United States General Accounting Office

GAO Report to Congressional Requesters

August 1995 PEACEKEEPING

Assessment of U.S.

Participation in the

Multinational Force

and Observers

GAO/NSIAD-95-113

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-260679 

August 15, 1995

The Honorable Benjamin A. Gilman

Chairman

The Honorable Lee H. Hamilton

Ranking Minority Member

Committee on International Relations

House of Representatives

This report responds to the Committee’s request that we review U.S. participation in the

Multinational Force and Observers (MFO). It contains recommendations to the Secretary of

State.

As agreed with your offices, unless you publicly announce its contents earlier, we plan no

further distribution of this report until 30 days from its issue date. At that time, we will send

copies to the Secretaries of State and Defense and the Director General of the MFO. Copies will

also be made available to others upon request.

I can be reached at (202) 512-4128 if you or your staff have any questions concerning this report.

Major contributors to this report are listed in appendix VI.

Benjamin Nelson

Associate Director

International Affairs Issues
Executive Summary

Purpose The recent signing of peace accords between Israel and the Palestinian

Liberation Organization, Israel and Jordan, and the possibility of similar

agreements between Israel and Syria and Lebanon have heightened

interest in the Multinational Force and Observers (MFO), which has

monitored the current Treaty of Peace between Egypt and Israel since

1982.

In light of these regional developments and the significant U.S.

contribution to the MFO since its inception, the Chairman and Ranking

Minority Member, House Committee on International Relations, asked GAO

to examine a number of issues regarding the MFO operations and

effectiveness. As agreed, this report provides information on (1) U.S.

contributions to and the total cost of the MFO, including measures taken to

reduce costs; (2) the level of U.S. participation and its operational impacts;

(3) State Department oversight of U.S. participation; and (4) State

Department and other relevant parties’ views of MFO performance and

lessons learned.

Background On March 26, 1979, following years of violent confrontation, Israel and

Egypt signed the Treaty of Peace. The Parties agreed to terminate the

existing state of war, including withdrawal of all Israeli forces from the

Sinai, establish normal and friendly relations, and to demarcate the Sinai

into militarily limited zones. While annex I, article VI of the treaty

specifically proposes that U.N. forces and observers supervise these

security arrangements, the United States committed, during the Camp

David Accords, to ensure the establishment of an acceptable alternative

multinational force if the U.N. process failed. On May 18, 1981, the United

Nations Security Council indicated that it was unable to reach the

necessary agreement on the proposal to establish U.N. forces and

observers. Consequently, on August 3, 1981, a protocol to the treaty was

signed by the governments of Egypt and Israel establishing the MFO. The

Protocol serves as the mandate and charter of the MFO.

The United States, though not a party to either the treaty or the Protocol,

agreed during follow-on negotiations with Egypt and Israel to (1) provide

to the MFO military forces and a group of civilian observers, (2) contribute

60 percent of the start-up costs of the MFO in 1981 through 1982, and

(3) pay one-third of the annual operating costs thereafter. This

participation agreement is viewed by the U.S. State Department as a major

instrument of U.S. foreign policy. State oversees U.S. interests in MFO

Page 2 GAO/NSIAD-95-113 Peacekeeping
Executive Summary

operations, with responsibility for policy, budget, and reporting annually

to Congress on the cost of U.S. participation.

The MFO operational responsibilities include manning observation posts in

the Sinai, conducting both ground and air surveillance, and conducting

naval patrols in the Strait of Tiran to monitor implementation of the

security arrangements established in the treaty. Currently, 11 countries

deploy troops to the MFO, each with its own participation agreement. As of

November 1994, the MFO military force consisted of 1,987 multinational

troops, of which 985 were U.S. Army soldiers.

Results in Brief The United States provides a significant portion of the MFO resources,

including one-third of its operating expenses, and the largest military

contingent. While annual U.S. assessments for MFO operating costs have

steadily declined since 1989, the cost to the Department of Defense (DOD)

to provide troops and specialized training has increased primarily due to

U.S. military salary increases. According to DOD officials, the continuous

deployment of a regular Army contingent to the MFO alone is not

significant but, when combined with contingencies such as the recent one

in Somalia, impacts Army operations. Army and MFO officials told GAO that

opportunities may exist to reduce the impact of the MFO on the U.S. Army

by reducing the number of logistical troops and using reserve forces.

U.S. and international officials view MFO as an operationally effective

peacekeeping organization. According to State, DOD, MFO, Egyptian, and

Israeli officials, the MFO has helped sustain peace between Egypt and Israel

since 1982. Factors cited as contributing to the MFO operational success

include (1) the presence of a definitive peace agreement between former

warring parties, (2) significant U.S. support, (3) a clear and realistic

mandate, (4) a benign operating environment, (5) an active liaison system

between parties, and (6) MFO management decisions that have improved

operational efficiency and reduced cost. DOD officials view the MFO as a

limited operation that is not applicable to more hostile peacekeeping

environments.

Despite the MFO operational success and its ability to reduce certain costs,

greater State oversight over U.S. participation may be needed because of

the MFO operating environment and the absence of assurance regarding the

adequacy of internal controls. Unlike other international organizations, the

MFO does not have a formal board of directors or an independent audit

committee to oversee its operations. Moreover, we observed that some

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Executive Summary

MFO policies have been changed to accommodate the personal needs of

MFO officials and that financial transactions involving the MFO and an MFO

retail store it established may not have received the necessary review.

State was not aware of the specifics surrounding these matters, both of

which had an impact on the cost of MFO operations and amount of the U.S.

contribution.

State can also improve the quality of its reporting to Congress. Some

annual reports to Congress have not contained full or accurate

information on the cost of U.S. participation.

Principal Findings

Total Cost of MFO and the

U.S. Contribution

The operating budget of the MFO for fiscal year 1993 totaled $56.1 million.

This does not include in-kind contributions and nonreimbursable costs

borne by participating and donor nations, which are difficult to quantify.

The total cost of U.S. participation in the MFO for fiscal year 1993 was

$64.4 million, which included (1) the annual assessment of $17.8 million

(one-third of MFO operating costs), (2) $45.8 million for U.S. troops

provided to the MFO, and (3) other DOD costs of $0.8 million.

The United States provides about 50 percent of the MFO military

contingent, including a logistics support battalion composed of logistics,

medical, and aviation support, and an infantry battalion. The MFO also has

access to the U.S. Army supply system and excess defense articles such as

medical equipment and has made some limited use of these resources.

Impact of MFO

Commitment on Other

Army Operations

While one U.S. infantry battalion is on duty with the MFO, another infantry

battalion is removed from routine training and readiness status in order to

train for, process, and deploy to the Sinai. According to DOD, this

commitment of two battalions, when combined with other Army global

commitments and recent Army downsizing, contributes to a cumulative

negative impact on Army operations. To help alleviate this impact, the

Army deployed a mixed active-duty, National Guard, and Reserve infantry

battalion to the Sinai in January 1995 to replace the regular Army rotation.

This deployment will be used as a test case to determine the feasibility of

using National Guard and Reserve soldiers in future MFO rotations. In

addition, MFO recent transfer of U.S. logistical functions to a private

Page 4 GAO/NSIAD-95-113 Peacekeeping
Executive Summary

contractor may provide additional opportunities to reduce the number of

U.S. Army troops.

The MFO Is Viewed as

Effective

The MFO is widely viewed as an effective organization in helping to

maintain peace between Egypt and Israel. Since 1982, not a single shot has

been fired in hostility in the Sinai. While not a deterrent force, Egyptian

and Israeli officials view the presence of the international organization as

a confidence builder. The MFO has helped improve communication

between the nations and monitors compliance with treaty provisions.

State officials view the MFO as an effective instrument of U.S. foreign

policy.

The MFO Model May Not

Apply to Other

Peacekeeping Scenarios

While considered operationally effective, the MFO model may not apply to

more hostile environments. Since inception, the MFO has operated in a

peaceful environment free from military hostility or challenge. Both Egypt

and Israel are committed to peace, and the land area in which MFO

operates is large and sparsely populated. According to DOD officials,

military or terrorist threats to MFO ground forces in the Sinai are minimal.

These officials believe that the MFO model may not be applicable to an

environment that is urban or densely populated with potentially hostile

parties or terrorism.

Lessons Learned From

MFO Operations

There are several lessons that can be learned from the MFO structure and

operation. In terms of commitment and oversight, U.S. participation in the

MFO is open-ended, without a formal requirement for periodic

reassessments, and there is no formal executive board to oversee its

operations. Positive lessons learned from the MFO are that it: (1) began

with a detailed Protocol that was supported by both parties, (2) makes the

Parties to the peace treaty contribute to the operation, (3) incorporated

standardized and interoperable field equipment, and (4) has an active

liaison system with the Parties.

State Oversight and

Reporting Should Be

Improved

The MFO operates in a unique environment. Once the budget is endorsed by

the signatories, the Director General of the MFO has great latitude over the

expenditure of funds as well as the processes used to account for them. He

also has broad discretion in selecting the external financial auditor and

designating the scope of activity to be examined. Further, he can change

MFO operating policies and procedures without review, consent, or

Page 5 GAO/NSIAD-95-113 Peacekeeping
Executive Summary

approval from other parties. This level of authority is unique among

international organizations. Other international organizations GAO

examined have an independent governing body above the chief executive

to oversee and approve operations and finances and responsibility for the

annual financial audit is typically vested with an independent entity.

State has taken a hands-off approach to overseeing U.S. participation in

the MFO, with reliance on informal discussions with MFO management, the

financial report of MFO external auditor, and annual trilateral meeting.

State officials were not knowledgeable of some important changes to MFO

policies and procedures that affected the cost of operations, including

some related to executive pay and benefits.

For example, GAO noted that MFO policies and procedures for designating

dependents of MFO officials were changed in 1992 and 1994 to broaden the

MFOs definition of a dependent to include persons other than spouses,

unmarried children, or dependent parents. While other members of the

MFO may benefit from these changes, the MFO General Counsel told GAO and

congressional staff in February 1995 that the changes were made to reflect

the personal circumstances of the Director General, who was already

receiving MFO-provided dependent benefits (housing, education assistance,

health care, etc.) for individuals who were not his spouse or unmarried

dependent child. State Department officials said that they were aware that

of the Director General’s personal circumstances and that some

accommodation would be necessary in order for him to accept the initial

appointment in 1988; however, they were not aware of the specific

changes made to MFO policies to satisfy this accommodation or the

associated costs.

In addition, State was not aware of certain transactions between the MFO

and the Force Exchange (FX),1 which was established with a loan from the

MFO operating fund, one-third of which is derived from U.S. contributions.

The FX had sales of $5 million and a profit of about $553,000 in 1993. GAO

noted that in 1985 the MFO had written off $530,000 of the loan to the FX

while the exchange did not write down the value of its obligation to the

MFO. While this does not violate generally acceptable accounting

principles, GAO’s inquiry prompted a change in MFO financial statements

and a reduction of $177,000 in the U.S. assessment for fiscal year 1994. If

State had been receiving and examining the audited financial statement of

both the FX and the MFO, they could have noted the improved financial

condition of the FX account and could have taken appropriate action so

1

The FX is a revenue generating retail store.

Page 6 GAO/NSIAD-95-113 Peacekeeping
Executive Summary

that the United States could have realized the reduction earlier. State

officials said that they did not believe it was necessary to request the audit

report of the FX because it is a separate, self-sustaining entity, funded from

sales to MFO soldiers.

Additionally, State does not know if the MFO has adequate internal controls

to deter the misuse of U.S. contributions. State officials told GAO that

management of the U.S. contribution is based on a relationship of mutual

trust with MFO management and the reports of MFO external auditor.

However, generally accepted auditing standards for financial statement

audits do not require an opinion on MFO internal controls and the external

auditor’s report has not included one. Consequently, GAO believes that

State should request that the MFO have its external auditor conduct an

evaluation of the MFO management and internal accounting controls

beyond what is generally required to complete the annual financial

statement audit, and provide a copy of the resulting report to State.

Finally, State’s annual report to Congress has been incomplete or

inaccurate on several occasions. For example, the fiscal year 1992 report

excluded about $12 million in DOD expenses and to date has not included

the cost of the U.S. annual assessment. This is due in part to inaccurate

data submitted to State by DOD on troop costs.

Recommendations GAO recommends that the Secretary of State ensure adequate oversight of

the MFO by (1) examining the annual MFO-published financial statements

for items that may impact U.S. contributions, (2) requesting and reviewing

all reports issued by MFO external auditors, and (3) requesting the MFO have

its external auditor include an evaluation of the MFO management and

internal accounting controls beyond what is required to complete the

annual financial statement audit and provide a copy of the resulting report

to State. GAO also recommends that the Secretary of State include the U.S.

annual assessment cost contribution of one-third of the MFO operating

costs in its annual report to Congress on MFO.

Agency Comments In commenting on a draft of this report, State disagreed with GAO’s

conclusion that greater State oversight of U.S. contributions to the MFO is

needed. State asserts that it has been U.S. policy to grant the MFO

considerable latitude in the way it manages its operations. Consequently,

State’s oversight of U.S. contributions is accomplished by frequent

informal discussions and infrequent formal meetings, such as the annual

Page 7 GAO/NSIAD-95-113 Peacekeeping
Executive Summary

Trilateral meeting. In addition, State asserts its review of the MFO external

audit, published financial report, and annual budget submission provides

an adequate oversight and reassessment mechanism. Nonetheless, State

agreed to implement most of GAO’s recommendations to improve

oversight.

GAO continues to believe that the review of the external auditor’s report,

published financial reports, and annual budget submissions does not

provide adequate oversight of U.S. contributions to the MFO. Under the MFO

management and operating structure, once the budget is endorsed by the

signatories, the Director General has substantial latitude over the

expenditure of funds as well as the processes used to account for them. As

pointed out in this report, this arrangement is unique to the MFO. In all

other international organizations GAO observed, there is an executive

oversight board that is independent of those charged with day-to-day

operations. The actions that State has already taken in response to GAO’s

review should improve its oversight capability; however, additional steps

need to be taken. State objected to an annual audit of MFO internal

controls, and GAO changed the report to clarify the recommendation for

periodic audits.

The MFO provided general comments, citing its operational and financial

successes since inception and its continued efforts to reduce costs. The

MFO also noted that some incorrect material is included in the report, but

did not provide any details. GAO previously met with MFO officials on a draft

of this report’s contents and made changes to the draft where appropriate.

DOD agreed with all of the report findings relevant to DOD and has taken

actions that should satisfy the recommendation GAO made to them in a

draft of this report.

Page 8 GAO/NSIAD-95-113 Peacekeeping
Page 9 GAO/NSIAD-95-113 Peacekeeping
Contents

Executive Summary 2

Chapter 1 

Introduction

12

The MFO Organization and Mandate 12

Operational Mission of the MFO 13

Management and Composition of the MFO 15

MFO Logistics Operations 18

Management of U.S. Participation in the MFO 19

Objectives, Scope, and Methodology 19

Chapter 2 

U.S. Military and

Civilian Participation

in the MFO

21

U.S. Military Participation 21

MFO Has Direct Access to the U.S. Military Supply System 22

When Combined With Other Demands, the MFO Commitment

Contributes to a Strain on Army Resources

23

Predeployment and In-Sinai Training 24

Post-Deployment Training and U.S. Army Impacts 24

The U.S. Army Has Deployed National Guard and Reserve

Volunteers to Alleviate Impacts

25

Potential Opportunities to Lessen Impact on U.S. Army 26

U.S. Civilian Participation in the MFO Civilian Observer Unit 26

Chapter 3 

Cost of the MFO and

the U.S. Contribution

28

Cost of the MFO 28

Cost of MFO to the United States 29

Chapter 4 

Views on MFO

Operational

Performance and

Lessons Learned

33

The MFO Is Viewed as Effectively Performing Its Mission 33

While Effective, the MFO Model May Not Apply to More

Challenging Peacekeeping Scenarios

34

Lessons Learned From MFO Operations 35

Page 10 GAO/NSIAD-95-113 Peacekeeping
Contents

Chapter 5 

State Oversight and

Reporting Could Be

Improved

38

Inadequate State Oversight of U.S. Contributions 38

State and DOD Reporting of the Cost of the MFO to Congress Can

Be Improved

43

Recommendations 43

Agency Comments 44

Appendixes Appendix I: The Exchange of Letters Between the United States,

Israel, and Egypt

46

Appendix II: Multinational Force and Observers Contingent

Strength

49

Appendix III: Comments From the Department of State 50

Appendix IV: Comments From the Multinational Force and

Observers

58

Appendix V: Comments From the Department of Defense 63

Appendix VI: Major Contributors to This Report 66

Tables Table 1.1: Military and Civilian Composition of MFO Units,

November 1994

18

Table 3.1: Operating Expense Budget of the MFO by Funding

Source

29

Table 3.2: Costs of U.S Participation in the MFO 30

Figures Figure 1.1: Map of the Sinai 14

Figure 1.2: Organizational Structure of the MFO 16

Figure 2.1: Percentage of Logistical Troops by Country 22

Figure 3.1: MFO Budget, Fiscal Years 1982-1993 31

Abbreviations

DOD Department of Defense

FX force exchange

GAO U.S. General Accounting Office

MFO Multinational Force and Observers

Page 11 GAO/NSIAD-95-113 Peacekeeping
Chapter 1 

Introduction

In September 1978, the governments of Egypt and Israel signed the Camp

David Accords, which, on March 26, 1979, culminated in the Treaty of

Peace, signed by the leaders of Egypt and Israel and witnessed by the

President of the United States. While annex I, article VI of the treaty

specifically proposes that U.N. forces and observers supervise these

security arrangements, the United States committed in a formal exchange

of letters with the presidents of Egypt and Israel to ensure the

establishment of an acceptable alternative multinational force if the U.N.

process failed. Efforts were made during the following 2 years to secure a

U.N. force and observers as contemplated by the Treaty of Peace.

However, on May 18, 1981, the President of the United Nations Security

Council announced the proposal to establish U.N. forces and observers in

the Sinai had been rejected. Consequently, on August 3, 1981, a Protocol to

the treaty was signed by the governments of Egypt and Israel and

witnessed by the United States, establishing the Multinational Force and

Observers (MFO).

The MFO is an independent, international peacekeeping organization,

established outside the U.N. framework, to monitor Israeli and Egyptian

compliance with Treaty of Peace provisions. Since 1982, the MFO has acted

as an observer, reporter, and monitor of security provisions, as well as an

active liaison between Israel and Egypt. The MFO was jointly conceived by

Israel and Egypt, with a firm U.S. diplomatic, military, and financial

commitment.

The MFO

Organization and

Mandate

The Protocol, when combined with annex I of the Treaty of Peace, serves

as the mandate and charter of the MFO. It sets forth the organization,

functions, privileges, and immunities of the MFO and its members. The

Protocol specifically substituted the MFO for the U.N. force and observers

stipulated in the treaty, making the MFO responsible for monitoring

compliance with, and reporting of any violations of, the military

limitations specified in the treaty. Annex I to the Treaty of Peace

establishes three security zones (A, B, and C) within the Sinai and one in

Israel (zone D) along the international border and specifies military

personnel and equipment limitations of each. Figure 1.1 illustrates the

zones.

Planning and preparation for MFO deployment occurred from August 1981

until its deployment in March 1982 with significant U.S. involvement.

During this period, (1) the MFO was headquartered in Northern Virginia,

(2) the U.S. Army Corps of Engineers accomplished all new construction

Page 12 GAO/NSIAD-95-113 Peacekeeping
Chapter 1 

Introduction

in the Sinai at the site of a vacated Israeli air base in the Northern Sinai

and at a totally undeveloped area in the Southern Sinai, and (3) the United

States assisted in obtaining MFO participants from other governments.

Although deployed in March 1982, the MFO formally assumed its functions

on April 25, 1982, in conjunction with the day of final Israeli withdrawal

from the Sinai. Since inception of the MFO, the U.S. government has

provided diplomatic, military and financial support. The scope of these

contributions are discussed in chapters 2 and 3.

Operational Mission

of the MFO

Under the Protocol, the mission of the MFO is to undertake the functions

and responsibilities stipulated in the treaty for the U.N. forces and

observers. Specifically, these functions are:

• Operation of checkpoints, reconnaissance patrols, and observation posts

along the international boundary and line B, and within zone C.

• Periodic verification of the implementation of the provisions of the Treaty

of Peace, to be carried out not less than twice a month unless otherwise

agreed by the Parties.

• Additional verification within 48 hours after receipt of a request from

either party.

• Ensuring the freedom of navigation through the Strait of Tiran.

Page 13 GAO/NSIAD-95-113 Peacekeeping
Chapter 1 

Introduction

Figure 1.1: Map of the Sinai

Zone "C" Zone "D" Zone "B" Zone "A"

sector 1

W. Bank

Beersheba

El Gorah

Armistice


Line

Gaza Strip

El Arish

sector 2

Mediterranean Sea

ISRAEL

sector 3

Saint Catherine's


Monastery

Sinai


Peninsula

sector 4 Elat

Jordan

sector 5

sector 6 SAUDI


ARABIA

Gulf


of


Aqaba

Sharm


El Sheikh

Strait


of Tiran

Red Sea Ras Mohammad

"C"

Gulf of


Suez

EGYPT

Suez

Ismailia

Great

Bitter

Lake

Al Qantarah

Suez Canal

Port Said

Wa di at Arish

Line "A"

Line "B"

International Boundary

Line "D"

MFO bases

"C" Part of zone "C"

— eastern line of zone "A"

— western line of zone "C"

— eastern line of zone "D"

"C"

0

0

50 Kilometers

50 Miles

Source: The MFO Headquarters, Rome.

Page 14 GAO/NSIAD-95-113 Peacekeeping
Chapter 1 

Introduction

In addition to military forces at checkpoints in the Sinai, the MFO has a

Coastal Patrol Unit and civilian observers who conduct both ground and

air surveillance.

Management and

Composition of the

MFO

The annex to the Treaty’s Protocol prescribes specific guidelines and

responsibilities for the MFO organization, management, and operation. The

Director General of the MFO is responsible for overall management and

control and has staff at four locations: (1) MFO Headquarters in Rome,

Italy; (2) Force Headquarters and operations in the Sinai; (3) offices

representing the Director General in Cairo; and (4) Tel Aviv. Figure 1.2

shows the organizational structure of the MFO.

Page 15 GAO/NSIAD-95-113 Peacekeeping
Chapter 1 

Introduction

Figure 1.2: Organizational Structure of the MFO

MFO Headquarters Rome

Director General

Director Logistics


Facilities and Contracts

Procurement Officer

Deputy Director


Engineering and Facilities

MFO Cairo and Tel Aviv

The Director General's


Representatives

Chief Procurement Officers


Procurement Staff


Logistics Staff

The Force Commander

Chief of Staff

Chief of Support

Force Procurement


and Contracting

Camp Commandant Food Service Officer Force Transportation Officer

Force Engineer Force Maintenance Officer

Deputy Director


Contracts

The Support Contractor

The Force

Deputy Chief of Support

Source: The MFO Headquarters, Rome.

The MFO headquarters staff in Rome, at the time of our review, was

composed of 15 international personnel, the majority being from the

United States, and 16 Italian nationals. The Director General, always a U.S.

national, serves a 4-year term, which may be renewed or terminated by the

Parties to the treaty. The Director General and his staff oversee all MFO

operations, including legal and financial matters, contracts, procurement,

facilities management, personnel and recruitment, morale and welfare

programs, troop rotation arrangements, and program evaluation.

Page 16 GAO/NSIAD-95-113 Peacekeeping
Chapter 1 

Introduction

Additionally, they handle all diplomatic matters between the MFO, Egypt,

and Israel, as well as the governments of the countries that provide troops

and financial contributions to the MFO. The Protocol also gives the Director

General, his deputy, the force commander, and their spouses and minor

children the privileges and immunities accorded to diplomatic convoys in

accordance with international law.

The functions of the force in the Sinai are controlled from the Force

Commander’s Headquarters at the northern base at el Gorah by the force

commander, appointed by the Director General with the approval of the

Parties. The force commander is of general officer rank, serves a 3-year

term, and cannot be from the United States.

Sinai activities fall into four main operational areas:

• the operation of troops in the field and ships at sea to provide a constant

presence;

• reconnaissance and verification of zones A, B, C, and D by the Civilian

Observer Unit;

• liaison between the MFO and the two host nations; and

• logistical support required to sustain the force.

The MFO in the Sinai is composed of military and civilian contingents, each

performing specific operational functions. The United States, Colombia,

and Fiji provide infantry battalions that perform observation missions in

zone C from 31 remote observations posts and checkpoints. In addition,

the United States, Canada, France, the Netherlands, New Zealand,

Uruguay, Italy, Norway, and Australia provide support units such as

engineers and headquarters staff personnel to the MFO. The size of the

military force at the time of our review was about 1,987. The United States

provides the largest contingent to the MFO, about 985 troops (50 percent of

the force), including a logistics support battalion that shares logistical

support tasks with MFO support contractor in the Sinai, with other

contingents, and with the MFO offices in Cairo and Tel Aviv. The MFO

offices in Cairo and Tel Aviv serve as the MFO diplomatic representative to

the receiving state and manage procurement and financial functions.

A civilian observer unit of 15 U.S. nationals performs observation and

verification missions in zones A, B, C, and D. The MFO also includes 30

other civilians, and approximately 127 international hire civilian

contractor personnel stationed in the Sinai performing a variety of support

functions, including laundry and food preparation. The MFO support

contractor also utilizes approximately 520 Egyptian nationals.

Page 17 GAO/NSIAD-95-113 Peacekeeping
Chapter 1 

Introduction

Table 1.1 shows the role and responsibilities of each participating nation

as well as the number of personnel allotted.

Table 1.1: Military and Civilian

Composition of MFO Units,

November 1994

Nation MFO unit Number

Australia Force commander’s staff 26

Canada Headquarters company staff 28

Colombia Infantry battalion 358

Fiji Infantry battalion 339

France Fixed-wing aviation unit 17

Italy Coastal patrol unit 83

Netherlands Military signal unit

Military police unit

59

New Zealand Training and support unit 24

Norway Force commander’s staff 4

United States Infantry battalion

Logistics support unit 

 including medical unit

Helicopter support Unit

985

Uruguay Transport unit

Engineer unit

64

Total military 1,987

United States Civilian observers 15

MFO Logistics

Operations

The MFO logistics operations are directed by the Director General through

the director of logistics, facilities, and contracts, and are carried out in the

field by the force in the Sinai and the offices in Cairo and Tel Aviv.

Headquarters logistics responsibilities involve implementing the Director

General’s logistics policies regarding procurement, maintenance,

engineering and facilities, transportation, contracting, stock control, and

property accountability and disposal. At the force level, the chief of

support, a U.S. Army colonel, is responsible for all support activities,

including supply, transportation, food services, contracting, maintenance,

and engineering. Field offices in Cairo and Tel Aviv procure supplies from

commercial vendors primarily located in these countries.

Logistical functions within the force as of November 1994 are

predominantly performed by the 428 troops of the U.S. 1st Support

Battalion. These operations are discussed in chapter 2 of this report. In

addition to the United States, France, Uruguay, New Zealand, Canada, and

the Netherlands also provide MFO with logistics support. Specifically,

Page 18 GAO/NSIAD-95-113 Peacekeeping
Chapter 1 

Introduction

France provides MFO with a fixed-wing aviation unit consisting of 1 DHC-6

Twin Otter and 17 aircrew, support, and maintenance personnel. The

Uruguayan and New Zealand contingents provide MFO with drivers and

engineers. Canada provides air traffic control support, and the

Netherlands provides signal communications specialists.

The MFO also uses support contractors to perform many logistics

functions, including administrative and clerical support; maintenance of

facilities; vehicles, grounds, and electronic equipment; fire prevention;

food services; personal services (barber and tailor/laundry); and receipt,

distribution, and storage of certain classes of supplies.

Management of U.S.

Participation in the

MFO

U.S. military and financial participation in the MFO is managed by the State

Department’s Bureau of Near Eastern Affairs, with the Department of

Defense (DOD) input regarding military matters. The Bureau, established by

a State Department notice dated March 5, 1982, serves as the single focal

point for the U.S. government regarding liaison and coordination of all

aspects of U.S. participation in the MFO. This includes the responsibility for

overseeing U.S. interests in MFO operations such as the budgeting of U.S.

funding to the MFO, assessing whether the U.S. contributions and other

resources provided to the MFO are being properly used, and annually

reporting U.S. costs incurred and military participation to Congress.

The Army serves as the DOD’s executive agent for matters pertaining to

U.S. military participation in and support of the MFO. The MFO mission is

assigned to the Commander, XVIIIth Airborne Corps, U.S. Forces

Command.

Objectives, Scope,

and Methodology

We initiated this study in response to a request from the Chairman and

Ranking Member of the House Committee on International Relations to

examine U.S. participation in the MFO. Our specific objectives were to

describe and assess (1) the level of U.S. participation, training, and

operational impacts; (2) the actual cost of MFO operations, the U.S.

contribution, and any cost-saving opportunities; (3) State oversight of the

U.S. contribution; and (4) views of the State Department and other

relevant parties on the MFO performance and lessons learned.

For objectives 1, 2, and 4, we performed our work at the MFO Headquarters

in Rome, Force Headquarters in the northern and southern Sinai, remote

observation posts throughout the Sinai, and MFO offices in Cairo and Tel

Page 19 GAO/NSIAD-95-113 Peacekeeping
Chapter 1 

Introduction

Aviv. At the MFO Headquarters, we met with the Director General and

officials from the following offices: (a) comptroller; (b) policy, planning,

and operations; (c) logistic, facilities, and contracts; and (d) political

affairs and general counsel.

In the Sinai, we visited the MFO North Camp, where we interviewed the

force commander, senior U.S. military officials at the Force Headquarters,

civilian observers, U.S. infantry battalion and 1st Support Battalion

personnel, and support contractors performing logistical functions. The

Director General directed that all documents we reviewed and/or

requested be individually reviewed and cleared by the general counsel

prior to release. Aside from this administrative formality, the MFO assisted

us with accommodations in the field and generally cooperated with this

review.

To gain Israeli and Egyptian government perspectives on MFO effectiveness

as a peacekeeping operation, we met with Egyptian and Israeli officials

from the Headquarters of the Egyptian Liaison Agency With International

Organizations and the Israeli Defense Force Liaison Unit.

For objectives 2, 3, and 4, we interviewed officials and reviewed

documents from the DOD and Department of State. We performed our work

at the State Department Bureau of Near East and South Asian Affairs; the

Office of the Under Secretary of Defense (Policy); the Army Operations,

Readiness and Mobilization Directorate Operations and Contingency Plans

Division; Politico-Military Affairs Division; DOD Joint Chiefs of Staff

Strategic Planning Directorate (J5); Department of the Army Budget;

Headquarters, XVIIIth Airborne Corps, Fort Bragg; and the Headquarters

Forces Command Operations and Budget office, Fort McPherson, Georgia.

We performed our review from February 1994 to February 1995 in

accordance with generally accepted government auditing standards. We

obtained agency comments from State, DOD, and the MFO.

Page 20 GAO/NSIAD-95-113 Peacekeeping
Chapter 2 

U.S. Military and Civilian Participation in the

MFO

Since inception of the MFO, the United States has always provided

significant military and civilian support. The United States provides the

largest military contingent, constituting 49.6 percent of the total force at

the time of our review. U.S. forces perform infantry battalion functions,

provide a large proportion of MFO logistical and medical support, and serve

on the headquarters staff in the Sinai. In addition, the United States gives

the MFO direct use of the U.S. Army’s logistics system, including access to

excess defense articles. According to MFO and U.S. Army officials,

opportunities may exist to reduce the number of U.S. Army logistical

personnel.

U.S. troops assigned to the MFO must receive predeployment training,

training while deployed, and training upon completion of their MFO tour.

According to Army officials, the MFO commitment contributes to the strain

on Army resources. To help alleviate the strain, starting in January 1995,

the Army pilot tested a mixed infantry battalion comprising active duty,

National Guard, and Reserve forces.

U.S. Military

Participation

U.S. military forces deployed to the MFO include an infantry battalion, a

logistics support battalion, and Force Headquarters staff personnel. An

infantry battalion tailored to the MFO mission is drawn from active units of

the XVIIIth Airborne Corps every 6 months. The overall strength of U.S.

armed forces participating in the MFO as of November 1994 was 985, which

is below the 1,200 member maximum limit authorized by Congress.

Appendix IV shows U.S. and other participant force strength in the MFO

since inception.

The infantry battalion deployed to the MFO totals approximately 529

persons and is stationed at South Camp at Sharm el-Sheikh. This battalion

operates observation posts and checkpoints and conducts patrols in the

southern sector of the Sinai, which runs along the Gulf of Aqaba, from

Sharm el-Sheikh to Taba. In addition, a logistics support battalion of 428

people based at both North and South Camps provides staff for (1) two

dispensaries; (2) an explosive ordnance disposal detachment; (3) a

transportation element that handles long-distance ground transportation;

(4) a small maintenance detachment for U.S.-made radios and weapons;

(5) a supply and service unit that deals with the requisition, receipt,

storage, and distribution of all classes of supply; (6) an aviation unit,

including 10 helicopters, crews, and maintenance personnel; and (7) an

Army post office detachment. Figure 2.1 shows the percentage of logistical

troops by MFO participating nation. Additionally, 28 officers and enlisted

Page 21 GAO/NSIAD-95-113 Peacekeeping
Chapter 2 

U.S. Military and Civilian Participation in the

MFO

men are assigned to various positions on the force commander’s staff at

el-Gorah.

Figure 2.1: Percentage of Logistical

Troops by Country

82.5% • United States (Logistics Troop

Total 429)

•

3.3%

France (Logistics/Operational

Troop Total 17)

•

10.2%

Uruguay (Troop Total 53)

1.7%

New Zealand (Troop Total 9)

1.3%

Canada (Logistics Troop Total 7)

1.0%

The Netherlands (Logistics Troop

Total 5)

MFO Has Direct

Access to the U.S.

Military Supply

System

In 1982, at MFO request, the Army authorized the MFO to purchase supplies

and equipment from DOD’s supply system.1

 The MFO has used this

authorization since 1982 to procure significant portions of its supplies,

ranging from 80 percent of its supplies in 1982 to 20 percent in 1993.

1

In addition to the MFO, the United Nations was granted access to the DOD supply system for its

peacekeeping operations in Somalia and Cambodia.

Page 22 GAO/NSIAD-95-113 Peacekeeping
Chapter 2 

U.S. Military and Civilian Participation in the

MFO

The MFO also has access to excess defense articles, defined as property

items no longer needed by the particular service and not originally

procured in anticipation of military assistance or sales. The MFO

authorization is identical to that of any U.S. Army unit, and as with other

Army units, receives a higher priority than other U.S. services requesting

excess Army articles.

In fiscal years 1993 and 1994, the MFO acquired excess articles that became

available during the closing of U.S. Army installations in Europe. The MFO

paid the shipping costs and received such items as generators, binoculars,

tables, refrigerators, and medical equipment ranging from heart monitors,

centrifuges, and ultrasonic cleaners to treadmills. The transfer of this

equipment benefited the MFO in a number of ways. For example, according

to MFO and Army officials, the MFO medical facility was substantially

upgraded as a result of excess Army articles, and some medical problems

that once required emergency medical evacuation to Israel can now be

performed in-house.

When Combined With

Other Demands, the

MFO Commitment

Contributes to a

Strain on Army

Resources

According to DOD officials, the continuous subtraction of the equivalent of

two light infantry battalions, and associated administrative headquarters

support to the MFO, when combined with other global commitments,

contributes to straining Army infantry and support resources—particularly

as the Army downsizes. However, they did not provide specific details on

the operational impact.

In January 1995, the Joint Chiefs of Staff conducted a study to assess

options and strategies regarding U.S. military participation in the MFO. The

study concluded, among other things, that there is no military requirement

for the deployment of elite or even active U.S. forces to the MFO. The study

further concluded that the costs to the Army of participating in the MFO

are:

• a reduction of one infantry brigade equivalent from the combat-ready

force structure caused by the continuous commitment of three

active/reserve infantry battalions for MFO unique training, deployment, and

post-MFO requalification;

• a loss of support personnel in specific skill fields deployed for 1 year to

the 1st Support Battalion; and

• a negative impact on personnel readiness of other units caused by the

ripple effect of the special personnel requirements of the MFO.

Page 23 GAO/NSIAD-95-113 Peacekeeping
Chapter 2 

U.S. Military and Civilian Participation in the

MFO

Predeployment and

In-Sinai Training

Predeployment training focuses on the MFO mission and is provided in the

United States. It includes individual, collective, and specialized tasks

tailored to support the mission. Individual training tasks include

peacekeeping skills and procedures; MFO rules of engagement, observation

and reporting procedures; desert operations and survival, aircraft, vehicle,

and uniform recognition; and Arabic customs and language. Collective

training includes vehicle patrolling, outpost operations, and squad-level

operations. Specialty training includes food handling and cooking,

generator operation, and remote field sanitation operations. Light infantry

units assigned to the MFO receive a minimum of 3 months of

predeployment training. Support troops receive a 1-week predeployment

orientation at Fort Bragg.

Shortly after arriving in the Sinai, all troops receive orientation training to

complement predeployment training and to ensure units are prepared to

undertake their missions. It includes follow-on training to previous

instruction that can be conducted under actual environmental conditions

as well as new subjects that were not suitable for inclusion in

predeployment training. Troops assigned to infantry or logistics support

battalions receive orientation training that includes standards of conduct,

minefield procedures, and preventive medicine. Specialized training in

communications, desert driving, and special equipment usage is also

provided where applicable. According to MFO officials, orientation training

lasts about 1 week.

Each contingent also conducts continuation or in-Sinai training in

appropriate mission related subjects, such as peacekeeping skills and

procedures, weapons qualification, and night vision techniques. According

to MFO officials, the frequency and type of in-Sinai training is based on the

respective unit commander’s assessment of need or as directed by the

force commander.

Post-Deployment

Training and U.S.

Army Impacts

According to DOD officials, the MFO commitment necessitates

post-deployment training for Army units deployed. U.S. forces returning

from MFO duty must receive post-deployment training in required

individual and collective skills before returning to their normal military

functions. According to Army officials, required skills of many returning

units are degraded during their MFO experience.

According to DOD officials, peace operations require a significant change in

orientation for military personnel. While most facets of normal military

Page 24 GAO/NSIAD-95-113 Peacekeeping
Chapter 2 

U.S. Military and Civilian Participation in the

MFO

operations apply to peace operations, peace operations require an

adjustment of attitude and approach. According to DOD officials,

commanders at the home station must allocate sufficient resources and

time for training in order to regain collective and individual standards

required for the unit’s primary war fighting mission. This post-deployment

training, redevelops skills and abilities that may have been affected by the

nature of MFO peace operations. For example, while performing the MFO

mission, U.S. units are prohibited from (1) all parachute jumping and

training involving parachute drops of equipment; (2) detonating

explosives, mines, and grenades for training; and (3) conducting live firing

by elements larger than a platoon size.

The extent of post-deployment training required is determined by the U.S.

home station commander. According to DOD officials, individual

post-deployment training generally takes about a month and collective

training about 3 months.

The U.S. Army Has

Deployed National

Guard and Reserve

Volunteers to

Alleviate Impacts

In October 1993, the Army Chief of Staff approved a pilot program to

organize, train, and deploy a composite light infantry battalion of Army

National Guard and Reserve volunteer soldiers and regular Army soldiers

to the MFO. The program, officially designated “MFO Sinai Initiative,” was

designed to determine the extent to which reservists can be used to

enhance the Army’s ability to perform peacekeeping missions as a way to

relieve the strain on active forces. The composite force deployed to the

MFO in January 1995 following individual and collective training at Fort

Bragg, North Carolina, in November 1994. The U.S. Army plans to rotate

composite battalions in the future depending on the success of the pilot

initiative, the availability of volunteers, and other factors. According to

DOD, the cost of implementing the pilot initiative is about $15 million. This

amount is in addition to other DOD costs to support the MFO.

While the Sinai initiative marks the first time reservists will be used to

support active troops in the MFO operation, it does not mark the first time

they have been used for peacetime operations. For example, reservists

have supported active forces in operations involving disaster relief and

humanitarian assistance. In the Sinai initiative, the National Guard and

Reserve, whose participation is strictly voluntary, will constitute

80 percent of the force; active service soldiers, in positions of leadership,

will constitute the remaining 20 percent.

Page 25 GAO/NSIAD-95-113 Peacekeeping
Chapter 2 

U.S. Military and Civilian Participation in the

MFO

Potential

Opportunities to

Lessen Impact on U.S.

Army

Despite the recent transfer by MFO of some U.S. logistical functions to its

existing support contractor, U.S. logistical troop levels have not been

correspondingly reduced. In August 1994, MFO began transferring some

U.S. logistical supply functions, such as the storing of commercial vehicle

parts and construction materials, to a contractor. According to MFO

management, the U.S. soldiers responsible for this function will be

replaced by contractor employees who are more experienced in managing

an inventory system of commercial items. These same MFO officials

indicated that these U.S. logistical troops continue to be needed for

emergencies, contingency operations, and other logistics support

functions such as moving materials, closing warehouses, and counting

stocks. In addition, according to U.S. Army documentation, since

transportation support is conducted with commercial vehicles and

augmented by drivers from New Zealand and Uruguay, an opportunity

exists to transfer responsibility for transportation support to the

contractor and/or other participating states.

In June 1995, after the completion of our fieldwork, State officials told us

that MFO had eliminated six 1st Support Battalion positions and was

considering replacing U.S. truck drivers with Egyptian contractors.

However, they agreed with DOD officials that changes in U.S. force levels

were subject to political constraints.

U.S. Civilian

Participation in the

MFO Civilian

Observer Unit

U.S. participation in the Civilian Observer Unit was established by a letter

from the Secretary of State to the Foreign Ministers of Egypt and Israel

that accompanied the signing of the Protocol to the treaty on August 3,

1981. The letter offered an observer unit composed of American citizens to

verify party compliance with Treaty of Peace provisions. Presently, the

unit contains 15 U.S. nationals, approximately half being on transfer from

the U.S. government and under contract to the MFO, the other contracted

directly by the MFO. Quite separate from the observation carried out in

zone C by the three infantry battalions of the force, only the Civilian

Observer Unit performs regular observation and verification missions

throughout all four zones of the treaty area in Egypt and Israel.

Verification missions last from 2 to 4 days and employ MFO helicopters and

vehicles to move the teams of observers throughout the four zones. During

these missions, observers are accompanied by Israeli or Egyptian liaison

officers, depending on which country the zone resides. During the course

of a complete cycle of missions, the observers cover all the Egyptian and

Israeli installations within the four zones to verify treaty limitations on

Page 26 GAO/NSIAD-95-113 Peacekeeping
Chapter 2 

U.S. Military and Civilian Participation in the

MFO

personnel, armaments, and military infrastructure. Verification missions

occur at least twice a month. Observers must also be prepared to

undertake additional verifications within 48 hours of a request from either

the Israeli or Egyptian government.

According to MFO officials, violations of the provisions of the treaty are

rare. They are typically the result of technical errors by individuals

regarding military restrictions and have been easily rectified by the

Parties. According to the Director General’s 1994 Trilateral Report, in

fiscal year 1993, there were three deviations from the terms of the treaty.

The details of violations are reported only to the Parties. Thus, we could

not verify the violations or their rectification.

Page 27 GAO/NSIAD-95-113 Peacekeeping
Chapter 3 

Cost of the MFO and the U.S. Contribution

In fiscal year 1993, the operating budget of the MFO totaled $56.1 million,

excluding in-kind contributions and nonreimbursable costs borne by

participating and donor nations. The operating budget is funded primarily

by assessed contributions from the United States, Egypt, and Israel, with

each country being assessed one-third of the cost, after small

contributions from Germany and Japan. The 11 participating nations

provide the military personnel and equipment and supplies. Since MFO

inception in 1982, the United States has provided the largest percentage of

MFO funding and resources. In fiscal year 1993, the incremental cost of U.S.

participation was $18.6 millon, while the total cost was $64.4 million. This

includes the annual assessment cost of $17.8 million and DOD costs of

$46.6 million for troops.

As a result of troop, personnel, and other cost reductions, the operating

costs of the MFO have steadily declined since 1989, which has decreased

the U.S. assessment cost accordingly. However, the total cost of the U.S.

participation in the MFO has increased during recent years due to the

higher military salaries paid to U.S. soldiers and reimbursement costs for

food and base support.

Cost of the MFO The total cost of the MFO consists of its annual budgeted operating costs,

in-kind contributions, and nonreimbursable costs borne by the

participating and donor nations. The operating costs include expenses

such as personnel, supplies and materials, contractual services, troop

rotations, and equipment acquisition. In addition, there are in-kind

contributions and nonreimbursable costs borne by the developed

participating nations, particularly the United States, France, and Italy.

These include capital equipment and excess property donations, and the

salaries of the troops provided by these countries. Also, the MFO is

reimbursed by participating developed nations for providing food, lodging,

and base support to the troops of these nations while they are on duty at

the MFO. For the United States, this is done through a credit to the account

of the MFO for the amount of expense (offset cost) that the United States

would have incurred for lodging and base support had its troops remained

at home. According to MFO officials, the MFO does not have sufficient

information to determine the total amount of unbudgeted contributions

provided by the participating nations. The MFO provides transportation,

food, lodging, base support, and a modified U.N. rate for troops of

developing countries participating in the MFO.

Page 28 GAO/NSIAD-95-113 Peacekeeping
Chapter 3 

Cost of the MFO and the U.S. Contribution

The operating budgets of the MFO for fiscal years 1989 through 1993 and

their funding sources are shown in table 3.1.

Table 3.1: Operating Expense Budget

of the MFO by Funding Source (Fiscal

Years 1989-93) 

Dollars in millions

Funding source FY 1989 FY 1990 FY 1991 FY 1992 FY 1993

United States $24.4 $24.4 $19.5 $18.2 $17.8

Egypt 24.4 24.4 19.5 18.2 17.8

Israel 24.4 24.4 19.5 18.2 17.8

Japana 1.0 1.5 1.5 1.4 1.0

Germany 0 0 0 0.6 0.6

Interest income 0.3 0.6 0.7 1.1 1.1

Total $74.2 $75.3 $60.7 $57.7 $56.1

aThe contributions from Japan are applied exclusively to pay for the cost of food and personnel

salaries.

The total annual operating expense of the MFO since its inception in fiscal

year 1982 is shown in figure 3.1. A detailed discussion on the contribution

of troops, equipment and logistical support provided by the participating

nations is discussed in chapter 2.

Cost of MFO to the

United States

The funding and resources the United States provides to the MFO includes

(1) the annual assessment contribution of one-third of the MFO operation

costs and (2) about 50 percent of the MFO military contingent. The MFO also

receives U.S. Army excess defense articles as discussed in chapter 2.

The cost of providing U.S. troops to the MFO is paid out of the DOD regular

operating budget. In contrast, the one-third U.S. assessment is paid

directly from appropriated funds to the State Department for

peacekeeping operations.

Table 3.2 shows the costs of the U.S. participation in the MFO by category

for fiscal years 1989 through 1993.

Page 29 GAO/NSIAD-95-113 Peacekeeping
Chapter 3 

Cost of the MFO and the U.S. Contribution

Table 3.2: Costs of U.S Participation in

the MFO Dollars in millions

Description FY 1989 FY 1990 FY 1991 FY 1992 FY 1993

DOD costs:

Salary cost of troops $31.0 $31.0 $32.1 $34.6 $36.1

Predeployment training 0.6 1.0 0.7 0.8 0.5

Unreimbursed travel 0.2 0.2 0.1 0.2 0.3

MFO food, lodging, and base

support

3.5 3.6 4.0 6.0 6.9

Troop transportation and

allowances, per diem, etc.

3.0 3.6 4.0 3.7 2.8

Total DOD costs $38.3 $39.4 $40.9 $45.3 $46.6

Plus:

U.S. assessment 24.4 24.4 19.5 18.2 17.8

Total costs of U.S.

participation

$62.7 $63.8 $60.4 $63.5 $64.4

Deduct:

DOD costs reimbursed by the MFO:

Troop transportation and

allowances, per diem, etc.

3.0 3.6 4.0 3.7 2.8

Costs DOD would have incurred had troops remained in the United States:

Salary cost of troops 31.0 31.0 32.1 34.6 36.1

MFO food, lodging and base

support

3.5 3.6 4.0 6.0 6.9

Total deductions 37.5 38.2 40.1 44.3 45.8

Total U.S. incremental costs $25.2 $25.6 $20.3 $19.2 $18.6

Table 3.2 illustrates that while the actual cost of the U.S. participation in

the MFO for fiscal year 1993 was $64.4 million, the incremental or

additional cost to the United States for its participation was $18.6 million.

The $45.8 million difference represents DOD costs that were either

reimbursed by the MFO ($2.8 million) or costs that DOD would have incurred

had its troops remained in the United States ($36.1 million salary costs and

$6.9 million offset costs for MFO food and base support provided to U.S.

troops). Of the $18.6 million incremental costs, $17.8 million is for the U.S.

annual assessment and the remaining $0.8 million is the DOD incremental

cost for predeployment training and unreimbursed travel. Table 3.2 does

not include the costs of excess defense articles and capital equipment

donated by the United States to the MFO. The cost of these activities is not

tracked by DOD.

Page 30 GAO/NSIAD-95-113 Peacekeeping
Chapter 3 

Cost of the MFO and the U.S. Contribution

MFO Operating Costs

Decrease but Actual Cost

of U.S. Participation

Increases

The MFO has progressively reduced its operating cost since fiscal year

1982. Figure 3.1 illustrates the decreases in the operating budget. MFO

stated that it is implementing measures to further reduce these costs, to

maintain current budgetary levels despite inflation costing about

$1 million per year. While the decrease in MFO operating costs has resulted

in corresponding reductions in the U.S. incremental costs, the total cost of

the U.S. participation has gradually increased since 1989. This is because

although U.S. troop levels have decreased, their salaries and the offset

costs have increased.

Also shown in figure 3.1, the operating budget of the MFO has progressively

decreased from $103 million in fiscal year 1983, the year after its inception,

to $56.1 million in fiscal year 1993.

Figure 3.1: MFO Budget, Fiscal Years 1982-1993

Dollars in millions

0

50.0

100.0

150.0

200.0

250.0

82 83 84 85 86 87 88 89 90 91 92 93

MFO fiscal year 1982 budget was about $225 million, primarily for start-up

costs that included construction of bases and facilities. Cost reductions of

$28.8 million between fiscal years 1983 and 1989 were primarily due to the

completion of start-up activities and the stabilization of operations. Since

fiscal year 1989, cost reductions of $18.1 million have primarily resulted

Page 31 GAO/NSIAD-95-113 Peacekeeping
Chapter 3 

Cost of the MFO and the U.S. Contribution

from significant reductions in military and civilian personnel strength and

through a host of cost-reduction initiatives by MFO management including

reductions in force vehicles, resale of used vehicles, and tighter inventory

controls.

The MFO total military strength was substantially reduced by 586 troops

between 1988 and 1993 to 2,063 troops. However, many of these

reductions came from contingents of developing nations, such as Fiji and

Colombia, which maximized MFO cost reductions because the MFO pays

transportation, maintenance costs, and a modified U.N. rate for these

troops. In addition, MFO civilian personnel, excluding support contractor

personnel, were reduced from 63 in fiscal year 1987 to 49 in fiscal 1993,

which resulted in further cost reductions.

The primary reasons for the increased actual cost of U.S. participation in

the MFO are increases in both military pay and the offset costs credited by

DOD to the MFO for providing food, lodging, and base support to U.S. troops.

While the U.S. authorized troop strength at the MFO decreased from 1,045

in fiscal year 1990 to 984 in fiscal year 1993, military pay raises increased

the salary cost of these troops from about $31 million in fiscal year 1990 to

$36.1 million for fiscal year 1993, and U.S. offset costs almost doubled

from $3.6 million to $6.9 million, primarily because of changes in the

Army’s procedure for calculating these costs. According to Army officials,

this procedure incorrectly included in the offset the costs of certain

services not provided to U.S. troops by the MFO. Prompted, in part, by our

review of the offset issue, DOD and MFO were able to agree on a

methodology to compute offset costs for fiscal year 1994 and future years.

Page 32 GAO/NSIAD-95-113 Peacekeeping
Chapter 4 

Views on MFO Operational Performance

and Lessons Learned

The MFO is widely viewed by United States and international officials as

effectively performing its duties in a cost-efficient manner. This view is

primarily held because of the sustained peace between Egypt and Israel,

which has provided a supportive environment for the mission’s success

and for active cost containment measures. According to State, MFO,

Egyptian, and Israeli officials, the MFO has helped sustain peace between

Egypt and Israel by serving as liaison and monitor of the treaty provisions.

According to many officials interviewed, the MFO operational success can

be attributed to several factors, including inherited advantageous

conditions resulting from the way the MFO was established, the

Israeli/Egyptian commitment to peace, significant U.S. military and

financial support, and financial co-responsibility placed on the Parties. As

a result of the favorable circumstances surrounding the establishment of

the MFO, particularly when compared to other peacekeeping operations,

some officials believed that the MFO model may not be readily applicable to

more challenging peacekeeping scenarios. However, the factors

contributing to the MFO operational success may serve as lessons learned

for future peacekeeping operations.

The MFO Is Viewed as

Effectively

Performing Its

Mission

State, DOD, Israeli, and Egyptian officials all view the MFO as effectively

performing its mission of monitoring, liaison, and reporting treaty

provisions and violations. State Department officials view the MFO as an

instrument of U.S. foreign policy in the Middle East that should remain

until sustained regional peace is achieved. According to State officials, the

MFO is an operationally and cost-effective peacekeeping operation that has

helped bridge confidence and communication between Egypt and Israel.

U.S. Army officials, while viewing the MFO as operationally effective, have

concerns about the level of U.S. participation, the operational impacts to

the Army, and the lack of an end date. These officials view the MFO as an

indefinite Army commitment.

According to Egyptian liaison officials, the MFO has helped build

confidence between the Israelis and Egyptians by supervising adherence

to the treaty. The liaison system promotes mutual dialogue and has

assisted in solving some challenges of both parties. These Egyptian

officials, although agreeing with their governments support of the MFO,

expressed concerns about the open ended term of the MFO and questioned

whether the MFO could be reduced to an observer only force. Egyptian

officials were pleased with the reductions in costs but would like to see

additional cuts.

Page 33 GAO/NSIAD-95-113 Peacekeeping
Chapter 4 

Views on MFO Operational Performance

and Lessons Learned

According to Israeli officials, the MFO has been successful in supervising

the conditions of the treaty and in building the confidence of the Parties. It

is their view that the MFO works because it has effectively supplemented

Israel’s and Egypt’s strategic interests by securing the provisions of the

treaty and providing a large U.S. military role. Officials viewed the United

States as essential to the MFO success and emphasized that any significant

reductions in U.S. forces could send a signal of lessened U.S. commitment

during current and future regional peace initiatives.

While Effective, the

MFO Model May Not

Apply to More

Challenging

Peacekeeping

Scenarios

According to DOD officials, the MFO began under almost optimum

conditions and was provided opportunities for success that are not typical

of most peacekeeping operations. Consequently, these officials believe

that the MFO model would not apply to more challenging and hostile

peacekeeping scenarios.

The MFO was preceded by a panoply of cease fire and withdrawal

agreements, negotiations, and U.N. peacekeeping forces between October

1973 and March 1979. These activities effectively transformed the Sinai

Peninsula from a violent battlefield to a tranquil state prior to the

deployment of the MFO. Thus, the MFO inherited a peaceful operating

environment. In addition, the MFO began with (1) a firm commitment to

peace between the Parties, as indicated by a formal treaty of peace and a

thorough Protocol; (2) an established geographic buffer zone in which to

operate; (3) substantial U.S. government military and financial

commitments; (4) a barren, scarcely populated operating environment;

and (5) a largely U.S. Army managed logistics system.

According to DOD officials, these conditions created an almost clinical

environment for MFO operations. For example, the MFO buffer zone, zone C,

is free from the hostilities of many peacekeeping operations. The

operating area is large, stretching over 10,000 square miles, but is largely

unpopulated. Consequently, according to DOD, any military or terrorist

threat to MFO ground forces in the Sinai is minimal. These officials believe

that this MFO model may not directly apply to an environment that is urban

or densely populated with potentially hostile parties over which a central

government would have little control and where urban guerilla warfare is a

possibility. In addition, officials emphasized that the MFO always had a U.S.

managed and designed logistics system with a direct link to the U.S. Army.

The MFO compares best with a traditional U.N. Chapter VI peacekeeping

operation responsible for observing and reporting as opposed to a peace

Page 34 GAO/NSIAD-95-113 Peacekeeping
Chapter 4 

Views on MFO Operational Performance

and Lessons Learned

enforcement Chapter VII operation. This is primarily because the MFO

mandate is to supervise the security arrangements of the Treaty of Peace

by observing and reporting violations and demanding rectification. The

MFO was not intended to serve as a fighting force or to repel national or

factional armies. According to DOD officials, the MFO strength lies not in its

military capability, but in the commitment of Israel and Egypt to peace,

and the political support of the participating states.

Lessons Learned

From MFO

Operations

According to U.S. and international officials, while the MFO has been

successful, there are several lessons that can be learned from its structure

and operation. In terms of U.S. commitment and oversight, the MFO

arrangement has an open-ended U.S. participation agreement, without a

formal requirement for periodic U.S. reassessments, and has no formal

executive board to oversee its operations.

The positive lessons from the MFO are that it: (1) began with a detailed

charter or mandate fully supported by all parties, (2) makes parties of the

peace treaty financially accountable, (3) incorporated standardized and

interoperable field equipment, and (4) has an active liaison system with

the Parties.

U.S. participation in the MFO does not have an end date or incremental

drawdown provision. According to DOD and Army officials, U.S.

arrangements in any similar future peacekeeping operation should include

provisions for drawdown and eventual termination. Other participating

developed nations have periodic renewal provisions in their participation

agreements. Consequently, these nations formally renegotiate their

participation with the MFO at specified intervals. In contrast, the United

States does not have any renewal provision in its participation agreement,

thus periodic reassessment is not formally accomplished. According to

U.S. Army officials, there should be formal periodic reassessments of the

level of U.S. military participation in the MFO, particularly in light of other

global demands. According to these officials, over a decade of

Israeli-Egyptian peace warrants such reassessment, particularly in light of

growing military requirements elsewhere, and reduced budgets and

resources.

In addition, the MFO does not have any formal executive oversight such as

a board of directors or an independent audit entity as discussed in 

chapter 5 of this report. While the broad management discretion granted

to the Director General by the Protocol has benefits such as cost cutting

Page 35 GAO/NSIAD-95-113 Peacekeeping
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Views on MFO Operational Performance

and Lessons Learned

flexibility, a more formal oversight mechanism could strengthen financial

accountability and deter misuse of expenditures. Thus, we believe that any

future operation should include a formal mechanism for adequate

oversight of the U.S. contribution.

On the other hand, a positive lesson can be learned from the way the MFO

charter is constructed. The MFO charter, unlike many peacekeeping

operations, provides details regarding the responsibilities, organization,

operations, military command structure, financing, and administration of

the MFO. According to MFO officials, there are few aspects of the MFO

peacekeeping tasks that require further expansion or interpretation by the

military staff of the MFO. According to DOD and State officials, few

peacekeeping missions have ever deployed with such a complete working

document as the MFO charter. In contrast, DOD officials note U.N. mandates

are often ambiguous and ill-defined, thereby complicating peacekeeping

operations. These officials cite favorable political circumstances and the

existence of an agreement between the Parties as largely determining the

specificity and realism of the mandate and ultimately the success or failure

of the operation. These officials also stated that where the United Nations

has been given similar favorable circumstances for mandates and terms of

reference deriving from a disengagement agreement between motivated

adversaries, results have been favorable.

Another potential lesson learned is MFO financing method. According to

MFO officials, unlike other peacekeeping operations, the Parties to the MFO

share in direct funding, thus each has a vested interest in cost

containment. The financial arrangements also make the MFO directly

accountable to the fund’s contributors, resulting in a contractor-client

relationship. According to MFO, State, and DOD officials, this arrangement is

advantageous because it actively engages former adversaries in the

financial planning of the peacekeeping operation.

As for the contributions of the participating states, arrangements for

external funding sources should be maximized while international interest

is high. This could work to reduce the financial burden of the one-third

assessment on the United States. According to MFO officials, the MFO

waited several years before trying to recruit external donors, with only

modest results.

In addition, since its inception, the MFO has used a system of commercial

procurement, contracting, and equipment standardization. MFO

procurement emphasizes the use of local markets to increase competition

Page 36 GAO/NSIAD-95-113 Peacekeeping
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Views on MFO Operational Performance

and Lessons Learned

and reduce costs. The MFO derives additional revenue from sales of used

vehicle and excess scrap.

Equipment standardization is also emphasized. According to MFO officials,

the principle underlying MFO logistics was that to promote fairness and

efficiency, each military unit, regardless of its resources, would receive the

same type of equipment. In contrast, many U.N. peacekeeping operations

maintain a variety of equipment and maintenance standards in different

contingents. The sophisticated equipment in the observation posts, the

vehicles, and the communications and mission-related equipment are all

standardized and are the property of the MFO. According to MFO, this has

been accomplished by procuring certain models of equipment from

specific manufacturers, such as General Motors for commercial vehicles

and Motorola for radio communication equipment. Standardization

presents several logistical advantages: (1) maintenance is easier,

(2) incoming battalions do not have to bring their own sophisticated

equipment and vehicles with them and all their diverse maintenance

problems, and (3) it reinforces the integrated appearance of the force. In

addition, interoperability of communication and electronics systems is

achieved.

The MFO liaison system also serves as a model for developing peaceful

relations and cooperation. According to MFO officials, the liaison system

fosters contact and permits parties to address and resolve issues at

graduated levels, serving as an instrument to adapt treaty conditions to

changing realities on the ground.

Page 37 GAO/NSIAD-95-113 Peacekeeping
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State Oversight and Reporting Could Be

Improved

The State Department has responsibility for overseeing U.S. participation

in the MFO and is required to annually report to Congress on MFO activities,

including the cost to the United States. DOD provides State data on the total

cost of deploying and maintaining U.S. troops at the MFO. We believe that

State could improve its oversight as well as the quality of the annual

reports it sends to Congress. These reports have contained inaccuracies

and did not show the total U.S. cost of participation in the MFO, due in part

to inaccurate data submitted by DOD on troop costs.

Inadequate State

Oversight of U.S.

Contributions

State has taken a hands-off approach to MFO and does not adequately

assess whether U.S. contributions to the MFO are spent efficiently and

properly. For example, State was not knowledgeable of important changes

in MFO policies and procedures that had an impact on U.S. costs. In

addition, State does not (1) know if the MFO has adequate internal

management and accounting controls in place to deter the misuse of U.S.

contributions, (2) obtain and review all audit reports issued by the MFO

external auditor, or (3) analyze MFO financial statements to detect items

that may impact the U.S. contribution.

Effective State oversight is needed because (1) MFO Director General has

broad management authority, (2) MFO does not have a formal board of

directors or governing body that provides executive oversight for the

accountability of the expenditure of funds, and (3) MFO does not have an

independent audit committee to oversee external audits.

State Unaware of MFO

Policies and Procedures

That Impact U.S. Costs

During our review, we observed that State officials were not

knowledgeable of details related to salary, benefits, and other matters

involving the MFO, which have had an effect on the cost of operation. For

example, until we began our inquiry, State was unaware of many details

relating to the Director General’s salary and benefits or other MFO

expenditures made on his behalf. We also noted that MFO policies and

procedures for designating dependents of MFO officials were changed by

the MFO two times in 1992 and 1994. They were changed in 1992 to broaden

the definition of dependent to include persons other than spouses,

unmarried children, or dependent parents as dependents. In 1994,

following the conclusion of our fieldwork, the policies and procedures

were revised by the MFO to expand the definition of an authorized

dependent. Specifically, the new regulation states that a person is an

authorized dependent if he/she has been so designated by the MFO staff

member and so approved by the Director General. While other members of

Page 38 GAO/NSIAD-95-113 Peacekeeping
Chapter 5 

State Oversight and Reporting Could Be

Improved

the MFO may benefit from these changes, the MFO general counsel told us

and congressional staff in February 1995 that the changes were made to

accommodate the personal circumstances of the Director General, who

was already receiving dependent benefits for individuals who were not his

spouse or unmarried dependent children. In an August 10, 1994, letter to

State, the Director General explained that housing used by the former

Director General, who was a bachelor, was not suitable for his household

and went on to explain the security and furnishing upgrades and

improvements to his MFO-provided residence that were necessary to

accommodate his household. He also stated that the MFO pays his

dependents’ elementary and high school fees and annual dependent

education travel, a benefit that is available to all members of the MFO

international staff.

In response to our inquiry, State Department officials said that they were

aware that the Director General had a nontraditional family and that some

accommodation would be necessary in order for him to accept the initial

appointment in 1988. However, they stated that they were not aware of the

specific changes made to MFO policies to satisfy this accommodation,

which had an affect on benefits and privileges. In view of the fact that the

Director General has such broad latitude to modify regulations and

procedures without external approval, we believe it is important for State

to be aware of all policy changes that may affect costs.

The Protocol to the treaty establishing the MFO does not provide for a

governing body for executive oversight of the MFO, or an independent audit

entity. It gives the MFO Director General broad management authority, with

a requirement to report developments relating to the functioning of the

MFO to the Parties. According to MFO officials, the annual Trilateral meeting

fulfills the purpose of a “board of directors” because the Director General

makes a detailed statement covering MFO operations, administration for

the prior fiscal year, and issues and funding requirements for the new

fiscal year, and invites practical suggestions from representatives from the

funds contributing countries participating in the meeting. In addition,

annual budgets are submitted to financial contributors for approval.

According to MFO officials, the U.S. government, as a participant, is on the

“board of directors” of the MFO. State officials agree that the statements at

the Trilateral meeting, informal discussions, and site visits throughout the

year constitute adequate oversight.

However, we believe that the Director General’s statements at the

Trilateral meeting and informal discussions throughout the year do not

Page 39 GAO/NSIAD-95-113 Peacekeeping
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State Oversight and Reporting Could Be

Improved

constitute a sufficient oversight mechanism to prevent the potential

misuse of U.S. contributions. In contrast, other international organizations

have an independent governing body above the chief executive to oversee

and approve operations and finances. For example, both the North

Atlantic Treaty Organization (NATO) and the Organization for Economic

Co-Operation and Development have councils to perform oversight of

their operations and serve as the highest decision-making bodies.

The MFO also does not have an independent audit entity between the

Director General and the external auditor to oversee the audit and report

to management on its performance and results and the disposition of any

recommendations resulting from the audit. The MFO Director General

selects, directs, and receives the report of the external auditor, Price

Waterhouse. In contrast, other international organizations we examined

such as NATO, the Organization of American States, and the European

Union, all have independent external audit committees that perform or

oversee external audits and are independent of the governing body or

chief executive.

The lack of a fully engaged “board of directors” or audit committee results

in the Director General essentially having carte blanche authority to run

the organization. We believe that in the absence of a formal executive

governing body, improved State oversight of U.S. contributions is

essential.

State Lacks Assurance

That MFO Has Adequate

Internal Controls

State relies on the audit report of the MFO external auditor, Price

Waterhouse, for assurance that the MFO has adequate internal controls.

This report, along with a separate management letter, is prepared in

accordance with generally accepted auditing standards and expresses the

auditor’s opinion on whether the financial statements are free of material

misstatement. However, generally accepted auditing standards do not

require the report to include an opinion on the adequacy of the MFO

internal controls. Accordingly, while the audit report provides assurance

that the data in the MFO financial statements are free of material

misstatement, it does not provide State assurance that the MFO has

adequate internal accounting controls in place to deter the improper use of

U.S. contributions.

We found that State did not request, obtain, or review the annual

management letter provided by the external auditor to the MFO

management. We obtained copies of the management letter for fiscal years

Page 40 GAO/NSIAD-95-113 Peacekeeping
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State Oversight and Reporting Could Be

Improved

1990, 1991, and 19932 and noted that although they do not express an

opinion on the MFO internal controls, they do discuss internal control

matters and problems noted during the audit, recommendations for

corrective action, and responses by the MFO management. Although this

letter would not provide State with a basis for determining whether the

MFO internal controls were adequate, it does provide information on

internal control problems found during the external audit and corrective

actions taken by the MFO management.

In order to determine whether the MFO internal controls are adequate,

State could ask the MFO to engage its external auditor to perform a

separate audit and issue an opinion on its internal controls. Since the

United States is a primary contributor, State should then request that the

MFO provide State with a copy of this report as the representative of the

U.S. government.

State Department officials believe they are fulfilling their oversight

responsibilities by relying on the audit report, the MFO published financial

statements, and the integrity of the MFO management, which is heavily

staffed by former State Department employees. They did not want to

micromanage the MFO. However, they agreed that periodic separate

reviews of the MFO internal controls by the external auditor and reviews of

the external auditor’s management letters to the MFO would provide

further assurance that the MFO had adequate internal controls in place and

would strengthen State’s oversight over U.S. contributions.

Need for State to Evaluate

MFO Published Financial

Statements and FX

Account Audit Report

During our review, we noted two items relating to U.S. contributions that

prompted changes to the MFO financial statements and a reduction in the

U.S. assessment for fiscal year 1994. These items could have been detected

several years ago by State if it had regularly reviewed the MFO published

financial statements and the FX account audit reports.

In one instance, we noted that for fiscal year 1993 and prior years, the MFO

financial statements did not disclose the amounts of DOD reimbursement to

the MFO for providing food, lodging, and base support to U.S. troops on

duty at the MFO ($6.9 million for fiscal year 1993). This reimbursement

amount is not shown as revenue in the income statement, but is applied as

a net against the expense of personnel in the MFO income statement with

no explanatory footnote. After we informed MFO officials that this did not

2

A management letter was not prepared by the external auditor for fiscal year 1992.

Page 41 GAO/NSIAD-95-113 Peacekeeping
Chapter 5 

State Oversight and Reporting Could Be

Improved

provide full disclosure of the U.S. contribution, they included an

explanation in the MFO financial statements for fiscal year 1994.

We also found that State was unaware of the total amount of loans made

by the MFO from its operating budget to its FX account and how much of

these loans remained outstanding. The FX is a self-sustaining consumer

goods store that serves the MFO military and civilian personnel stationed in

the Sinai. The MFO external auditor performs a separate audit on the FX

account annually; however, State had not requested, obtained, or reviewed

the reports resulting from these audits.

Several weeks after our inquiry, an MFO official told us that the outstanding

loan amount shown on the MFO financial statements did not agree with the

outstanding amount shown on the FX financial statements. He stated that

the FX financial statements showed that the FX owes a loan balance of

$1.53 million to the MFO, while the MFO financial statements showed the

loan owed to them was $1 million—or $530,000 less. The official noted that

the reason for the differences was that the MFO had written off $530,000 of

the FX loan on the books several years ago because they had determined

this amount to be uncollectible, which is in accord with generally accepted

accounting principles. State was unaware of this transaction, although the

MFO had reported the loan write-off in its financial statements for fiscal

year 1985, the year that it occurred. Prompted by our inquiry and the

improved financial condition of the FX since the loan write-offs, the MFO

reinstated the loan write-off on its fiscal year 1994 financial statements,

and the resulting $530,000 of income will be credited to the three

contributing countries, reducing the U.S. assessment for fiscal year 1995

by $177,000.

State officials noted that in the past they did not believe it was necessary

to request the audit reports of the FX account because it is a separate,

self-sustaining account, funded from sales to the MFO soldiers. However,

we believe that the United States has an interest in this account because

the FX was established through loans from the MFO operating funds,

one-third of which is paid by the United States. Also, U.S. military

personnel make up about half of the soldiers who use the FX, which has

total annual sales of about $5 million and annual income of about

$553,000. MFO officials stated that the FX profits are used to fund morale

support activities for the MFO military personnel. If State had been

receiving and examining the audited financial statement of both the FX and

the MFO, it could have noted the improved financial condition of the FX

account and could have taken appropriate action so that the United States

Page 42 GAO/NSIAD-95-113 Peacekeeping
Chapter 5 

State Oversight and Reporting Could Be

Improved

could have realized the reduction earlier. State officials stated that in the

future they would request and review the external auditors report of the FX

account in order to strengthen the performance of their oversight

responsibilities.

State and DOD

Reporting of the Cost

of the MFO to

Congress Can Be

Improved

The legislation authorizing U.S. participation in the MFO requires that the

President submit an annual report to Congress on the activities of the MFO

that describes all costs borne by the U.S. government in its relationship

with the MFO whether the United States was reimbursed for these costs or

not. This report is prepared by the State Department with input from the

Department of the Army, which is the DOD executive agent for matters

pertaining to the MFO.

We found that none of the previous reports included the annual

assessment paid from the State’s budget to the MFO ($18.3 million for fiscal

year 1993) as its share of the total operating costs of the MFO. This is

covered separately in State’s congressional presentation and other budget

presentations to Congress. State maintained that it does not include the

annual assessment in the annual report because it would make the report

too lengthy. However, State could include the amount of the assessment in

the report and refer the reader to the congressional presentation for

details on how this amount was computed. This would enable Congress to

have access to the full cost of the MFO to the United States in one

document. Subsequent to the completion of our fieldwork, State officials

agreed that the annual assessment amount should be included in the MFO

report to Congress and included it in the 1994 report.

Also, we found that the annual report contained an inaccuracy in the

amounts shown for the salary costs of military personnel for 1 year. For

fiscal year 1992, military salary costs reported were only $12.1 million,

which was less than half of what was reported for fiscal years 1991 and

1993. Army officials have recomputed the salary costs to correct the

discrepancy.

Recommendations We recommend that the Secretary of State improve the oversight of the

MFO by (1) examining the MFO annual published financial statements for

discrepancies, (2) requesting and reviewing all reports issued by the MFO

external auditors, (3) request the MFO to have its external auditor

periodically perform a separate audit of the MFO management and internal

accounting controls and provide a copy of the resulting report to State,

Page 43 GAO/NSIAD-95-113 Peacekeeping
Chapter 5 

State Oversight and Reporting Could Be

Improved

and (4) include the U.S. annual assessment cost contribution of one-third

of the MFO operating costs in its annual report to Congress on the MFO.

Agency Comments In commenting on a draft of this report State disagreed with our

conclusion that greater State oversight of U.S. contributions to the MFO is

needed. State asserts that it has been U.S. policy to grant the MFO

considerable latitude in the way it manages its operations and that this

policy creates a limited framework for oversight. Consequently, State’s

oversight of U.S. contributions is accomplished by frequent informal

discussions and infrequent formal meetings, such as the annual Trilateral

meeting. In addition, State asserts its review of the MFO external audit,

published financial report, and annual budget submission provides an

adequate oversight and reassessment mechanism. Nonetheless, State

agreed to implement all but one of our recommendations to improve

oversight. State’s comments on the report and our response are in

appendix V of this report.

We continue to believe that the reviews of the external auditor’s report,

published financial reports, and annual budget submissions do not provide

adequate oversight of U.S. contributions to the MFO. Under the MFO

management and operating structure, once the budget is endorsed by the

signatories, the Director General has great latitude over the expenditure of

funds as well as the processes used to account for them. As pointed out in

this report, this arrangement is unique to the MFO. In all other international

organizations we observed, there is an executive oversight board that is

independent of those charged with day-to-day operations. The actions that

State has already taken in response to our review should improve its

oversight capability; however, additional steps need to be taken. State

objected to an annual audit of the MFO internal controls, and we changed

the report to clarify the recommendation for periodic audits.

The MFO provided general comments, citing its operational and financial

successes since inception, and its continued efforts to reduce costs. We

previously met with MFO officials on a draft of this report contents and

made changes to the draft where appropriate.

DOD agreed with all of the report findings relevant to DOD and reported that

it has taken actions that address concerns we raised in a draft of this

report about the accuracy on cost data it was providing to State regarding

its participation in the MFO. If fully implemented, these actions should

Page 44 GAO/NSIAD-95-113 Peacekeeping
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State Oversight and Reporting Could Be

Improved

satisfy the intent of our recommendation. Therefore, we are no longer

making a recommendation to DOD.

Page 45 GAO/NSIAD-95-113 Peacekeeping
Appendix I 

The Exchange of Letters Between the

United States, Israel, and Egypt

Page 46 GAO/NSIAD-95-113 Peacekeeping
Appendix I 

The Exchange of Letters Between the

United States, Israel, and Egypt

Page 47 GAO/NSIAD-95-113 Peacekeeping
Appendix I 

The Exchange of Letters Between the

United States, Israel, and Egypt

Page 48 GAO/NSIAD-95-113 Peacekeeping
Appendix II 

Multinational Force and Observers

Contingent Strength

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

AUSTRALIA 102 102 102 25 26

CANADA 100 134 135 133 130 25 25 28 28

COLOMBIA 502 502 502 500 498 499 402 401 379 379 379 358

FIJI 500 500 500 498 498 499 394 400 378 378 378 339

FRANCE 38 38 42 38 39 37 44 40 21 18 17 17

GREAT BRITAIN 37 37 37 38 38 38 37 36 35 34

ITALY 90 90 90 94 102 90 89 91 82 82 83 83

NETHERLANDS 107 107 107 107 111 116 117 117 85 84 84 59

NORWAY 4 4 4 4 4 5 4 3 3 3 4 4

NEW ZEALAND 36 36 36 36 14 14 25 26 26 26 24 24

URUGUAY 76 76 76 75 75 76 76 76 64 64 62 64

UNITED STATES 1,200 1,200 1,200 1,161 1,192 1,145 1,053 1,045 998 998 984 985

TOTAL 2,692 2,692 2,696 2,651 2,705 2,654 2,374 2,365 2,096 2,091 2,068 1,987

Page 49 GAO/NSIAD-95-113 Peacekeeping
Appendix III 

Comments From the Department of State

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 50 GAO/NSIAD-95-113 Peacekeeping
Appendix III 

Comments From the Department of State

See comment 1.

See comment 2.

Page 51 GAO/NSIAD-95-113 Peacekeeping
Appendix III 

Comments From the Department of State

See comment 3.

See comment 4.

See comment 5.

Page 52 GAO/NSIAD-95-113 Peacekeeping
Appendix III 

Comments From the Department of State

See comment 6.

See comment 7.

Page 53 GAO/NSIAD-95-113 Peacekeeping
Appendix III 

Comments From the Department of State

See comment 8.

Page 54 GAO/NSIAD-95-113 Peacekeeping
Appendix III 

Comments From the Department of State

The following are GAO’s comments on the State Department’s letter dated

June 5, 1995.

GAO Comments 1. Our report clearly recognized the Multinational Force and Observers’

(MFO) accomplishments. Our concerns related to State’s oversight of the

expenditure of U.S. contributions. Moreover, State’s comments are

somewhat misleading and inconsistent with our observations during this

review. The cost reduction and savings figures are misleading because

they start with a high base year that includes all of the initial start-up costs

and occurred over a 13-year period. While the MFO has achieved annual

cost savings, they are not of the magnitude suggested in State’s comments.

Additionally, State did not explain its role in reducing the MFO operating

costs. In fact, in other sections of its comments, State attributes the MFO

cost savings to the considerable latitude granted to the MFO to manage its

operations. During the course of this review, neither State nor MFO officials

could provide us with documentation evidencing any State inquiries or

scrutiny regarding the MFO financial operations.

2. Our request from the House Foreign Affairs Committee specifically

asked us to report on MFO lessons learned that could be applied to future

Middle East peacekeeping operations. The factors cited in State

Department’s comments, and others, were discussed in the report.

3. See comments 1 and 5.

4. The “terms of reference” provided to us on April 5, 1995, was an internal

working paper that included tasks and responsibilities to be accomplished

by various staff in the Near East Affairs Bureau. Some of these tasks had

been ongoing practices, while others were to be implemented as a result of

ourreview. To date, these terms of reference for State’s oversight

responsibilities have not been codified into an operations or procedures

manual.

5. While State asserts that it maintains frequent informal and formal

contact with the MFO, this contact has not resulted in close scrutiny of the

MFO’s use of U.S. contributions. For example, as we pointed out in our

report, State was unaware of several the MFO practices and revisions to

regulations that had the effect of increasing U.S. costs. These practices or

revisions were not discussed in any of the Trilateral meeting minutes,

external audit reports, or other forums relied upon by the State

Department for oversight such as informal discussions, and occasional

Page 55 GAO/NSIAD-95-113 Peacekeeping
Appendix III 

Comments From the Department of State

visits to Rome and the Sinai. While State disagreed with our conclusion on

the need for oversight, they accepted our recommendations.

6. State asserts that it formally reassesses the level of financial support to

the MFO annually in preparing the budget request to Congress for

Promoting Peace. However, in our view, this process does not constitute a

reassessment of U.S. contributions to the MFO. First, the budget request

cited only represents the U.S. one-third assessment and does not include

U.S. offset costs, excess defense items, and other DOD costs. Thus, State

does not assess the complete U.S. financial support package to the MFO as

State’s comment suggests. Second, the MFO budget submission has broad

categories of expenditures and lacks sufficient detail for a formal

assessment.

7. We disagree with State’s characterization of the oversight issues as

minor. Collectively, the four areas represent a significant management

weakness. While State may examine the MFO’s published financial

statements, the examination lacks the level of scrutiny required for

adequate oversight. As cited in the report, during our review, we found

several items in the MFO’s financial statements that went undetected by the

Near East Affairs Bureau for several years. In addition, State was unaware

of the total amount of outstanding MFO loans due to the United States

which in addition to being outstanding, were later written-off the MFO’s

financial records by the MFO. Only following our review and inquiry did

MFO reinstate these loans resulting in a $177,000 reduction in the U.S.

assessment. State was unaware that the Director General’s contract is

approved and signed by his subordinate, and has resulted in unique

arrangements for the designation of dependents and extension of benefits.

These unique arrangements all had the effect of increasing U.S. costs. In

addition, State oversight relies on the report of the MFO external auditor,

who is hired and directed by the Director General and has not been asked

to certify the MFO’s internal controls. A periodic internal control review

and careful State evaluation of the MFO’s financial reports would have

revealed these issues long before our review. Our recommendations would

improve States’ ability to ensure proper accountability of U.S. resources.

8. The fact that the MFO has never received an audit opinion that was

qualified due to a perceived failure of internal controls does not provide

State assurance that the MFO’s controls are adequate. As stated in our

report, the purpose of the annual external audit is to determine whether

the financial statements are free from material misstatement and not to

issue an opinion on the adequacy of internal controls. We revised our

Page 56 GAO/NSIAD-95-113 Peacekeeping
Appendix III 

Comments From the Department of State

recommendation in the report to cite that State should request the MFO

have its external auditors periodically (not annually) perform a separate

audit of the MFO’s management and internal accounting controls and

provide a copy of the resulting report to State. These periodic audits

would enhance State’s assurance that the MFO has adequate internal

controls in place to deter the misuse of funds.

Page 57 GAO/NSIAD-95-113 Peacekeeping
Appendix IV 

Comments From the Multinational Force

and Observers

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

See comment 1.

Page 58 GAO/NSIAD-95-113 Peacekeeping
Appendix IV 

Comments From the Multinational Force

and Observers

Page 59 GAO/NSIAD-95-113 Peacekeeping
Appendix IV 

Comments From the Multinational Force

and Observers

See comment 2.

See comment 3.

Page 60 GAO/NSIAD-95-113 Peacekeeping
Appendix IV 

Comments From the Multinational Force

and Observers

Page 61 GAO/NSIAD-95-113 Peacekeeping
Appendix IV 

Comments From the Multinational Force

and Observers

The following are GAO’s comments on the MFO’s letter dated May 18, 1995.

GAO Comments 1. We gave the MFO two opportunities to comment on the report during the

final stages of its drafting. As the MFO comments indicate, many of its

suggestions to both iterations have been incorporated where appropriate.

The MFO’s comments also noted that some incorrect material is included in

the report; however, the MFO chose not to provide us with specific

examples of what they view as inaccurate. There remain disagreements

between GAO and the MFO relating to the significance and interpretation of

various aspects of our review. For example whether, as the MFO asserts,

the annual Trilateral meeting, which is neither mandated in the Protocol

that established the MFO nor mentioned in subsequent side agreements to

which the United States is signature, constitutes formal executive

oversight. We believe it does not, and note in the report the character of

executive oversight in other duly constituted international organizations

vital to U.S. economic and national security interests, such as the North

Atlantic Council of North Atlantic Treaty Organization which is mandated

in the North Atlantic Treaty.

2. This information was not available at the time of our field work and

review; therefore, we could not analyze it for completeness and accuracy.

However, we do not take issue with the general thrust of the MFO

comments on its accomplishments.

3. We acknowledge that the MFO has implemented a number of

management initiatives to reduce operating costs while effectively

performing its mission.

Page 62 GAO/NSIAD-95-113 Peacekeeping
Appendix V 

Comments From the Department of Defense

Page 63 GAO/NSIAD-95-113 Peacekeeping
Appendix V 

Comments From the Department of Defense

Page 64 GAO/NSIAD-95-113 Peacekeeping
Appendix V 

Comments From the Department of Defense

Page 65 GAO/NSIAD-95-113 Peacekeeping
Appendix VI 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington

D.C.

LeRoy W. Richardson, Assistant Director

Gregory S. Nixon, Evaluator-in-Charge

Norman Thorpe, Senior Evaluator

Bill Stepp, Senior Evaluator

New York Regional

Office

Michael Gipson, Evaluator

(711067) Page 66 GAO/NSIAD-95-113 Peacekeeping
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