that about 15 were most 

appropriate for the purpose of categorizing its GWOT obligations. 

The use of a single standardized EOR to categorize obligations for varying 

types of goods and services also affects proper cost categorization. For 

example, there is one EOR for all purchases made with a Government 

Purchase Card (GPC), regardless of the item or service purchased. In 

another example, resource management officials at one Army division told 

us that while deployed to Afghanistan, cash purchases made by its field 

ordering officers were always coded to the EOR for general supplies, no 

matter what item or service was obtained. Finally, ARCENT resource 

management officials told us that the command identified contracts that 

should have been allocated to several EORs but were consolidated under 

one EOR. These contracts inflated the costs for that EOR category. 

When coding errors are made, they are not always corrected. Resource 

management officials at one Army division told us that it was too timeconsuming to fix miscoded EORs, as it involves having to coordinate with 

customers and make changes in the Army’s financial accounting system. 

As a result, inaccurate information remains in the accounting system. This 

division’s Comptroller acknowledged that better attention should be paid 

to coding purchase requests at the comptroller level and that oversight 

should be a higher concern. 

People responsible for categorizing purchases by the EOR are not always 

properly trained, which further complicates correct categorization. 

Resource management officials at an Army command we visited told us 

that there were training concerns with staff in the Comptroller’s office, 

particularly given the frequent rotation in and out of the office that is 

typical of military staff. These officials told us that, often, the person 

responsible for entering EORs into the system has not been trained to do 

so. Obligations are often entered by lower-ranked enlisted soldiers who 

have been assigned to the position because they have downtime and are 

computer literate. These soldiers may not have any experience with 

entering obligation data and might have received little or no training on 

how to do so. According to the officials, inexperience is not a major issue 

with more straightforward obligation categories such as transportation; 

however, when applied to more complicated categories, such as supplies, 

many errors can occur. 
Page 28 GAO-05-882 Global War on Terrorism

Like the Army, the Marine Corps also captures GWOT obligations using 

cost categories, known in the Marine Corps as cost account codes. 

However, because the Marine Corps uses fewer categories, converting data 

into the contingency cost categories is simpler than for the other services. 

For example, Marine Corps Forces Pacific resource management officials 

established 31 cost account codes that translate into 25 of the 55 GWOT 

cost report categories. Resource management officials at one Marine 

Expeditionary Force told us that utilizing a simple system helps to improve 

the accuracy of their obligation data. 

Processes for Recording GWOT 

Costs Can Lead to Errors

Processes used to enter and monitor operation and maintenance 

obligations may also contribute to unreliable cost data. For example, in the 

Army, resource management officials from two divisions that had deployed 

to Iraq and one division that had deployed to Afghanistan reported that, 

when deployed, the divisions were junior users of the Army’s database 

Commitment Accounting System and did not have access to the Army’s 

principal accounting system, the Standard Army Financial System. As a 

result, the three divisions had to submit their document registers to 

ARCENT to record obligations and commit funds. Resource management 

officials at two of the three divisions stated that the amounts recorded in 

ARCENT’s ledger could not be relied upon because of manipulations and 

adjustments made to the data by ARCENT. One official stated that 

obligations or commitments would sometimes be doubled or eliminated 

entirely from the ledger. For example, one division had to reenter $40 

million in obligations that ARCENT dropped from the ledger during the 

fiscal year 2003 closeout. This official also told us that the system that the 

Army uses to track commitments was antiquated and did not support the 

data needed to accurately track and analyze costs.

The Use of Existing GWOT 

Cost Data Affects Multiple 

DOD Financial Processes

Notwithstanding concerns about data reliability, according to the Office of 

the Under Secretary of Defense (Comptroller), which develops GWOT 

budget requests in concert with the military services and other DOD 

components, a metric is needed and the GWOT cost reports are the only 

available data. In discussing the implications of improperly categorizing 

GWOT obligations, the Comptroller’s office told us that it adversely affects 

decision making and the ability to use the data for analysis. In discussing 

how the detailed cost data are used, a Comptroller representative told us 

that he uses the detailed information presented in the cost breakdown 

structure categories in the report for several purposes, as follows:
Page 29 GAO-05-882 Global War on Terrorism

• to make billion-dollar decisions in developing supplemental funding 

budget requests;

• to cross-check the cost data as presented in the cost breakdown 

structure with the estimates developed by the Contingency Operations 

Support Tool (COST) model; and

• as a management tool to adjust the cost factors in the COST model and 

revise the model, prepare supplemental funding budget requests, and 

inform DOD leadership of detailed costs incurred for GWOT.

DOD Is Using 

Regulations to Guide 

GWOT Budgeting, 

Reporting, and 

Spending That Were 

Not Designed for 

Wartime Operations

Office of the Under Secretary of Defense (Comptroller) and military service 

officials are using DOD’s existing financial management regulation that 

addresses contingency operation funding for guiding budget submissions, 

cost reporting, and spending for GWOT. However, DOD’s Financial 

Management Regulation,22 which contains these policies and procedures, 

was designed for small-scale contingency operations and has language 

expressly stating that it is not intended to address wartime activities such 

as those that DOD is confronted with in the current war.23 Furthermore, 

specific provisions in this regulation conflict with the GWOT funding 

procedures and, in some cases, the needs of the war. Without an updated 

policy on GWOT budgeting, cost reporting, and spending, the military 

services and other DOD agencies cannot make informed judgments on the 

appropriate use of GWOT funding authorities. In response to our work, the 

Office of the Under Secretary of Defense (Comptroller) has updated its 

regulation to address GWOT spending.

Current Spending Policy 

Was Developed for SmallerScale Operations 

DOD’s current regulation was designed for small-scale contingency 

operations and is not intended to address wartime activities. In February 

1995, DOD added a chapter to its financial management regulation to 

establish policies and procedures for estimating the budget and reporting 

the costs of contingency operations (vol. 12, ch. 23—Contingency 

Operations). In 1998 the Office of the Under Secretary of Defense 

(Comptroller) implemented a standard cost breakdown structure for 

22 Department of Defense Financial Management Regulation 7000.14R, vol. 12, ch. 23, 

Contingency Operations (January 2005).

23 Ch. 23, sec. 230101 and 230105.
Page 30 GAO-05-882 Global War on Terrorism

standard contingency operations to improve the budgeting and reporting of 

these costs. This structure was incorporated in the 2001 version of chapter 

23 and has been expanded in the latest January 2005 version. The Office of 

the Under Secretary of Defense (Comptroller) has also supplemented its 

regulation through messages regarding cost reporting and formulating 

specific fiscal year budget requests. Since its publication in 1995, 

Comptroller officials have used chapter 23 and later the cost breakdown 

structure in particular, to budget, capture the costs, and fund or seek 

supplemental funding for contingency operations. Comptroller officials 

have also directed the services to prepare budget estimates and report the 

costs of contingency operations (to include the various missions that 

support the Global War on Terrorism), according to chapter 23’s provisions. 

During our visits to the military commands and installations that have been 

involved in supporting GWOT contingency operations, service financial 

managers indicated that they use chapter 23 as a primary source to guide 

all war-related spending. 

Although Office of the Under Secretary of Defense (Comptroller) and 

service financial management officials are continuing to use the provisions 

in chapter 23 to guide their GWOT budget submissions, cost reporting, and 

spending, it is not clear to what extent these provisions should apply, 

especially given that, on its face, chapter 23 states that its policies and 

procedures do not address wartime activities or circumstances that require 

U.S. military forces to be placed on a wartime footing.24 Moreover, 

numerous specific provisions in chapter 23 conflict with the GWOT funding 

procedures and, in some cases, the needs of the war. 

In addition to the express language that states that chapter 23 does not 

apply to wartime activities, the overall structure of chapter 23 and many of 

its specific provisions are not intended to address the types of costs 

incurred or funding authorities provided to support GWOT. For example, 

although the fiscal year 2004 GWOT budget estimates and cost reporting 

contained significant amounts of investment costs, chapter 23, given that it 

was designed to address small-scale contingency operations, which usually 

would not involve such costs, did not include policies and procedures to 

guide the budgeting or reporting of these costs.25 Moreover, another 

24 Ch. 23, sec. 230105.

25 Chapter 23 was revised in January 2005 to include these cost categories and provide 

descriptions of these types of costs. 
Page 31 GAO-05-882 Global War on Terrorism

specific provision in chapter 23 states that these costs should not be 

considered as incremental costs of a contingency operation.26 Recognizing 

that large-scale contingency operations lasting as long as GWOT and 

affecting a large portion of U.S. military units may necessarily incur 

investment costs, these provisions illustrate an inconsistency between the 

needs to support the war and the current DOD policies and procedures 

used to guide the preparation of GWOT budgets, cost reporting, and 

spending. This lack of clarity could lead to uncertainty at all levels within 

DOD over what policies actually are intended to guide the funding for the 

war. 

Use of GWOT Funds for 

Home Station Operations Is 

Most Affected by the Lack 

of Updated Policy

There is confusion over DOD’s policies and procedures for guiding the 

preparation of GWOT budgets, cost reporting, and the spending of billions 

of dollars in GWOT funding for base operation activities at the home 

stations of the military units that are preparing to deploy or have deployed 

on GWOT missions. Chapter 23 expressly states that costs associated with 

facilities/base support activities may be budgeted and reported only if the 

activities occur away from a unit’s home station.27 Despite this 

administrative limitation, many installations have been budgeting and 

recognizing as GWOT-related costs base support costs for home station 

activities. For example, in fiscal year 2003 the Navy spent $42.5 million for 

wharf repairs at Pearl Harbor, Hawaii. In fiscal years 2003 and 2004, the Air 

Force spent a total of more than $117 million at Anderson Air Force base in 

Guam for a variety of installation-related costs (e.g., support facilities for 

bomber aircraft and storm damage repair). The Army’s Installation and 

Management Agency, which manages all Army installations, obligated $1.52 

billion in fiscal year 2004 and has budgeted about $2.07 billion in fiscal year 

2005 expressly for GWOT-related “home station” base support activities. All 

of these costs conflict with the home station spending limitation in chapter 

23.

Notwithstanding chapter 23’s administrative limitation on budgeting and 

reporting costs for home station facilities/base support activities, some of 

these reported costs appear to meet the definition of “incremental costs,” 

which guides all GWOT spending. DOD policy states that costs associated 

26 Ch. 23, sec. 230902.

27 Ch. 23, sec. 230406, Cost Category 3.4, Facilities/Base Support. Examples of activities 

away from home station would include those in Iraq.
Page 32 GAO-05-882 Global War on Terrorism

with contingency operations are limited to the incremental costs of the 

operations, that is, costs that are above and beyond baseline training, 

operations, and personnel costs or costs that would not have been incurred 

had the contingency operation not been supported28 (i.e., costs that are 

directly attributable to the operation). During our review, we noted a 

number of instances in which GWOT costs were recorded relating to home 

station base operation activities that appear to be directly attributable to 

the war. At one Army installation—an installation that helped prepare 

reserve military personnel for deployments in support of GWOT—we found 

reported GWOT costs for the renovation of barracks, dining facilities, and 

latrines to accommodate increased numbers of reserve personnel using 

those facilities. However, we also found some home station costs that did 

not appear to support the war or only to tangentially support it. For 

example, at this same installation we found that it also reported GWOT 

costs for renovating unneeded vehicles for redistribution within the Army 

even though they were not used in any contingency operation and had been 

declared excess to the unit before it deployed. At another Army 

installation, we found GWOT costs to improve the readiness condition of 

equipment not deployed for contingency operations. In addition, we found 

that one Navy Command reported GWOT costs for improving the condition 

of floating docks that were not properly stored while the unit responsible 

for their upkeep was deployed on a GWOT mission. The docks were 

seriously corroded as a result of not being stored properly and left in salt 

water for more than a year. Navy officials said that nearly $6 million in 

GWOT funding had been used in fiscal year 2003 to pay for these repairs. 

Navy officials disagreed with our view that these costs were at best 

tangential to the support of the war and noted that the justification for the 

repairs was that these docks were a requirement and would likely be 

needed in the future to support GWOT. However, we believe that GWOT 

costs are limited by the provisions of chapter 23 to those costs that are in 

direct support of the war. 

In response to our concerns about the inconsistencies contained in chapter 

23, in August 2005, the Office of the Under Secretary of Defense 

(Comptroller) officials approved a revision to chapter 23 to clarify the 

policy on both base operations and investment costs for contingency 

operations. This clarification should assist the military services and other 

DOD agencies in making informed judgments on the appropriate use of 

GWOT funding authorities. 

28 Ch. 23, sec. 230406 and 230902.
Page 33 GAO-05-882 Global War on Terrorism

Cost Controls Can Be 

Strengthened As 

Operations Mature

DOD and Office of Management and Budget policies emphasize the need to 

spend funds prudently. Individual commands and commanders have 

implemented a variety of cost controls for GWOT spending. Current cost 

controls include acquisition review boards, command review of purchases, 

limits on some categories of spending, and a cost reduction goal in Iraq. 

However, DOD’s policies and guidance do not go beyond advising DOD 

officials of their financial management responsibilities with regard to the 

prudent use of contingency funding authorities and provide no guidelines 

on steps that should be taken to control costs, particularly as operations 

mature, while ensuring mission accomplishment. Resource managers from 

a number of Army divisions that have deployed to Iraq or Afghanistan have 

told us that cost controls can be strengthened as operations mature.

Policy Emphasizes the Need 

for Prudent Spending

OMB circular A-123 requires all mangers of federal funds to ensure that 

cost-effective controls be implemented for the expenditure of appropriated 

funds. Section 230108 of DOD’s financial management regulation for 

contingency operations, which was added in January 2005, advises DOD 

officials of their financial management responsibilities to ensure the 

prudent use of contingency funding authorities. The section emphasizes 

that it is vital for civilian and military personnel authorized to obligate and 

expend funds in support of contingency operations to employ a fiduciary 

approach to ensure that funds are used in a prudent manner. 

GWOT spending has risen steadily since the attacks of September 11, 2001, 

as operations have expanded. As shown in figure 2, from fiscal year 2002 

through fiscal year 2004, reported costs rose from $11 billion to $71 billion 

annually and, from our projection of reported fiscal year 2005 obligations 

through May 2005, could reach about $71.5 billion again in fiscal year 2005. 

The large amount of spending and its growth underscore the need for cost 

controls. 
Page 34 GAO-05-882 Global War on Terrorism

Figure 2: Growth in Reported and Projected GWOT Spending, Fiscal Years 2002-5

a GAO projected the fiscal year 2005 GWOT cost on the basis of reported obligations through May 

2005.

Individual Commands Have 

Developed a Variety of Cost 

Controls for GWOT 

Spending, but There Is No 

Systematic DOD Effort to 

Ensure That All Commands 

Pursue Cost Controls

Some commands have taken steps to seek economy and efficiency in 

performing tasks by reviewing existing requirements and seeking more 

efficient methods to perform required tasks. Over the years, we have 

reported that when the government seeks opportunities to control costs, 

savings are usually realized. For example, in July 2004 we reported that 

savings are generally realized when the customer reviews logistics support 

contractors’ work for economy and efficiency but that these reviews have 

0

10

20

30

40

50

60

70

80

Fiscal year

2002 GWOT

$11.2 billion

Fiscal year

2003 GWOT

$61.0 billion

Fiscal year

2004 GWOT

$71.3 billion

10/2001 10/2002 10/2003 10/2004 10/2005

March 19, 2003 

Invasion of Iraq

Oct. 7, 2001 

Military

operations

begin in

Afghanistan

Sept. 11, 2001

Attacks on the

World Trade

Center and

Pentagon

Dollars in billions

Source: GAO's analysis of DOD GWOT-cost reporting data. 

Fiscal year

2005 GWOT

$71.5 billiona

Reported and projected GWOT obligations, fiscal years 2002-5.

Reported GWOT obligations, fiscal years 2002-4.

GAO projected fiscal year 2005 GWOT obligations based on DOD's

May 2005 Supplemental and Cost of War Execution report.
Page 35 GAO-05-882 Global War on Terrorism

not been routinely conducted at all work locations.29 We reported that U.S. 

Army Europe saved $200 million dollars, or 10 percent of the contract 

ceiling price, on its Balkans Support Contract; Third Army would save $31 

million annually in Kuwait, or 43 percent by changing food service 

contractors; and the Marine Corps saved $8.6 million, or 18 percent, from 

an estimated $48 million in work in Djibouti, which is one of the Operation 

Enduring Freedom locations.

Military commands and individual commanders involved in GWOT as well 

as in earlier operations have put in place a variety of controls on their own 

initiative designed to control costs. Some examples are as follows:

• Acquisition review boards are being used in Iraq, Afghanistan, and 

Kuwait to assess if requirements are valid and, if so, decide how best to 

satisfy them. In addition, in an August 2004 order, the commander of 

Multinational Forces-Iraq established a stewardship council intended to 

reinforce fiscal discipline in order to ensure that limited financial 

resources are effectively and efficiently employed to accomplish the 

command’s strategic objectives. 

• Individual Army divisions have taken steps to control costs. One Army 

division we visited has restricted the use of its Government Purchase 

Cards for GWOT reconstitution obligations until the card holders 

complete a training class detailing the appropriate use of the cards. The 

division Comptroller stated that this action was taken to limit spending 

and ensure that purchases made in support of GWOT were appropriate. 

Another Army division implemented a Program Budget Advisory 

Committee to review its GWOT predeployment requirements. One 

example of economies directed by the committee was to consolidate 

requirements for medical supplies, batteries, and ballistic blankets into 

a single division purchase. The committee was reestablished upon the 

division’s return from Afghanistan for the review and approval of GWOT 

reconstitution requirements. 

• Third Army, which obligated almost $17 billion in fiscal year 2004 to 

support GWOT, has taken a number of steps to control costs. Among 

other things, it reviews requisitions of items obtained through the stock 

fund that are not reviewed by the review boards in Iraq, Afghanistan, 

29 GAO, Military Operations: DOD’s Extensive Use of Logistics Support Contracts 

Requires Strengthened Oversight, GAO-04-854 (Washington, D.C.: July 19, 2004).
Page 36 GAO-05-882 Global War on Terrorism

and Kuwait—specifically, items that have a high dollar value, involve 

large quantities, are pilferable, or are personal items. In a March 2005 

message to the Vice Chief of Staff of the Army, the Third Army 

commander also described cost control measures implemented by 

organizations funded by Third Army. These included management 

controls placed on requests to expand the use of LOGCAP, reducing the 

cost of transporting cargo into the theater, and reducing demurrage 

charges associated with commercial containers by identifying and 

returning excess containers.

The Army has also set limits on certain kinds of spending. For example, the 

Army set a $6.5 billion limit on LOGCAP spending in fiscal year 2004 on the 

basis of the estimated cost of required work and a $6.6 billion limit for 

fiscal year 2005. On a much smaller scale, in July 2004, Third Army issued a 

policy memorandum setting forth procedures for purchasing and awarding 

unit coins30 to limit coins purchased with contingency operations funds. 

The policy recommends a funding ceiling for coin purchases from 

operating funds of $1,000 per battalion and $3,000 per brigade. 

One command has also set spending reduction targets to constrain 

spending. The commander of coalition forces in Iraq has set a 10 percent 

cost reduction target in Iraq. According to the Deputy Chief of Staff for 

Resource Management for Multinational Forces-Iraq, the cost-reduction 

goal was intended as a direction to take the command rather than as a hard 

target. While realizing that many factors driving costs were outside his 

control, the commanding general wanted the command to manage those 

areas that the command could affect. The cost-reduction plan was broken 

down into three lines of operation—stock fund, LOGCAP, and nonstock 

fund. As a result the command reports the following: 

• Efforts to control stock fund costs have met with mixed results. The 

command has encountered difficulties in controlling stock fund costs in 

part because units can order items directly from the supplying 

command, bypassing the command in Iraq. However, some control 

procedures have been established, which reduced direct orders from 

approximately $50 million per month to $5 million in April 2005.

30 Unit coins are custom-minted and emblazoned coins or similar items, typically with unit 

insignia on the obverse (front) side and an inscription on the reverse side, presented by or 

on behalf of the commander as an on-the-spot award to show recognition for 

accomplishment to U.S. military members or civilians.
Page 37 GAO-05-882 Global War on Terrorism

• The command reports that it has been working to control LOGCAP 

costs, but additional requirements were subsequently identified that 

were expected to drive up LOGCAP costs beyond the initial $4.3 billion 

goal. The commanding general has asked the Army Audit Agency to 

help evaluate the use of the LOGCAP program in Iraq and provide 

recommendations for cost savings and improved processes.

• The command reports that it is well on its way to achieving its goal of 

$2.25 billion for nonstock fund spending. As of April 30, 2005, the 

command reported that it had obligated only about $1 billion in 

nonstock funds and was well on its way to come in under the initial 

savings goal.

ARCENT, the Army command responsible for funding the command in Iraq, 

was aware of the initiative but not its details and was not aware of whether 

there were similar efforts in other countries, specifically in Afghanistan and 

Kuwait.

While DOD policy emphasizes commanders’ fiduciary responsibility to 

spend funds prudently, it has not directed any systematic effort for the 

services and combatant commands to seek opportunities to reduce costs or 

provided guidelines for doing so. In discussions with resource 

management personnel in Army units that were deployed to Iraq and/or 

Afghanistan, there was a consensus that cost controls can be strengthened 

as an operation matures. For example, resource managers at one Army 

division that deployed to Iraq told us that the division’s experience is that 

spending can be managed at all stages of a contingency operation, even 

under high-operating-tempo combat operations. Another Army division 

resource manager who deployed to Iraq told us that he could have operated 

under a budget after his third month of deployment to Iraq. He preferred to 

operate under a budget where he knew the amount of funding that was 

available and could tell commanders that they had to prioritize their 

requirements. A third Army division resource manager, who deployed to 

Afghanistan, told us that as an operation matures, cost controls can be 

strengthened.

In discussing efforts to control costs with the Office of the Under Secretary 

of Defense (Comptroller), the view was expressed that on the basis of the 

varying combat situations, steps to control costs were best left to the 

individual commands. As described above, individual commands have 

done much to control costs, but efforts vary by command, and there is 

limited knowledge of such efforts outside each command. The 
Page 38 GAO-05-882 Global War on Terrorism

Comptroller’s office has no direct knowledge of the commands’ cost 

control efforts and has not asked to be kept informed of cost control steps. 

We believe that more can be done and that absent DOD-wide guidelines on 

cost control efforts, there is no assurance that successive commanders will 

emphasize cost control and that each command’s efforts will be equally 

comprehensive. 

Conclusions We found numerous problems with DOD’s processes for recording and 

reporting costs for the Global War on Terrorism, raising significant 

concerns about the overall reliability of DOD’s reported cost data. Because 

of these problems, neither DOD nor Congress can reliably know how much 

the war is costing and details on how appropriated funds are being spent, 

or have historical data useful in considering future funding needs. In 

response to our work, DOD has identified a number of steps it said it is 

taking to improve the accuracy and reliability of its cost reporting. Until 

DOD fully implements those steps, gives improving its GWOT cost 

reporting high priority, and undertakes an exhaustive effort to ensure that 

the data in its GWOT cost reports are reliable, there can be no assurance 

that the cost of the war is accurate and whether funding is adequate.

DOD is generally using its existing contingency operations financial 

management regulation to guide GWOT budgeting, cost reporting, and 

spending, although this regulation was developed and structured to 

manage the costs of small-scale contingency operations. Specific 

provisions of the regulation conflict with the needs of GWOT. One such 

conflict concerns administrative limitations on the use of supplemental 

funds for base support activities at home stations. In addition, the 

regulation includes conflicting policies and procedures to guide the 

budgeting or reporting of investment costs of the war. Without an updated 

policy, the military services and other DOD agencies cannot make informed 

judgments on the appropriate use of GWOT funding authorities. In 

response to our work, DOD revised its Financial Management Regulation.

While certain individual commands have taken steps to control costs and 

DOD policy generally advises its officials of their financial management 

responsibilities with regard to the prudent use of contingency funding, the 

Office of the Under Secretary of Defense (Comptroller) has not 

systematically called for all commands involved in GWOT to take steps to 

control costs and to keep the office informed of those steps and their 

success. With the growth in GWOT costs, there is a need to ensure that all 

commands seek to control costs. Until the department establishes 
Page 39 GAO-05-882 Global War on Terrorism

guidelines on cost controls and is routinely informed about the types of 

controls and their impact on costs, it cannot be sure that all that can be 

done to control costs is being done. 

Recommendations for 

Executive Action

To ensure that Congress and the Department of Defense can reliably know 

how much the war is costing, we recommend that the Secretary of Defense 

take the following three steps:

1. Direct the Secretaries of the military services to undertake a series of 

steps to ensure that reported GWOT costs are accurate and reliable, to 

include: 

• developing a systematic process to review reported obligations;

• developing and monitoring procedures to ensure that obligations are 

categorized correctly;

• using actual data whenever possible and, when not possible, to take 

steps to allow the development of actual data; and 

• ensuring that actions previously agreed to in response to audits have 

been implemented effectively.

2. Direct the Office of the Under Secretary of Defense (Comptroller) to 

oversee the above service efforts as well as to develop a systematic 

process to review and test the reliability of the overall GWOT cost 

reports. 

3. Direct the Secretary of the Army to take the following steps:

• develop and implement formal procedures to guide the monthly 

reporting of GWOT military personnel costs;

• formalize the Army’s management review of military personnel cost 

information submitted for the GWOT cost report; 

• use information from the DOD payroll system, where applicable, to 

identify and report GWOT military personnel cost information; and 

• review and simplify the numbers of elements of resource currently used 

to identify, categorize, and record contingency costs.
Page 40 GAO-05-882 Global War on Terrorism

To ensure that the military services and other DOD agencies make 

informed judgments on the appropriate use of GWOT funding authorities 

that are consistent with DOD guidance and meet the needs of GWOT, we 

recommend that the Secretary of Defense expand DOD’s financial 

management regulation for contingency operations to include 

contingencies as large as the current GWOT. At a minimum, the updated 

policy should address the budgeting, cost reporting, and spending 

associated with investment and base operation and support costs at the 

home stations of units that support GWOT. 

To ensure that GWOT mission needs are being met while applying 

appropriate cost controls we recommend that the Secretary of Defense 

direct the Office of the Under Secretary of Defense (Comptroller) to take 

the following two steps:

1. establish guidelines on cost controls, including identifying what types 

of cost controls are available to the services, and 

2. require that the services routinely keep the Comptroller’s office 

informed about the types of controls and their impact on costs, and 

share information on cost control efforts.

Agency Comments and 

Our Evaluation

DOD provided written comments on a draft of this report. Its comments 

are discussed below and are reprinted in appendix III.

DOD agreed with all but one of our recommendations, stating that it 

generally agreed with the intent of the recommendations and has carefully 

reviewed its guidance and procedures for reporting cost data. DOD further 

commented that on the basis of its review and consistent with our 

recommendations it has taken several immediate actions to improve 

procedures and strengthen the cost reports. These include issuing 

additional direction and guidance to strengthen, clarify, standardize, and 

simplify procedures for collecting, reporting, and auditing cost of war 

information and issuing supplemental guidance to its Financial 

Management Regulation to address large-scale contingency operations. 

Regarding our recommendations on improving the accuracy and reliability 

of reported costs of the Global War on Terrorism and to have the Office of 

the Under Secretary of Defense (Comptroller) play a role in overseeing the 

efforts as well as to develop a systematic process to review and test the 

reliability of the overall GWOT cost reports, DOD stated that it has 
Page 41 GAO-05-882 Global War on Terrorism

completed implementation of this recommendation through the execution 

of new guidance and procedures for collecting and reporting cost of war 

information and is actively overseeing the preparation of GWOT cost 

reports. DOD further stated that the Army has changed its data collection 

and reporting process and among other things is now using a Standard 

Operating Procedure which prescribes a clear methodology for capturing 

contingency operations cost data from the accounting systems and a 

formal management review process to prepare military cost information 

associated with GWOT. 

Regarding our recommendation to expand DOD’s Financial Management 

Regulation for contingency operations to include contingencies as large as 

the current Global War on Terrorism, DOD agreed and stated that it has 

published supplemental guidance to volume 12, chapter 23 of its Financial 

Management Regulation to address large scale contingencies. While we 

agree that many of the revisions address problems we highlighted in our 

report, we are concerned with one provision that inappropriately expands 

the definition of incremental costs, stating that 

“Additionally, because of the scale of operations, including intense combat or long term 

stability or anti-insurgency operations, expenses beyond only direct incremental costs may 

be appropriate on a case by case basis in written coordination with the Office of the Under 

Secretary of Defense (Comptroller).” 

Although the revised guidance states that such costs require coordination 

with the Office of the Under Secretary of Defense (Comptroller), we 

believe that this expanded definition of incremental costs suggests that the 

costs of large-scale contingency operations can be beyond those defined 

elsewhere in DOD’s guidance as incremental costs--i.e., those additional 

costs to the DOD Component appropriations that would not have been 

incurred had the contingency operations not been supported. We further 

believe that costs incurred beyond what was reasonably necessary to 

support a contingency operation cannot be deemed incremental expenses, 

since such costs are not directly attributable to support of the operation. In 

addition, we believe that expanding allowable costs of contingency 

operations beyond those directly attributable to support of the operation is 

problematic because it provides no guidance on what costs beyond those 

that are attributable to the operation are now allowed to be reported. We 

therefore do not believe that this provision meets the intent of our 

recommendation. The Under Secretary of Defense (Comptroller) should 

reconsider this provision in light of our evaluation of its potential 

consequences.
Page 42 GAO-05-882 Global War on Terrorism

DOD did not agree with our recommendation to have the Office of the 

Under Secretary of Defense (Comptroller) establish guidelines on cost 

controls. In commenting on our recommendation, DOD stated that field 

commanders are the correct echelon to adopt and emphasize cost controls 

during a contingency; that it relies on the judgment of the combatant 

commander in the theater of operations to manage resources at their 

disposal to effectively safeguard personnel and perform the mission; and 

that implementing administrative funding controls could have a 

detrimental effect on the commanders’ ability to make critical decisions in 

the theater. DOD further stated that the Office of the Under Secretary of 

Defense (Comptroller) has included a section in the Financial Management 

Regulation that emphasizes that the DOD components are responsible to 

employ a fiduciary approach to ensure that the funds are used in a prudent 

manner and that as operations mature, steps should be taken to evaluate 

and establish spending constraints. We recognize that certain individual 

commands have done much to control costs and describe some of those 

efforts, but we further note in our discussion of cost controls that efforts 

vary by command and that there is limited knowledge of such efforts 

outside each command. We do not believe, as DOD suggests, that our 

recommendation would have a detrimental effect on the commanders’ 

ability to make critical decisions in the theater. We are simply 

recommending that DOD provide guidance that increases awareness of the 

need for reasonable cost controls and requires that the Office of the Under 

Secretary of Defense (Comptroller) be kept informed of the types of 

controls and their impact on costs and share information within DOD on 

cost control efforts. We continue to believe that more can be done and that 

absent DOD-wide guidelines on cost control efforts, there is no assurance 

that successive commanders will emphasize cost control and that each 

command’s efforts will be equally comprehensive. Therefore, we have 

retained the recommendation.

In commenting on the report’s content, DOD disagreed with GAO’s position 

on the overstatement of the reported costs for mobilized Army reservists in 

fiscal year 2004. DOD commented that our report was incomplete because 

we did not consider military retirement pay and other costs, which DOD 

stated accounted for almost $1.3 billion of the $2.1 billion difference cited 

in our report. We disagree. As discussed in our draft report, initially, the 

Army could not support its reported costs for mobilized Army reservists or 

explain the $2.1 billion difference that we noted between its payroll system 

and its reported cost for mobilized Army reservists. During our audit, the 

Army and the Office of the Under Secretary of Defense (Comptroller) 

provided us with several possible, although sometimes inaccurate, 
Page 43 GAO-05-882 Global War on Terrorism

explanations for the $2.1 billion difference. After several months, DOD 

provided information showing that it could account for about $1.6 billion of 

the $2.1 billion difference. While making it clear that the information was 

received too late for us to assess its accuracy and completeness as part of 

our audit, we did include the information in our draft report. We stated that 

some of the explanations appeared valid, while others did not and, taken 

together, they failed to fully account for the difference. The fact that DOD’s 

comment letter reduces the $1.6 billion to $1.3 billion further confirms the 

concerns we have expressed throughout this report over the accuracy of 

DOD’s past reported costs. Finally, we believe that DOD’s reference in its 

comment letter to the $2.1 billion difference as an anomaly is a 

mischaracterization--particularly when viewed in the context of its 

explanation that “the Department’s use of estimates led to a difference.” 

As clearly stated in this report, we found that the reported cost data are not 

reliable, in part because of long-standing deficiencies in DOD’s financial 

and accounting systems, a lack of systematic processes to ensure that data 

are properly entered into those accounting systems, and the use of 

estimates rather than actual information. We understand that DOD is 

planning corrective action to address issues related to cost reporting for 

military personnel supporting GWOT operations. 

We are sending copies of this report to other interested congressional 

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

(Comptroller); the Secretaries of the military services; and the Director, 

Office of Management and Budget. Copies of this report will also be made 

available to others upon request. In addition, this report will be available at 

no charge on the GAO Web site at http://www.gao.gov.

If you or your staff has any questions regarding this report, please contact 

Sharon Pickup at 202-512-9619 or by e-mail at pickups@gao.gov or Greg 

Kutz at 202-512-9095 or kutzg@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 
Page 44 GAO-05-882 Global War on Terrorism

of this report. GAO staff that made major contributions to this report are 

included in appendix IV.

Sharon L. Pickup

Director, Defense Capabilities

and Management

Gregory D. Kutz

Managing Director

Forensic Audits and Special Investigations
Page 45 GAO-05-882 Global War on Terrorism

List of Congressional Committees

The Honorable Ted Stevens

Chairman

The Honorable Daniel Inouye

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable John Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable C. W. Bill Young

Chairman

The Honorable John P. Murtha

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives

The Honorable Duncan Hunter

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives
Page 46 GAO-05-882 Global War on Terrorism

Appendix I

Scope and Methodology ApApenednxidexiIs

To accomplish this review, we obtained and analyzed copies of all 12 

months of the Department of Defense’s (DOD) fiscal year 2004 monthly 

Consolidated DOD Terrorist Response Cost Report from the Office of the 

Under Secretary of Defense (Comptroller), which was renamed the 

Supplemental and Cost of War Execution Report in January 2005, to 

identify reported obligations by operation and by appropriation account for 

the military services. We did not review the obligations reported by the 

intelligence community or the other defense agencies, but we do mention 

the amount appropriated and obligated because the amount appropriated 

was part of the total DOD appropriation. We focused our analysis 

primarily, but not exclusively, on reported costs for fiscal year 2004—the 

latest full year of data available at the time of our review—and specifically 

the military personnel and operation and maintenance accounts as they 

represent the largest amount of spending. We also did not conduct site 

visits to Air Force units because their audit agency was conducting a 

similar review. 

To determine the reliability of DOD’s data, we reviewed previous GAO 

reports and reports from other audit agencies that identified long-standing 

material weaknesses in DOD’s accounting systems. We conducted limited 

testing on operation and maintenance obligations using Global War on 

Terrorism (GWOT) funding because DOD’s financial management systems 

and business processes have been reported to contain significant 

deficiencies. At the Army- and Marine Corps-unit levels, we judgmentally 

selected obligation data entries and traced them back to a computerized 

database or paper documents to determine whether the data were properly 

entered into the accounting system. At the Army’s Central Command 

Headquarters, we judgmentally selected document numbers and item 

descriptions for obligations made in Iraq and Afghanistan. We traced the 

document register numbers against paper documentation controlled by the 

Defense Finance and Accounting Service (DFAS), Rome, New York. We 

also provided a written data reliability assessment checklist for Navy 

officials to report how they ensured that their data were accurate and 

reliable. Finally, we discussed the processes used to ensure that GWOT 

obligation data provided were accurate and reliable with service financial 

managers. We found that the reported cost data were not reliable because 

of long-standing deficiencies in DOD’s financial and accounting systems, 

the lack of a systematic process to ensure that data were properly entered 

into those accounting systems, the use of estimates rather than actual data 

for some of DOD’s reported costs, and the incorrect categorization of some 

reported costs due to the large number of cost categories and limited 

training on how to apply them. However, because it was not feasible to 
Appendix I

Scope and Methodology

Page 47 GAO-05-882 Global War on Terrorism

examine all reported costs and significant data reliability problems existed, 

we were not able to determine the extent that total costs were misstated. 

To identify unusual fluctuations in the reported Army military personnel 

GWOT obligations, we analyzed the fiscal year 2004 GWOT cost reports 

and discussed our work with the Army Budget Office and DFAS. We also 

obtained and reviewed cost-reporting for military personnel information, 

budget estimates, supplemental appropriation information, budget 

reprogramming documents, and other supporting documentation from the 

Army Budget Office. To determine if reported obligations were based 

primarily on estimates, we compared reported GWOT amounts for Army 

military personnel with Army obligation plans. We obtained monthly 

extracts of fiscal year 2004 military pay records for Army Reserve and 

National Guard soldiers supporting GWOT operations from the DOD 

payroll system at DFAS, Indianapolis. To identify GWOT obligations for 

Army military personnel based on actual DOD payroll information, we 

summarized payroll record extracts by pay component and aligned these 

amounts with the cost category structure of the GWOT cost report. For 

cost category “Reserve Components Called to Active Duty,” we compared 

actual DOD payroll information with the estimated Army military 

personnel amounts in the GWOT cost report, calculated the difference, and 

discussed our work with the Army Budget Office. In July 2005, we obtained 

information from the Army and DOD on this difference.

To assess the extent to which DOD’s existing financial management policy 

is applicable to war spending, we focused our efforts on analyzing guidance 

provided by the fiscal year 2004 Defense Appropriation Act and DOD’s and 

the military services’ specific policy and procedures. We reviewed 

previous GAO reports regarding guidance and oversight of contingency 

operations costs. We also reviewed DOD Financial Management 

Regulation volume 12 chapter 23, which establishes DOD policy and 

procedures for developing contingency budget estimates and cost 

reporting. We analyzed DOD’s emergency supplemental budget requests 

for fiscal year 2003 and fiscal year 2004, and service contingency operation 

financial management policies and procedures. Lastly, we spoke with 

Office of the Under Secretary of Defense (Comptroller) and service 

financial management officials about GWOT budget estimations, cost 

reporting activities, and whether the current policy is sufficient or needs to 

be modified to reflect GWOT conditions. 

To determine controls over costs, we reviewed reports on GWOT spending 

and contract management from other audit agencies as well as command 
Appendix I

Scope and Methodology

Page 48 GAO-05-882 Global War on Terrorism

guidance and held discussions with resource management officials from 

major commands and units that had returned from Iraq and Afghanistan 

regarding their experiences. We also discussed what steps DOD has 

directed or implemented to strengthen cost controls and what actions it 

has implemented. Furthermore, we discussed cost controls implemented 

by Army divisions while deployed or upon the units’ return to their home 

station. 

We visited the following locations during our review:

• Office of the Under Secretary of Defense (Comptroller), Washington, 

D.C.

• Headquarters, Defense Finance and Accounting Service, Arlington, 

Virginia.

• Headquarters, Department of the Army, Washington, D.C.

• U.S. Army Installation Management Agency, Washington, D.C.

• U.S. Army Installation Management Agency, Southeast Region, Fort 

McPherson, Georgia.

• Headquarters, U.S. Army Forces Command and Headquarters, Third 

Army (Army Central Command), Fort McPherson, Georgia.

• Headquarters, U.S. Army Pacific, Fort Shafter, Hawaii.

• Headquarters, 25th Infantry Division, Schofield Barracks, Hawaii.

• Headquarters, U.S. Army Europe, Heidelberg, Germany.

• Headquarters, 1st Armored Division, Wiesbaden, Germany.

• Headquarters, III Corps and 1st Cavalry Division, Fort Hood, Texas.

• Headquarters, 3rd Armored Cavalry Regiment, Fort Carson, Colorado.

• Headquarters, U.S. Marine Corps Forces Pacific, Camp H.M. Smith, 

Hawaii.
Appendix I

Scope and Methodology

Page 49 GAO-05-882 Global War on Terrorism

• Headquarters, 1st Marine Expeditionary Force, Camp Pendleton, 

California.

• Defense Finance and Accounting Service Center, Denver, Colorado.

• Defense Finance and Accounting Service Center, Indianapolis, Indiana.

• Defense Finance and Accounting Service-Rome, Rome, New York.

• Assistant Secretary of the Navy, Financial Management and Comptroller, 

Washington, D.C.

• Commander, Naval Installations Command, Washington, D.C.

• U.S. Fleet Forces Command, U.S. Atlantic Fleet, Norfolk, Virginia.

• Commander, U.S. Pacific Fleet, Pearl Harbor, Hawaii.

• Commander, Naval Air Force, San Diego, California.

• Commander, Naval Surface Force, San Diego, California.

• Commander, Submarine Force, Pearl Harbor, Hawaii.

• U.S. Air Force Audit Agency, March Air Reserve Base, California.

• U.S. Air Forces Pacific, Hickam Air Force Base, Hawaii.

We performed our work from August 2004 through August 2005 in 

accordance with generally accepted government auditing standards.
Page 50 GAO-05-882 Global War on Terrorism

Appendix II

Ineffective Reporting of Fiscal Year 2004 Army 

Military Personnel Global War on Terrorism 

Obligations ApendxiI

As part of our work on cost reporting for the Global War on Terrorism 

(GWOT), we undertook a detailed review of obligations for Army military 

personnel supporting GWOT operations. The results of that review follow.

Background In fiscal year 2004, the Department of Defense (DOD) asked for funds in a 

supplemental budget request to provide pay, allowances, subsistence, and 

other personnel costs for active- and reserve-component military personnel 

activated for duty in support of GWOT. This request included certain 

special pays that active-duty military personnel received for deployment, as 

well as the base pay, special pays, and allowances for reserve personnel 

mobilized to participate in or directly support GWOT operations. In 

addition, the estimate also included the costs to pay active-component 

personnel affected by military stop-loss programs and additional military 

personnel maintained on active duty above the normal end-strength levels 

to sustain the readiness of deploying units. As shown in figure 3, Congress 

provided about $17.8 billion in funding for DOD military personnel in the 

fiscal year 2004 supplemental appropriation,1

 including almost $12.9 billion 

provided for the Army. This was an increase from the about $13.4 billion in 

funding for DOD military personnel, including about $7.8 billion for Army 

military personnel in the fiscal year 2003 supplemental appropriation.2

1

 Emergency Wartime Supplemental Appropriations Act for Defense and for the 

Reconstruction of Iraq and Afghanistan, Pub. L. No. 108-106, 117 Stat. 1209 (Nov. 6, 2003).

2

 Emergency Wartime Supplemental Appropriations Act, Pub. L. No. 108-11, 117 Stat. 559 

(Apr. 16, 2003).
Appendix II

Ineffective Reporting of Fiscal Year 2004 

Army Military Personnel Global War on 

Terrorism Obligations

Page 51 GAO-05-882 Global War on Terrorism

Figure 3: Supplemental Funding of DOD Military Personnel for GWOT Operations in Fiscal Years 2003 and 2004

In the September 2004 GWOT cost report, DOD military personnel 

obligations totaled over $17 billion of the reported $71.2 billion in total 

GWOT obligations for fiscal year 2004. Of this $17 billion, Army military 

personnel obligations reported by DOD totaled almost $12 billion, or about 

71 percent, of military personnel obligations for GWOT operations. As 

shown in table 2, Army military personnel obligations for GWOT operations 

increased from fiscal year 2003 through fiscal year 2004, while obligations 

reported by other DOD organizations decreased.

9.0%

4.2%

4.6%

19.0%

72.2%

11.9%

58.2% 20.9%

$1.2 billion

$1.6 billion

$2.8 billion

$7.8 billion

$0.8 billion

$0.8 billion

$3.4 billion

$12.9 billion

Marine Corps

Navy

Air Force

Army

FY 2003 total = $13.4 billion FY 2004 total = $17.8 billion

Source: GAO's analysis of Pub. L Nos. 108-11 and 108-6.
Appendix II

Ineffective Reporting of Fiscal Year 2004 

Army Military Personnel Global War on 

Terrorism Obligations

Page 52 GAO-05-882 Global War on Terrorism

Table 2: DOD Military Personnel Obligations for GWOT Operations in Fiscal Years 

2003 and 2004

Source: September 2003 and 2004 GWOT cost reports.

The Army Budget Office controls the Military Personnel, Army, 

appropriation account and is also responsible for identifying and reporting 

the incremental costs of Army military personnel in support of GWOT 

operations. Incremental military personnel costs are to include pay, special 

pay, and entitlements above normal monthly payroll costs for active- and 

reserve-component personnel.

In fiscal year 2004, the monthly GWOT cost report included the following 

six primary cost categories for military personnel as designated in the DOD 

Financial Management Regulation:3

• “Reserve Components Called to Active Duty” includes basic military pay 

for Reserve and National Guard personnel either as part of the operation 

or as backfill.

• “Imminent Danger or Hostile Fire Pay,” when authorized, provides a 

monthly special pay for active- and reserve-component personnel. 

• “Family Separation Allowance” is a monthly special allowance paid to 

active- and reserve-component personnel who are separated from their 

families for 30 days or more. 

Dollars in millions

Dollars

DOD organizations

Fiscal year

2003

Fiscal year

2004

Army $8,730 $11,972

Air Force 3,409 3,272

Navy 1,934 857

Marine Corps 1,482 918

DOD & defense agencies 11 0

Total $15,566 $17,019

3

 DOD Financial Management Regulation 7000.14-R, vol. 12, ch. 23 (February 2001). A 2005 

change to the FMR calls for eight cost categories related to military personnel obligations.
Appendix II

Ineffective Reporting of Fiscal Year 2004 

Army Military Personnel Global War on 

Terrorism Obligations

Page 53 GAO-05-882 Global War on Terrorism

• “Foreign Duty Pay” is a monthly special pay for active- and reservecomponent personnel who are at a designated location outside of the 

continental United States.

• “Subsistence” includes the costs of food, water, ice, and other 

subsistence items that are purchased expressly to support personnel 

engaged in or supporting the operation.

• “Other Military Personnel” includes other allowances or special pay for 

active- and reserve-component personnel that are not included in 

another cost category. In fiscal year 2004, this category included the 

costs to pay active-component soldiers affected by military stop-loss 

programs and additional soldiers maintained on active duty above the 

normal end-strength levels.

Table 3 shows the Army military personnel obligations for GWOT 

operations reported in fiscal years 2003 and 2004.

Table 3: Army Military Personnel Obligations for GWOT Operations in Fiscal Years 

2003 and 2004

Source: September 2003 and 2004 GWOT cost reports.

Dollars in millions

Dollars

Military personnel cost category

Fiscal year

2003

Fiscal year

2004

Reserve components called to active duty $5,988 $7,123

Imminent danger or hostile fire pay 248 499

Family separation allowance 146 105

Foreign duty pay 87 128

Subsistence 996 2,308

Other military personnel 1,265 1,809

Total $8,730 $11,972
Appendix II

Ineffective Reporting of Fiscal Year 2004 

Army Military Personnel Global War on 

Terrorism Obligations

Page 54 GAO-05-882 Global War on Terrorism

Army Lacked a 

Reasonable and 

Reliable Process to 

Report GWOT Military 

Personnel Obligations

The Army did not have a reasonable and reliable process to identify and 

report almost $12 billion of GWOT military personnel obligations in fiscal 

year 2004. Instead of using actual information, the Army based the GWOT 

military personnel obligations used in the GWOT cost report primarily on 

estimates in its fiscal year 2004 obligation plan and, in the end, forced, or 

“plugged,” obligations to match available supplemental budget authority. 

Army officials were unable to readily explain the process for identifying 

and reporting GWOT military personnel obligations owing to the lack of 

both formalized reporting procedures and management review of reported 

obligations, problems which were exacerbated by staff losses in the 

September 11 terrorist attack on the Pentagon, personnel turnover, and 

hiring difficulties.

Our analysis showed that obligations associated with Army military 

personnel in the monthly GWOT cost report were not consistent with 

related DOD payroll information, and the use of planned obligations 

instead of related DOD payroll information might have resulted in reported 

GWOT military personnel obligations being materially overstated. For 

fiscal year 2004, our analysis of the more than $7.1 billion in incremental 

military personnel costs listed in the cost category “Reserve Components 

Called to Active Duty” identified as much as $2.1 billion of reported 

obligations in excess of related DOD payroll information. Army Budget 

Office officials were unable to explain the entire difference.

Army GWOT Reporting 

Process Used Estimated 

Obligations 

In 2003, the Army developed a monthly obligation plan for estimated 

GWOT military personnel obligations in fiscal year 2004 on the basis of 

anticipated funding of $12.5 billion from the fiscal year 2004 DOD 

supplemental appropriation request. In October 2003, the Army began 

incurring military personnel obligations for fiscal year 2004 GWOT 

operations before passage of a supplemental appropriation. However, 

instead of using actual information, the Army based the military personnel 

obligations used in the monthly GWOT cost report primarily on estimates 

in its fiscal year 2004 obligation plan, and “plugged” to available 

supplemental budget authority. Effectively, the Army was reporting back 

to Congress exactly what it had appropriated.

Through much of fiscal year 2004, the Army Budget Office based military 

personnel obligations for GWOT operations primarily on its monthly 

obligation plan. As illustrated in table 4, this resulted in the cumulative 
Appendix II

Ineffective Reporting of Fiscal Year 2004 

Army Military Personnel Global War on 

Terrorism Obligations

Page 55 GAO-05-882 Global War on Terrorism

GWOT military personnel obligations tracking closely to and, in two cases 

equaling, the estimated amounts from the fiscal year 2004 obligation plan.

Table 4: Army Obligation Plan and Reported Military Personnel Obligations for 

GWOT Operations in Fiscal Year 2004

Source: Army Budget Office and fiscal year 2004 GWOT cost reports.

One example of military personnel obligations reported directly from the 

Army obligation plan is evident with the cost category for “Subsistence” 

described earlier. The Army obligation plan for “Subsistence” showed an 

estimated obligation amount of about $130 million monthly in most of fiscal 

year 2004 and, except for a large increase4

 in September 2004, was largely 

identical to the monthly GWOT cost report amounts as shown in table 5. 

Subsistence costs at the end of fiscal year 2004 were a major factor in the 

need to “plug” reported military personnel obligations in the GWOT report’s 

cost category “Reserve Components Called to Active Duty” as discussed 

later.

Dollars in millions

Cumulative dollars

Month Obligation plan GWOT cost report

October 2003 $956 $811

November 2003 2,018 2,018

December 2003 3,122 2,819

January 2004 4,366 3,818

February 2004 5,320 4,886

March 2004 6,528 6,528

April 2004 7,650 7,686

May 2004 8,669 8,535

June 2004 9,657 9,421

July 2004 10,621 10,324

August 2004 11,577 11,219

September 2004 $12,530 $11,972

4

 Army budget officials attributed this large, year-end increase to additional water contracts, 

transfers due to incorrect funding of the logistics civilian augmentation program, and 

anticipated carryover of fiscal year 2004 subsistence costs.
Appendix II

Ineffective Reporting of Fiscal Year 2004 

Army Military Personnel Global War on 

Terrorism Obligations

Page 56 GAO-05-882 Global War on Terrorism

Table 5: Army Obligation Plan and Reported Subsistence Obligations for GWOT 

Operations in Fiscal Year 2004

Source: Army Budget Office and fiscal year 2004 GWOT cost reports.

Budget authority for Army military personnel supporting GWOT operations 

provided in the fiscal year 2004 emergency supplemental appropriation was 

reduced late in the fiscal year. As detailed in table 6, reprogrammings and 

additional reductions lowered the supplemental budget authority available 

from the supplemental appropriation to about $12 billion for Army GWOT 

military personnel in fiscal year 2004.

Dollars in millions

Dollars per month

Month Obligation plan GWOT cost report

October 2003 $100 $130

November 2003 160 130

December 2003 130 130

January 2004 130 130

February 2004 130 148

March 2004 130 130

April 2004 130 130

May 2004 130 130

June 2004 130 130

July 2004 130 130

August 2004 130 130

September 2004 130 860

Total $1,560 $2,308
Appendix II

Ineffective Reporting of Fiscal Year 2004 

Army Military Personnel Global War on 

Terrorism Obligations

Page 57 GAO-05-882 Global War on Terrorism

Table 6: Supplemental Budget Authority for Army GWOT Military Personnel in Fiscal 

Year 2004

Source: Pub. L. No. 108-106, DOD, and GAO’s analysis of Army Budget Office information.

The Army Budget Office reported negative obligations of more than $439 

million in the cost category “Reserve Components Called to Active Duty” 

for September 2004 so that GWOT military personnel obligations would 

equal available supplemental budget authority of about $12 billion. This 

was necessary (1) because the fiscal year 2004 Army obligation plan was 

originally developed for about $12.5 billion in GWOT military personnel 

spending and the available supplemental budget authority was reduced late 

in the fiscal year and (2) because of the unexpected need to obligate a large 

amount for the “Subsistence” cost category in September 2004. As shown 

in figure 4, the reporting of a negative amount effectively resulted in the 

Army’s use of “plugging,” or reporting back to Congress exactly the amount 

of available budget authority, as adjusted, remaining from the fiscal year 

2004 emergency supplemental appropriation.

Dollars in millions

Budget authority Dollars

Fiscal year 2004 emergency supplemental appropriation $12,859

August 2004 omnibus reprogramming (801)

September 2004 additional reductions (86)

Available supplemental budget authority $11,972
Appendix II

Ineffective Reporting of Fiscal Year 2004 

Army Military Personnel Global War on 

Terrorism Obligations

Page 58 GAO-05-882 Global War on Terrorism

Figure 4: Army Military Personnel Obligations for GWOT Operations in Fiscal Year 

2004

Army’s Reporting Process 

Hampered by Lack of 

Formal Procedures and 

Management Review

The process used in fiscal year 2004 to determine the Army’s military 

personnel obligations for the monthly GWOT cost report was not clearly 

understood by Army Budget Office management, and we found that Army 

management was not familiar with the process used to force, or “plug,” the 

reported fiscal year 2004 GWOT military personnel obligations to match 

available supplemental budget authority.

According to Army Budget Office officials, they did not have formal 

procedures for developing and reporting GWOT military personnel 

obligations. These officials explained that, in the absence of written 

Military personnel cost category Dollars

Reserve components called to active duty 

 October 2003 $637

 November 2003 622

 December 2003 730

 January 2004 726

 February 2004 745

 March 2004 868

 April 2004 882

 May 2004 590

 June 2004 785

 July 2004 581

 August 2004 396

 September 2004 (439)

Reserve components called to active duty 7,123

Imminent danger or hostile fire pay 499

Family separation allowance 105

Foreign duty pay 128

Subsistence 2,308

Other military personnel 1,809

Available supplemental budget authority $11,972

Source: Fiscal year 2004 GWOT cost reports.

Plug

Dollars in millions
Appendix II

Ineffective Reporting of Fiscal Year 2004 

Army Military Personnel Global War on 

Terrorism Obligations

Page 59 GAO-05-882 Global War on Terrorism

procedures, the process used to develop the monthly obligation 

information reported to the Defense Finance and Accounting Service 

(DFAS) was entirely dependent on the staff person assigned to this task. A 

DOD Financial Management Regulation includes general guidance on 

developing and reporting incremental costs related to contingency 

operations. For example, the guidance requires that controls, accounting 

systems, and procedures provide, in financial records, a proper 

identification and recording of the costs incurred for DOD contingency 

operations. However, this general guidance is not a substitute for detailed, 

written implementing procedures at the service level.

Furthermore, the Army Budget Office did not establish a formal 

management review process for the GWOT military personnel obligations 

reported monthly to DFAS. The Army could not provide documentation to 

show that management-level officials reviewed its GWOT military 

personnel obligations in fiscal year 2004 that were sent to DFAS for 

inclusion in the monthly GWOT report. Army Budget Office officials also 

told us that these problems were exacerbated by staff lost in the September 

11 terrorist attack on the Pentagon, personnel turnover, and hiring 

difficulties. Specifically, the Army Budget Office-Military Personnel 

Division is authorized 10 civilian positions and had not been fully staffed in 

over 2 years. The position of Chief for the Military Personnel Division was 

held by three different individuals in the last 2 years. We were told that 

only one staff member had been with the division longer than 2 years. As of 

May 2005, Army Budget Office officials told us that 2 of the 10 positions 

were staffed by interns and 3 positions were not filled.

High staff turnover and new staff training make it increasingly important 

that detailed, documented procedures be developed for identifying and 

reporting incremental GWOT military personnel obligations. Formal 

procedures would help ensure that the monthly amounts are reported 

consistently and accurately, using the best available information. Lacking 

such procedures, Army Budget Office management provided two different 

explanations for the process for identifying and reporting GWOT military 

personnel obligations. When asked, Army management initially explained 

that reported GWOT military personnel obligations for fiscal year 2004 

were based largely on payroll expenditures. However, our analysis of 

reported obligations revealed a significant, unexpected monthly fluctuation 

in two GWOT military personnel cost categories, raising doubts about the 

reasonableness of management’s explanation and the reliability of the 

Army’s estimation process. For example, as previously noted, a large 

negative obligation amount was reported in the “Reserve Components 
Appendix II

Ineffective Reporting of Fiscal Year 2004 

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Page 60 GAO-05-882 Global War on Terrorism

Called to Active Duty” cost category in September 2004 even though the 

associated Army National Guard and Reserve soldier strength remained 

relatively constant during the period.

In December 2004, Army Budget Office management provided a different 

explanation and stated that GWOT military personnel obligations were 

estimates based principally on a calculation that considered the number of 

soldiers (e.g., mobilized, deployed) and a monthly composite pay rate or 

special pay/allowance amount. The Army Budget Office provided a 

schedule in January 2005 supporting this description of the estimating 

process for its GWOT military personnel obligations in fiscal year 2004. 

Using this description, our analysis of these obligations, however, indicated 

that the Army’s estimation process was not reliable. For example, our 

analysis showed that the estimated obligations reported were not 

reasonable owing to both inconsistencies with the number of soldiers and 

the high composite pay rate (i.e., officer-grade equivalent).

After further discussion with us about the reasonableness of their earlier 

explanations, an Army Budget Office official agreed with our determination 

in February 2005 that the reported amounts were based on planned 

obligations and later agreed that the year-end amount was matched, or 

“plugged,” to available supplemental budget authority. Army and DOD 

officials stated that efforts were being undertaken to improve GWOT cost 

reporting by using, where applicable, DOD payroll information instead of 

estimated amounts.

Reported GWOT 

Obligations for Mobilized 

Army Soldiers Were 

Significantly Higher Than 

Related DOD Payroll 

Information 

GWOT military personnel obligations reported in fiscal year 2004 were not 

consistent with the DOD payroll information we reviewed. Army 

management expressed a belief that pay and allowance information could 

not be obtained from the DOD payroll system and used for the monthly 

GWOT cost report. However, we obtained fiscal year 2004 payroll 

information from DFAS for reserve-component soldiers mobilized for 

GWOT operations and demonstrated that actual DOD payroll information, 

where applicable, could be used to identify incremental military personnel 

obligations for mobilized Army National Guard and Reserve soldiers. 

Although we previously reported that several system issues were 

significant factors impeding accurate and timely payroll payments to 
Appendix II

Ineffective Reporting of Fiscal Year 2004 

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Page 61 GAO-05-882 Global War on Terrorism

mobilized reserve-component soldiers,5 we believe that payroll information 

represents the best information available and should be used, where 

applicable, to prepare the GWOT cost report.

For fiscal year 2004, we evaluated the Army obligation plan estimates and 

military personnel cost category titled “Reserve Components Called to 

Active Duty.” Army officials explained that this estimate included a 

soldier’s basic pay, Federal Insurance Contribution Act contributions (i.e., 

Social Security and Medicare), allowances for housing and subsistence, 

and accrual amounts for retirement pay and retirement health care. From 

the DOD payroll system, we identified the payroll information for Army 

soldiers mobilized to support GWOT operations in fiscal year 2004 and 

analyzed payroll information for the related pay components used to 

estimate Army military personnel GWOT obligations. As shown in table 7, 

military personnel costs identified from the DOD payroll system were as 

much as $2.1 billion less than the estimated Army obligations reported in 

the monthly GWOT cost report.

Table 7: Estimated Army Obligations for “Reserve Components Called to Active 

Duty” and Related DOD Payroll Costs in Fiscal Year 2004

Source: September 2004 GWOT cost report and GAO’s analysis of DOD payroll data.

5

 GAO, Military Pay: Army Reserve Soldiers Mobilized to Active Duty Experienced 

Significant Pay Problems, GAO-04-911 (Washington, D.C.: Aug. 20, 2004), and Military Pay: 

Army National Guard Personnel Mobilized to Active Duty Experienced Significant Pay 

Problems, GAO-04-89 (Washington, D.C.: Nov. 13, 2003). 

Dollars in millions

Reserve Components Called to Active Duty cost category Dollars

Estimated obligations in GWOT cost report $7,123

Related DOD payroll costs

 Basic pay 3,472

 FICA 266

 Allowance for housing 1,204

 Allowance for subsistence (officer) 30

DOD payroll total 4,972

Difference $2,151
Appendix II

Ineffective Reporting of Fiscal Year 2004 

Army Military Personnel Global War on 

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Page 62 GAO-05-882 Global War on Terrorism

Initially, the Army could not support this difference or its reported GWOT 

military personnel obligations. Over the next several months, the Army and 

the Office of the Under Secretary of Defense (Comptroller) provided us 

with several possible, though sometimes inaccurate, explanations for this 

difference. Some explanations appeared valid while others did not and, 

taken together, they failed to fully account for the difference. For example, 

when asked to explain the difference in military personnel obligations 

between the GWOT cost report and related DOD payroll information, Army 

Budget Office officials stated in March 2005 that a portion of the difference 

was attributable to retirement pay and retirement health care accruals. We 

found that the retirement health care accrual did not result in incremental 

costs and, therefore, was not a valid explanation for the difference. In July 

2005, DOD agreed that mobilized reservists do not receive an increase in 

retirement health care benefits over benefits for nonmobilized reservists 

and, therefore, DOD does not incur incremental costs related to this 

benefit. However, mobilized reservists receive an increase in retirement 

pay benefits over benefits for nonmobilized reservists and, therefore, DOD 

incurs incremental costs related to this benefit. In July 2005, Army and 

Office of the Under Secretary of Defense (Comptroller) officials reported 

to us that $824 million of the difference was attributable to the inclusion of 

the retirement pay accruals and provided other potential reconciling cost 

information totaling $732 million as additional explanations for the 

difference. This information was provided too late in our audit to assess its 

accuracy and completeness.
Page 63 GAO-05-882 Global War on Terrorism

Appendix III

Comments from the Department of Defense ApendxiI
Appendix III

Comments from the Department of Defense

Page 64 GAO-05-882 Global War on Terrorism
Appendix III

Comments from the Department of Defense

Page 65 GAO-05-882 Global War on Terrorism
Appendix III

Comments from the Department of Defense

Page 66 GAO-05-882 Global War on Terrorism
Appendix III

Comments from the Department of Defense

Page 67 GAO-05-882 Global War on Terrorism
Appendix III

Comments from the Department of Defense

Page 68 GAO-05-882 Global War on Terrorism
Appendix III

Comments from the Department of Defense

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Appendix IV

GAO Contacts and Staff Acknowledgments ApendxiIV

GAO Contacts Sharon Pickup (202) 512-9619 

Greg Kutz (202) 512-9095

Acknowledgments In addition to the contacts named above, Steve Sternlieb, Mark Connelly, 

Leo Sullivan, Vince Balloon, Kurt Burgeson, Laura Czohara, Dave Mayfield, 

Francine Delvecchio, Abe Dymond, K. Eric Essig, Jason Kelly, John 

Ledford, and Wayne Turowski made key contributions to this report.

(350589/192148)
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