Global War on Terrorism: DOD Should Consider All Funds Requested for the War When Determining Needs and Covering Expenses
Published: 2005-09-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: To assist the Congress in its oversight role, GAO is undertaking a series of reviews on the costs of operations in support of the Global War on Terrorism (GWOT). In related work, GAO is raising concerns about the reliability of the Department of Defense's (DOD) reported cost data and therefore is unable to ensure that DOD's reported obligations for GWOT are complete, reliable, and accurate. In this report, GAO (1) identified funding for GWOT in fiscal years 2004 and 2005, (2) compared supplemental appropriations for GWOT in fiscal year 2004 to the military services' reported obligations, and (3) compared supplemental appropriations for GWOT in fiscal year 2005 to the military services' projected obligations.
section_title: What GAO Found
paragraphs: In fiscal years 2004 and 2005, DOD received funding for GWOT through both funds included in its annual appropriation and supplemental appropriations. In fiscal years 2004 and 2005, the military services received about $52.4 billion and $62.1 billion, respectively, in supplemental appropriations for GWOT (1) military personnel and (2) operation and maintenance expenses. The Army, Air Force, and Navy also received in their annual appropriations a combined $7.9 billion in fiscal year 2004 and a combined $7.6 billion in fiscal year 2005, which DOD described as being intended to support GWOT. The military services absorbed the increase into their annual appropriations and allocated it based on their judgment of where the funds were most needed. DOD's accounting systems, however, do not separately identify these additional appropriations, and there are no reporting requirements for DOD to identify to which appropriation accounts the funds were allocated; consequently, the military services have lost visibility over these funds and do not know the extent to which they are being used to support GWOT. Despite having asked for the increase to support GWOT, DOD is not explicitly counting these additional funds when considering the amount of funding available to cover GWOT expenses. For fiscal year 2004, regarding supplemental appropriations for GWOT military personnel expenses, the Navy and Marine Corps reported more in obligations than they received in supplemental appropriations, while the Army and Air Force received more in supplemental appropriations than their reported obligations. Each of the services reported more in GWOT operation and maintenance obligations than it received in supplemental appropriations. To cover the differences (gaps), DOD and the services exercised a number of authorities provided them, including transferring funds and reducing or deferring planned spending for peacetime operations. However, in considering the amount of funding available to cover the gaps, DOD did not explicitly take into account the funds provided through its annual appropriation that as previously noted it described as for the support of GWOT. If DOD had considered these funds, it could have reduced the Army's GWOT gap and eliminated the GWOT gaps of the Air Force and Navy. For fiscal year 2005, the services' forecasts of GWOT obligations for the full fiscal year as of June 2005 suggest a potential gap of $500 million for military personnel for the Air Force and potential gaps of about $2.7 billion and about $1 billion, respectively, for operation and maintenance for the Army and Air Force. To cover expenses, DOD and the services again plan to take a variety of actions, including reprogramming funds and reducing or deferring planned spending. However, DOD is again not explicitly considering the funds provided through its annual appropriation, which it described as for the support of GWOT. If counted in fiscal year 2005, the amounts potentially could reduce the Army's and eliminate the Air Force's GWOT gaps and eliminate the need for reprogramming funds and reducing or deferring planned spending.

section_title: Letter
paragraphs: Since the September 11, 2001, terrorist attacks, the Congress has provided  the Department of Defense (DOD) with more than $265 billion, as of  August 2005, in supplemental appropriations to support military operations  to combat terrorism worldwide. The Congress has also provided funds to  combat terrorism in DOD’s annual appropriation. Military operations to  defend the United States from terrorist attacks are known as Operation  Noble Eagle. Overseas military operations to combat terrorism are known  as Operation Iraqi Freedom, which takes place in and around Iraq, and  Operation Enduring Freedom, which takes place principally in Afghanistan.  These operations are known collectively as the Global War on Terrorism  (GWOT).
To assist the Congress in its oversight role, we have conducted under the  Comptroller General’s statutory authority a series of reviews on the  reported obligations and funding for military operations in support of  GWOT and have addressed this report to the congressional committees of  jurisdiction. Obligations are incurred through actions such as orders  placed, contracts awarded, services received, or similar transactions made  by federal agencies during a given period that will require payments during  the same or a future period. In July 2004, we issued a report that discussed  fiscal year 2004 obligations and funding through April 2004. This report  completes our analysis of fiscal year 2004 and includes our assessment of  the outlook for fiscal year 2005 obligations and funding for the war as of  May 2005. In this report, we (1) identified funding for GWOT in fiscal years  2004 and 2005; (2) compared supplemental appropriations for GWOT in  fiscal year 2004 to the military services’ reported obligations and, if  differences occurred, determined the actions DOD and the services took to  cover them; and (3) compared supplemental appropriations for GWOT in  fiscal year 2005 to the services’ projected obligations. Where it appeared  that obligations may exceed the supplemental appropriations provided in  fiscal year 2005, we sought to identify the actions DOD and the services  plan to take to cover the gaps. For purposes of this report, the term “gap”  refers to comparisons between funds provided in supplemental  appropriations and DOD’s reported GWOT obligations—specifically to  instances where DOD’s reported GWOT obligations exceed the  supplemental appropriations provided to the department during the fiscal  year. Because operational conditions on the ground can vary substantially  during the fiscal year, DOD’s actual funding needs may be more or less than  the amount initially estimated or received. As we discuss in this report,  DOD may address these differences (gaps) by using its annual  appropriations. There is no indication, however, that DOD incurred any  Antideficiency Act violations.
We limited our review to the obligation of funds appropriated for military  personnel and operation and maintenance, for both active and reserve  forces of the Army, Air Force, Navy, and Marine Corps, because they  represented the majority of the funds obligated in fiscal years 2004 and  2005, about 90 percent in each year. We did not review the obligation of  funds for investment, which are used for procurement; military  construction; and research, development, test, and evaluation.
To identify funding DOD describes as intended for GWOT, we reviewed  applicable annual and supplemental DOD appropriations in fiscal years  2004 and 2005. To compare supplemental appropriations provided to the  military services for GWOT to reported obligations in both fiscal years 2004  and 2005, we reviewed applicable supplemental appropriations and  compared them to the reported amounts obligated by each service. To  identify DOD’s reported GWOT obligations, we used DOD’s Supplemental  and Cost of War Execution Reports, which report DOD’s monthly and  cumulative GWOT obligations, and analyzed these data. These reports were  called the Consolidated Department of Defense Terrorist Response Cost  Reports through December 2004, and renamed beginning in January 2005.  We excluded classified programs from our review, because obligations for  those programs are not reported in DOD’s Supplemental and Cost of War  Execution Reports. To determine actions taken by DOD and the services to  cover any identified gaps between reported obligations and supplemental  appropriations for GWOT, we held discussions with DOD representatives  from the Office of the Under Secretary of Defense (Comptroller) and the  Army, Air Force, Navy, and Marine Corps.
We have previously reported concerns regarding DOD’s oversight and cost  reporting of funds appropriated for contingency operations. For example,  in May 2004 we reported that DOD’s cost reporting for GWOT included  large amounts of funds that have been reported as obligated in  miscellaneous categories and thus provide little insight on how those funds  have been spent, and in April 2003 we reported that DOD’s ability to track  the use of funds appropriated for GWOT has varying limitations depending  on the appropriation. In response, DOD has taken a number of steps to  improve its oversight and cost reporting of funds appropriated for  contingency operations. These actions include revising the Department of  Defense Financial Management Regulation in January 2005 to include  new cost reporting categories that refine the reporting of obligations  previously reported as miscellaneous.
GWOT obligations provided in this report are DOD’s claimed obligations as  reported in the Supplemental and Cost of War Execution Reports. In  related work, we have reported these data to be of questionable reliability.  For example, we found financial management systems with acknowledged  weaknesses, a lack of systematic processes to ensure accurate data entry,  failure to use actual data when it was available, and improperly categorized  costs. Therefore, we are unable to ensure that DOD’s reported obligations  for GWOT are complete, reliable, and accurate. Consequently, the gaps we  identify between supplemental appropriations and DOD’s reported  obligations may not reliably reflect true differences between supplemental  appropriations and obligations and therefore should be considered  approximations. Despite the uncertainty about the obligation data, we are  reporting the information because it is the only data available on overall  GWOT costs and so the only way to approach an estimate of the costs of  the war. Also, despite the uncertainty surrounding the true dollar figure for  obligations, these data are used to advise the Congress on the cost of the  war. As such, obligation data provided in this report reflect DOD reported  obligations, however unreliable those reports may be.
We conducted our review from November 2004 through August 2005 in  accordance with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: About 90 percent of the costs associated with GWOT fall into two  accounts—military personnel and operation and maintenance. Military  personnel funds provided to support GWOT cover the pay and allowances  of mobilized reservists as well as special payments or allowances for all  qualifying military personnel, both active and reserve, such as Imminent  Danger Pay and Family Separation Allowance. Operation and maintenance  funds provided to support GWOT are used for a variety of purposes,  including transportation of personnel, goods, and equipment; unit  operating support costs; and intelligence, communications, and logistics  support.
We have reported on several occasions, including in 1999 and 2003, that  estimating the cost of ongoing military operations is difficult. This is  because operational requirements can differ substantially during the fiscal  year from what was assumed in preparing budget estimates. The result can  be that operations can cost more or less than originally estimated. If  operations cost more than originally estimated, DOD may use a number of  authorities provided to it, including transferring and reprogramming funds  and reducing or deferring planned spending for peacetime operations, to  meet its needs. DOD uses “transfer authority” to shift funds between  appropriation accounts, for example, between military personnel and  operation and maintenance. Transfer authority is granted by the Congress  to DOD usually pursuant to specific provisions in authorization or  appropriation acts. The ability to shift funds within a specific  appropriation account, like operation and maintenance, is referred to as  “reprogramming.” In general, DOD does not need statutory authority to  reprogram funds within an account as long as the funds to be spent would  be used for the same general purpose of the appropriation and the  reprogramming does not violate any other specific statutory requirements  or limitations. For example, DOD could reprogram operation and  maintenance funds originally appropriated for training to cover increased  fuel costs because both uses meet the general purpose of the operation and  maintenance account, as long as the shift does not violate any other  specific statutory prohibition or limitation.
section_title: Funding for GWOT in Fiscal Years 2004 and 2005 Was Provided in Annual and Supplemental Appropriations
paragraphs: In fiscal years 2004 and 2005, the military services received about  $52.4 billion and about $62.1 billion, respectively, in supplemental  appropriations for GWOT military personnel and operation and  maintenance expenses. The Army, Air Force, and Navy also received funds  for GWOT through their annual appropriations. However, DOD and the  military services have lost visibility over these funds provided through  annual appropriations, including knowing how much, if any, was used to  support GWOT in fiscal years 2004 and 2005.
subsections: section_title: Supplemental Appropriations for GWOT
paragraphs: As shown in table 1, DOD received funding through supplemental  appropriations to support GWOT in both fiscal years 2004 and 2005.
To pay for the military personnel and operation and maintenance costs of  GWOT in fiscal year 2004, the Congress appropriated about $52.4 billion to  DOD. Of the $52.4 billion, the Congress provided the military services  about $50.4 billion in the Emergency Supplemental Appropriations Act for  Defense and for the Reconstruction of Iraq and Afghanistan, 2004. In  addition, the services used $120 million of the funds provided in late fiscal  year 2004 through Title IX of the Department of Defense Appropriations  Act, 2005.
DOD also transferred about $1.9 billion from funds originally appropriated  to the Iraqi Freedom Fund. The Iraqi Freedom Fund provides 2-year funds  that can be transferred to the services’ accounts for additional expenses for  ongoing military operations in Iraq, operations authorized by the Authorization for Use of Military Force, and other operations and related  activities in support of GWOT. Of the $1.9 billion, about $860 million was  provided through the Emergency Wartime Supplemental Appropriations  Act, 2003, while about $1.1 billion was provided through the Emergency  Supplemental Appropriations Act for Defense and for the Reconstruction  of Iraq and Afghanistan, 2004.
For fiscal year 2005, the military services had about $62.1 billion available  to pay for the military personnel and operation and maintenance costs of  GWOT. Of this, the Congress appropriated about $44.5 billion through the  Emergency Supplemental Appropriations Act for Defense, the Global War  on Terror, and Tsunami Relief, 2005. The military services also had the  remaining balance—about $17.3 billion—that was provided through Title  IX of the Department of Defense Appropriations Act, 2005, and was  available for obligation in fiscal year 2005 to help pay for the military  personnel and operation and maintenance costs of GWOT. In addition, as of  July 2005, DOD had transferred about $348 million from funds originally  appropriated to the Iraqi Freedom Fund.
section_title: Some Annual Appropriations Described by DOD as for GWOT
paragraphs: In addition to funds DOD received through supplemental appropriations  for GWOT, beginning in fiscal year 2003, the administration increased  DOD’s annual appropriation request by more than $10 billion per year. DOD  described these funds as being intended to support GWOT. According to a  representative from the Office of the Under Secretary of Defense  (Comptroller), in December 2001 the President directed that his annual  budget submission for DOD be increased by about $10 billion annually to  support GWOT. Consequently, Program Budget Decision 736, entitled  Continuing the War on Terrorism and dated January 31, 2002, was  approved by the Under Secretary of Defense (Comptroller). Program  Budget Decision 736 provided for increasing DOD’s annual budget request  in the amount of more than $10 billion per year plus inflation in fiscal years  2003 through 2007 to enhance the department’s efforts to respond to, or  protect against, acts or threatened acts of terrorism against the United  States. According to a DOD representative, unless action is taken to reduce  these funds in future budgets, Program Budget Decision 736 provides for a  permanent increase of about $10 billion per year plus inflation to DOD’s  annual budget request to support military operations in the war on  terrorism.
As shown in table 2, in fiscal years 2004 and 2005, the Army, Air Force, and  Navy received additional funds in their annual appropriations—a total of  about $7.9 billion in fiscal year 2004 and about $7.6 billion in fiscal year  2005—which DOD described as for support of military operations in the  war on terrorism. According to DOD representatives, the Marine Corps did  not receive an increase to its annual appropriation through Program  Budget Decision 736.
Under Program Budget Decision 736, a number of DOD programs were to  receive increases in their proposed annual budgets in both fiscal years 2004  and 2005. For example, in fiscal year 2004, Program Budget Decision 736  indicates that about $2.1 billion was for counterterrorism and force  protection efforts, about $1.2 billion for combat air patrols over U.S. cities,  and about $600 million for such things as depot maintenance and spare  parts. Program Budget Decision 736 indicates funds were to be provided to  these programs and others in fiscal years 2005 through 2007 as well.  According to representatives of the Office of the Under Secretary of  Defense (Comptroller), some of the funds in Program Budget Decision  736 were intended to cover costs associated with Operation Noble Eagle  while others were intended to cover costs associated with Operation  Enduring Freedom.
For fiscal years 2004 and 2005, an Office of the Under Secretary of Defense  (Comptroller) representative stated the additional funds provided through  Program Budget Decision 736 were in the military services’ various  appropriations accounts. However, the Office of the Under Secretary of  Defense (Comptroller) has no specific information about which programs  or activities actually received the funds or how they were eventually  expended, including whether they were used in support of GWOT. Once the  services received these additional funds, they allocated them to their  appropriations accounts based on their judgment of where the funds were  most needed. DOD’s accounting systems do not separately identify which  appropriations accounts received these funds, and there are no reporting  requirements for DOD to identify to which appropriation accounts the  funds were allocated. While the military services also stated they received  their share of the Program Budget Decision 736 funds as part of their fiscal  year 2004 and fiscal year 2005 annual appropriations and that some of the  funds were used for war-related expenses, they too could not identify  which programs or activities received the funds and could not document  what portion of these funds were used for war-related expenses. As a  result, although DOD requested these funds to support GWOT, DOD and  the military services cannot be certain that they were actually used to  support GWOT-related activities.
In developing the fiscal year 2005 request for supplemental appropriations  to support GWOT, DOD took steps to adjust the request to reflect the  receipt of funds provided through Program Budget Decision 736. In a  November 2004 memorandum requesting that all DOD components provide  their GWOT supplemental appropriations estimates for fiscal year 2005, the  Office of the Under Secretary of Defense (Comptroller) stated the  following with respect to funds that had already been provided through  Program Budget Decision 736:  Funding for GWOT missions previously added to the baseline budget  (e.g., Program Budget Decision 736, Continuing the War on Terrorism)  should be explicitly identified as a reduction to funding requests in  those areas, as appropriate.
Component requests must consider that that some funding is already in  the baseline accounts. Program Budget Decision 736 provided funds for  antiterrorism, continental United States combat air patrols, and force  protection. The components’ submissions should show the total  requirement and note the level of funding already in the baseline for this  purpose. The supplemental request will net out the available funding.
In the November 2004 memorandum the Office of the Under Secretary of  Defense (Comptroller) further stated that the emergency supplemental  appropriations request will address the incremental costs above the  baseline funding needed to support specific forces and capabilities  required to execute Operation Iraqi Freedom, Operation Enduring  Freedom, and portions (to be determined) of Operation Noble Eagle. DOD  described Operation Noble Eagle as including defending the United States  from airborne attacks and maintaining U.S. air sovereignty. This operation  had been included in the supplemental appropriations request for fiscal  year 2004.
None of the military services provided the information requested in the  November 2004 memorandum and instead the services requested funds for  Operation Noble Eagle. Service budget representatives told us that  Program Budget Decision 736 funds were considered as base program (e.g.,  annual appropriations) issues and not supplemental candidates. According  to service budget representatives, they requested funds for Operation  Noble Eagle in fiscal year 2005 that were in addition to the funds provided  through Program Budget Decision 736. For example, the Navy requested  $53.3 million for incremental requirements above its baseline request. The  Army requested more than $1 billion in incremental requirements above its  baseline. However, in preparing the fiscal year 2005 supplemental  appropriations budget request, the Office of Management and Budget did  not include Operation Noble Eagle in the President’s budget request  because funds had already been included in DOD’s annual appropriation, as  described in Program Budget Decision 736.
section_title: Most Fiscal Year 2004 Supplemental Appropriations for GWOT Were Less Than Reported Obligations; However, DOD Is Not Explicitly Counting Additional Funds Requested for GWOT in Its Annual Appropriation
paragraphs: In fiscal year 2004, the difference between supplemental appropriations  available to the military services for GWOT military personnel and  operation and maintenance expenses compared to reported obligations  varied by service. For military personnel, the Navy and Marine Corps  reported more in obligations than they received in supplemental  appropriations, while for operation and maintenance each of the military  services reported more in obligations than it received in supplemental  appropriations. To cover the differences (gaps), DOD and the military  services took several actions, including transferring funds and reducing or  deferring planned spending for peacetime operations. In the case of the  Army and Air Force, which each received supplemental appropriations that  exceeded its reported obligations for military personnel, this included  transferring $801 million and $113 million, respectively, to cover their  GWOT operation and maintenance expenses. In some instances, these  actions reduced DOD’s flexibility to cover potential gaps in fiscal year 2005.  DOD did not explicitly take into account the GWOT funds provided through  its annual appropriation that DOD requested for GWOT to help cover the  gaps. If it had taken these funds into account it could have reduced the  Army’s GWOT gap, eliminated the GWOT gaps of the Air Force and Navy,  and been able to defer fewer activities.
subsections: section_title: Difference between Reported GWOT Obligations and Fiscal Year 2004 Supplemental Appropriations for GWOT Varied by Service
paragraphs: Within the military personnel accounts, as shown in table 3, the Navy and  Marine Corps reported more obligations in support of GWOT than they  received in supplemental appropriations. However, these reported gaps  were a relatively small portion of the services’ annual military personnel  appropriations. For example, the Navy’s reported gap of $40.4 million  represents less than 1 percent of its annual military personnel  appropriation. In fiscal year 2004, both the Army and Air Force received  supplemental appropriations that exceeded their reported obligations for  military personnel. The Army and Air Force used these funds to cover  operation and maintenance expenses related to GWOT, as discussed below.
Within the operation and maintenance accounts, as shown in table 4, in  fiscal year 2004 each of the military services reported more in GWOT  obligations than it received in supplemental appropriations. The Army  reported the largest gap, about $4.3 billion, while the Air Force and Navy  reported gaps of $579 million and about $618 million, respectively. The  Marine Corps reported the smallest gap, about $195 million.
section_title: Variety of Actions Were Taken to Cover the Military Services’ GWOT Gaps in Fiscal Year 2004
paragraphs: To cover the military services’ gaps between reported fiscal year 2004  obligations and supplemental appropriations, the Office of the Under  Secretary of Defense (Comptroller) and the military services used a  number of authorities provided to them, including transferring funds and  reducing or deferring planned spending for peacetime operations. While  involving hundreds of millions or sometimes billions of dollars, in  discussing the actions taken to cover the gaps, some service  representatives noted that the gaps represented a small percentage of their  annual appropriations. Within the services’ annual operation and  maintenance accounts we found that the gaps varied by service, ranging  from a low of 1.7 percent of the Air Force’s annual operation and  maintenance appropriation to a high of 13.7 percent of the Army’s annual  operation and maintenance appropriation. In the services’ annual military  personnel accounts, all the gaps were less than 1 percent of their annual  military personnel appropriations. However, DOD did not explicitly take  into account the funds provided through its annual appropriations that it  intended for support of GWOT. As discussed earlier, since DOD’s  accounting systems do not separately identify the portion of the  department’s annual appropriations that were described as having been  requested to support GWOT and there are no reporting requirements for  DOD to identify to which appropriation accounts the funds were allocated,  the military services have lost visibility over these funds and do not know  the extent to which they are being used to support GWOT. Consequently,  despite having asked for the increase, DOD is not explicitly counting these  additional funds when considering funding for GWOT and alternatively  took actions that affected its peacetime operations, which may create  spending pressures in fiscal year 2005 and later.
subsections: section_title: Military Service Actions to Address Fiscal Year 2004 GWOT Needs
paragraphs: Each of the military services projected a gap between reported obligations  and supplemental appropriations at its midyear budget review. Service  representatives told us these projected gaps were reduced over the course  of fiscal year 2004 by reviewing their GWOT requirements and, in some  instances, seeking to reduce or defer planned spending. With respect to the  GWOT gaps faced by the services in fiscal year 2004, we were told the  following:  For fiscal year 2004, the Army’s reported obligations in its operation and  maintenance account exceeded its supplemental appropriations by  about $4.3 billion, substantially less than the $10.9 billion it had  projected in the account at its midyear budget review. To cover the  $4.3 billion, DOD and the Army took a number of actions, including  using internal resources and passing the remaining amount on to the  Army’s major commands to be absorbed by reducing or deferring  planned peacetime spending to meet its GWOT needs. More specifically,  to cover the Army’s gap, the Under Secretary of Defense (Comptroller)  transferred about $3 billion from the working capital funds of the  Army, Air Force, and Navy—including $1.3 billion from the Army, about  $1.5 billion from the Air Force, and $200 million from the Navy. In  addition, about $801 million was transferred from the Army’s military  personnel account to help cover the gap in the Army’s operation and  maintenance account, while about $500 million was transferred from  other DOD-wide accounts. The major Army commands absorbed the  remainder. For example, to cover its portion of the gap, the Army  Materiel Command reprioritized or deferred about $184 million in depot  maintenance until fiscal year 2005 for such programs as the Patriot and  Hellfire missile systems. It also reduced or deferred the number of  available training hours for some of its nondeployed units. However,  Army Materiel Command representatives told us that in some instances,  the training hours they deferred to help cover the fiscal year 2004 gap  were deferred until fiscal year 2006.
The Air Force’s gap in its operation and maintenance account of about  $579 million was substantially less than the $1.5 billion it had projected  in the two accounts at its midyear budget review. To cover the $579 million gap, the Air Force took a number of actions, including  transferring $113 million in funds available in its overall military  personnel appropriation account, decreasing peacetime flying hours,  reducing depot maintenance, and deferring facility sustainment  restoration and modernization projects until fiscal year 2005. The Air  Force’s major commands also absorbed a portion of the gap. For  example, the Air Combat Command absorbed its share of the GWOT  gap, about $92 million, by reducing or deferring its fiscal year 2004  peacetime spending. Approximately $46 million, or half of the Air  Combat Command’s $92 million share of the gap, was covered by  reducing its peacetime flying hour program by about 6,800 hours. While  reducing its peacetime flying hours helped the Air Combat Command  cover its portion of the gap, Air Combat Command representatives told  us the reduced training opportunities created a training backlog, which  could affect pilot readiness for future combat missions.
The Navy’s combined gap for fiscal year 2004 of about $659 million in its  military personnel and operation and maintenance accounts was less  than its midyear projection of $931 million. To cover the $659 million  gap, the Navy canceled some peacetime spending, including various  nonreadiness operation and maintenance spending and various  infrastructure projects. Of the Navy’s major commands, the Atlantic  Fleet and Pacific Fleet absorbed the largest share of the gap for fiscal  year 2004. For example, the Atlantic Fleet absorbed about $110 million  by reducing air operations and ship depot maintenance activities. Navy  budget representatives noted that the gap represented about 1 percent  of the total baseline funding available for aircraft operations and ship  depot maintenance for the Navy in that fiscal year. In addition, the Navy  canceled or deferred procurement actions for the MH-60R Seahawk  helicopter, V-22 Osprey, F/A-18 Hornet, and Joint Tactical Radio System.
The Marine Corps’ combined gap in its military personnel and operation  and maintenance appropriations accounts of about $225 million for  GWOT in fiscal year 2004 was also less than the $446 million projected  at its midyear budget review. To cover the $225 million gap, the Marine  Corps reduced or deferred spending in noncritical areas, such as facility  improvements. The Navy provided the Marine Corps with funds from its  base operating support and facilities sustainment restoration and  modernization appropriations accounts and with $121 million that was  transferred to the Navy from the U.S. Transportation Command’s  Working Capital Fund. According to Marine Corps representatives, a  portion of the gap was also absorbed by the Marine Corps’ annual  military personnel and operation and maintenance appropriations  accounts.
The Navy provided us a detailed discussion of the process used in  addressing gaps. A Navy budget representative said that the Navy analyzed  its entire $116.8 billion in baseline funding (which includes both the  original $114 billion baseline and the added $2.8 billion for Program Budget  Decision 736 initiatives) as potential financing sources for its GWOT needs.  According to the Navy representative the Navy’s internal analysis first  looked at funding flexibility in baseline programs resulting from changes in  current year execution. For example, certain baseline program  requirements change from year to year as a result of development issues,  schedule and implementation delays, manufacturing problems, changes in  requirements or inventory levels, and labor disputes. The accumulated  value of those changes in a given execution year, such as fiscal year 2004,  may have made any financial resources excess to fiscal year 2004  requirements available to fund GWOT needs. Although their specific  identification as such would be lacking, they stated that previously  baselined Program Budget Decision 736 requirements could have been  included, by implication, as part of those deliberations. For example, by the  end of fiscal year 2004, based on delayed execution, about $136 million was  reallocated from base infrastructure support, maintenance, and repair to  fund Operation Iraqi Freedom costs. If insufficient funding sources were  identified as part of an execution analysis, then it would be necessary to  make affirmative decisions about reducing baseline programs to fund the  balance of the GWOT needs. Those reductions, for the most part, had  subsequent programmatic and financial impacts. Those changes required  to support the increased GWOT needs were monitored and approved by the  Office of the Under Secretary of Defense (Comptroller) staff during their  annual budget and execution reviews. Some of the changes were  recoverable (such as specific procurement and depot maintenance items  considered deferrable and that could be funded with a subsequent year's  money) and some changes were nonrecoverable (items considered  nondeferrable current expenses, where the performance period has lapsed,  but for which a subsequent year's funding is now available to fully meet  that year’s requirements). For example, of the Navy and Marine Corps’  approximately $1.6 billion in absorbed costs in all appropriation accounts  for the Department of the Navy ($1.4 billion was for Navy items,  $200 million was for Marine Corps items), nearly 40 percent of the fiscal  year 2004 requirements were considered recoverable with subsequent  year’s funding. This included $200 million for drawing down the Navy  Working Capital Fund, which was included in the Navy’s fiscal year 2005  supplemental appropriations request.
As previously discussed, DOD used the military services’ working capital  funds as a source of cash to provide funds for GWOT expenditures in fiscal  year 2004. DOD’s working capital funds finance the operations of two  fundamentally different types of support organizations: stock fund  activities, which provide spare parts and other items to military units and  other customers, and industrial activities, which provide depot  maintenance, research and development, and other services, such as those  provided by the Defense Financial Accounting Service, Defense  Information Systems Agency, Defense Commissary Agency, and U.S.  Transportation Command. In fiscal year 2004, DOD transferred about  $3 billion from the military services’ working capital funds to help cover the  Army’s gap between reported obligations and supplemental appropriations.
While such transfers from the services’ working capital funds helped DOD  cover its fiscal year 2004 gap, the transfers have left few working capital  funds available to be used in fiscal year 2005. For example, to help cover  the Army’s operation and maintenance gap, about $980 million was  transferred from the U.S. Transportation Command’s Transportation  Working Capital Fund during fiscal year 2004. This transfer was made  possible due to a surplus of transportation charges collected from the  military services by the U.S. Transportation Command during the year.  However, a U.S. Transportation Command representative told us the  transfers have left the fund’s balance below the minimum goal of  $517 million. Specifically, with the transfer of almost $1 billion in fiscal  year 2004 to help cover the Army’s operation and maintenance gap, as of  July 2005, there was only $168 million remaining in the fund, well below the  minimum goal for the year. Further, the representative stated that the  projected fund balance for the end of fiscal year 2005 is about $231 million,  still below the minimum goal.
section_title: DOD Did Not Explicitly Account for Funds Provided through Its Annual Appropriation That It Described as for GWOT When Determining How to Cover Its Fiscal Year 2004 Gaps
paragraphs: In determining how to cover the gaps between the services’ supplemental  appropriations and reported GWOT obligations for military personnel and  operation and maintenance expenses, DOD did not explicitly take into  account the almost $7.9 billion in funds the Army, Air Force, and Navy  received in their annual appropriations through Program Budget Decision  736 to help fund GWOT. This includes $1.3 billion received by the Army,  $3.5 billion received by the Air Force, and $3 billion received by the Navy. If  counted in fiscal year 2004 and applied to the services’ military personnel  and operation and maintenance accounts, these amounts could have  reduced the Army’s need to transfer funds from other activities and  eliminated the GWOT gaps for the Air Force and the Navy, as shown in  table 5. However, the services acknowledge that they have lost visibility  over the Program Budget Decision 736 funds after fiscal year 2003 and do  not know whether any of the funds were used in support of GWOT.
We discussed our analysis with DOD representatives at each of the  services’ budget offices, who disagreed with our depiction of Program  Budget Decision 736. These representatives believed that our analysis  should take into account the fact that the funds provided through Program  Budget Decision 736 were included in DOD’s baseline budget and therefore  were already taken into account when considering funds available for  GWOT. Service budget representatives made the following observations  regarding the Program Budget Decision 736 funds:   Once merged into those baseline budgets, full justification for funding is  provided in the annual President’s budget request. For example,  increased funding for additional security personnel and physical  security equipment were merged with existing program lines and not  subsequently separately identified as to how they were initially funded  or sustained over the years.
Once the Program Budget Decision 736 funds were in the baseline  budget, they were not in support of specific contingency operations, for  which the Department of Defense Financial Management Regulation,  Volume 12, Chapter 23, Contingency Operations, requires separate  documentation and execution tracking, and no such requirement exists  for “baselined” funds, other than the annual justification exhibits. That  is, Chapter 23 only requires reporting incremental costs (costs not  already in the baseline), and not total costs.
Subsequent to Program Budget Decision 736 additional requirements  were placed on the services fiscal year 2004-2009 spending program  without accompanying funds. To meet these requirements service  budget representatives said that they looked in part to the funds  provided in Program Budget Decision 736.
We recognize that DOD’s annual budget submissions include justification  for all the department’s activities, including those funded through Program  Budget Decision 736. However, the funds provided through Program  Budget Decision 736 were identified as being in support of GWOT. While  service budget representatives noted that the documentation and tracking  requirements contained in the Department of Defense Financial  Management Regulation, Volume 12, Chapter 23, Contingency Operations,  do not apply to the funds provided through Program Budget Decision 736,  we believe that DOD should have been tracking these funds in light of their  connection to GWOT. While the services’ budget representatives told us  that they took the funds provided through Program Budget Decision 736  into account in addressing GWOT funding needs, we note that once these  funds were merged into the services’ baseline budgets visibility was lost so  there is no assurance as to how the funds were taken into account or used.
section_title: Fiscal Year 2005 Reported Obligations for GWOT Could Exceed Supplemental Appropriations, Requiring the Military Services to Use Authorities Provided to Them to Cover the Differences
paragraphs: Our analysis of the military services’ reported obligations for the first 8  months of fiscal year 2005 and the military services’ forecasts as of June  2005 of full fiscal year 2005 costs suggest the services’ military personnel  and operation and maintenance GWOT obligations could exceed available  supplemental appropriations for the war in some accounts. Our projections  of reported GWOT obligations through May 2005 suggest the services  should have sufficient supplemental appropriations for military personnel  expenses in fiscal year 2005 but that there could be gaps for operation and  maintenance expenses for the Army and the Marine Corps. The services’  more detailed forecasts suggest a gap for military personnel expenses for  the Air Force of about $500 million, and gaps for operation and  maintenance expenses for the Army and Air Force of about $2.7 billion and  about $1 billion, respectively. The Marine Corps expects its supplemental  appropriations will be sufficient to cover its GWOT costs. To cover any  gaps and meet its GWOT needs, DOD and the services plan to take a variety  of actions, including reprogramming funds from annual appropriations and  reducing or deferring planned spending for peacetime operations.
subsections: section_title: Supplemental Appropriations for GWOT Military Personnel Costs in Fiscal Year 2005 Should Be Sufficient for All Services Except for the Air Force
paragraphs: Our assessment of reported obligations in fiscal year 2005 through May  2005 suggests that the military services should have sufficient  supplemental appropriations for military personnel expenses in fiscal year  2005. As figure 1 shows, with 8 months, or about 67 percent, of the fiscal  year gone, the Marine Corps has obligated 46 percent of its available  supplemental appropriations; the Army 54 percent; and the Air Force and  Navy 58 percent each.
section_title: Projections of GWOT Obligations through May 2005 Suggest Supplemental Appropriations for Some Operation and Maintenance Accounts Are Not Likely to Be Sufficient
paragraphs: Our assessment of reported obligations within the military services’  operation and maintenance accounts through May 2005 suggests that the  supplemental appropriations provided to the services for GWOT should be  sufficient for the Air Force and Navy but not for the Army and Marine  Corps. As shown in figure 2, the percentage of available supplemental  appropriations obligated in the services’ operation and maintenance  accounts as of May 2005, ranged from 49 percent for the Navy and 52  percent for the Air Force to 71 percent for the Army and the Marine Corps.  We recognize that funds are not obligated equally each month throughout  the fiscal year. However, we believe that the further into the fiscal year the  closer to 100 percent obligations should be relative to appropriations if all  appropriated funds are likely to be obligated. Consequently, given these  obligation rates, we believe that if the Army and Marine Corps continue to  obligate funds at the current rate or higher, their reported obligations  within the operation and maintenance accounts could exceed available  supplemental appropriations in fiscal year 2005, requiring them to use  other authorities provided to them to cover the difference. However, as  discussed below, the Air Force believes it will have an operation and  maintenance gap, while the Marine Corps believes it will have sufficient  funds for operation and maintenance.
section_title: Fiscal Year 2005 Midyear Budget Review Forecasts of the Military Services
paragraphs: Each of the military services completed a midyear budget review for the  Office of the Under Secretary of Defense (Comptroller), including a  forecast of its full fiscal year 2005 GWOT needs. The Army concluded that  it would not have sufficient supplemental appropriations to cover its  projected GWOT operation and maintenance obligations, while the Air  Force indicated its combined military personnel and operation and  maintenance obligations would exceed available supplemental  appropriations. With respect to the Army’s and Air Force’s midyear budget  review projections:  The Army forecast a GWOT gap of about $2.7 billion in its operation and  maintenance account, of which a large component—about $1 billion—is  attributed to higher fuel costs due to, among other things, the increase  in June 2005 of DOD’s composite fuel rate from $56.28 per barrel to  $73.08. Other components of the forecasted gap include support of the  Army’s modular force initiative; higher spending in the second half of  fiscal year 2005 as compared to the first half, resulting from deferred  spending early in the fiscal year; and higher spending on recruiting and  retention efforts, primarily for the Army Reserve. According to the  Army, the modular force initiative and its reconstitution and reset  efforts are being treated as GWOT costs in fiscal year 2005.
The Air Force forecast a GWOT gap of about $500 million in its military  personnel account and about $1 billion in its operation and maintenance  account, for a total gap of about $1.5 billion. Air Force representatives  attributed the gap in its military personnel account primarily to having  higher-than-anticipated end-strength levels, and stated that the $1 billion  gap in its operation and maintenance account is to replenish the  Transportation Working Capital Fund, which was drawn down last year  to help cover the Army’s fiscal year 2004 GWOT gap. Regarding the  projected military personnel gap, Air Force representatives stated that  funds were subsequently transferred to pay for prior obligations at  higher-than-anticipated end-strength levels. Since then, the Air Force  has corrected the end-strength imbalance and expects to be within end  strength for GWOT during the remainder of the fiscal year. As a result of  these actions, Air Force representatives no longer project a military  personnel gap for GWOT in fiscal year 2005.
The Navy projected a small gap of about $36 million for GWOT at the time  of its midyear budget review, which it has since covered with cost savings  from shifting the bulk of its transportation of equipment and supplies from  air to sea. The Marine Corps indicated that its supplemental appropriations  should be sufficient to cover reported GWOT obligations for fiscal year  2005. In considering the services’ midyear budget reviews, our analysis of  the Navy and Marine Corps GWOT obligations indicates substantial under  execution in the Navy’s operation and maintenance account and the Marine  Corps’s military personnel account. In response, the Navy stated that it  expects its rate of obligating GWOT funds to increase toward the end of  fiscal year 2005 due to, among other things, providing additional support in  theatre and on the ground in Iraq as part of Joint Sourcing. According to a  Navy representative, the Navy had about 5,000 personnel stationed on the  ground in Kuwait, Iraq, and Afghanistan at the end of fiscal year 2004. By  the end of fiscal year 2005, the Navy plans to have about 8,500 personnel in  theatre with the additional personnel having begun to deploy in May 2005.  The Marine Corps stated it expects to obligate an additional $220 million in  military personnel funds due to the new death gratuity benefit, while  another $265 million in military personnel funds will be used to replenish  the Marine Corps’s annual appropriation for funds reprogrammed earlier in  the fiscal year to buy additional body-armor and other equipment to  counter the use of improvised explosive devices in Iraq.
section_title: DOD Plans to Take a Variety of Actions to Address Its Fiscal Year 2005 GWOT Needs
paragraphs: To cover the forecasted GWOT needs for fiscal year 2005, DOD, the Army,  and the Air Force have identified a number of steps they plan to take. These  include exercising a number of authorities provided to them, such as  transferring and reprogramming funds from annual appropriations and  reducing or deferring planned spending for peacetime operations.
The Army, the service with the largest forecasted gap in its operation and  maintenance account, plans to take a variety of actions to meet its fiscal  year 2005 GWOT funding needs. Some actions include taking steps to  transfer or reprogram funds. For example, DOD reprogrammed more than  $800 million in funds in May 2005 from the military personnel accounts of  the Air Force, Navy, Marine Corps, and Army National Guard, and  $250 million from the Army’s Working Capital Fund, to the Army to meet  urgent GWOT needs. Other actions the Army plans to take to help fund  GWOT in fiscal year 2005 involve reducing or deferring current costs. For  example, the Army reports that it has been able to reduce its fiscal year  2005 Logistics Civil Augmentation Program (LOGCAP) contract costs by  about $890 million by reviewing and reducing current LOGCAP  requirements. In discussing its plans to meet its fiscal year 2005 GWOT  needs, the Army plans to use any surplus funds in its working capital fund  to help cover any fiscal year 2005 GWOT gaps. However, due to the  transfers from the services’ working capital funds to cover the fiscal year  2004 gaps, as discussed above, few assets remain elsewhere to cover the  Army’s fiscal year 2005 GWOT gap. Should the Army’s GWOT gap be larger  than forecasted, the Army may have to absorb the difference in its annual  appropriation.
The Air Force also plans to take a variety of actions to address the gap  between its supplemental appropriations and reported operation and  maintenance obligations for GWOT. These include decreasing peacetime  flying hours by $700 million, reducing or deferring depot maintenance  activities by $400 million, and freezing activities involving facility  sustainment and restoration modernization projects. Other areas that could  be targeted for cost reductions or deferments include noncritical travel and  other supplies and equipment.
section_title: DOD Is Not Explicitly Considering Funds in Its Annual Appropriations for GWOT to Cover Its Projected Fiscal Year 2005 Gaps
paragraphs: To meet its GWOT needs in fiscal year 2005, DOD is again not explicitly  considering the Program Budget Decision 736 funds to support GWOT that  were provided to the military services through their annual appropriations.  However, as discussed earlier, unlike in fiscal year 2004, in fiscal year 2005  some of the funds provided in Program Budget Decision 736 are being used  to fund Operation Noble Eagle, which had previously been funded as part  of GWOT through supplemental appropriations. In fiscal year 2004 DOD  had included $2.2 billion in its budget request for Operation Noble Eagle.  Adjusting for Operation Noble Eagle at the fiscal year 2004 funding level  would result in more than $5.4 billion in funds included in Program Budget  Decision 736 in support of GWOT for the military services remaining  available in fiscal year 2005. If counted in fiscal year 2005, the amounts  potentially could reduce the need for reprogrammings from other activities  and could reduce the Army’s and eliminate the Air Force’s GWOT gaps.  Instead, as in fiscal year 2004, the Office of the Under Secretary of Defense  (Comptroller) and the military services will again meet those needs by  taking actions that may affect DOD’s peacetime operations, such as  reducing or deferring planned spending. In some instances, these funding  reductions and deferments could add to future spending pressures in fiscal  year 2006 or potentially in later years and run the risk of producing a large  “bow wave” of requirements. This can have both short-term and long-term  impacts. In the short term, deferring spending can lead to higher costs than  expected later in the current fiscal year, which may need to be covered by  additional transfers and reprogrammings. In the long term, continued  deferments can lead to higher costs.
section_title: Conclusions
paragraphs: The extent to which one considers that GWOT funding has been sufficient  depends on whether one counts both funding provided through  supplemental appropriations and funding included in DOD’s annual  appropriation, which DOD requested for GWOT. The administration  increased DOD’s annual appropriation request by more than $10 billion  annually beginning in fiscal year 2003 to support GWOT, with the military  services receiving about $7.9 billion of that amount in fiscal year 2004 and  about $7.6 billion in fiscal year 2005. The military services absorbed the  increase into their annual appropriations and allocated it based on their  judgment of where the funds were most needed. Since DOD’s accounting  systems do not separately identify these additional appropriations and  there are no reporting requirements for DOD to identify to which  appropriation accounts the funds were allocated, the military services have  lost visibility over these funds and do not know the extent to which they  are being used to support GWOT. Consequently, despite having asked for  the increase, DOD is not explicitly counting the more than $10 billion when  considering funding for GWOT. In fiscal year 2004, the military services  reported obligations in support of GWOT that were above the supplemental  funds appropriated by the Congress. In response, DOD used authorities  granted to it, including transferring funds and reducing or deferring  planned spending for peacetime operations, to cover the gaps. However, if  the additional funds that were included in DOD’s annual appropriation to  help fund the war are included in the analysis, those funds could potentially  have reduced the Army’s gap and eliminated the gap for the Air Force and  Navy in fiscal year 2004. In fiscal year 2005, the Army and the Air Force are  again projecting obligations for the war above their supplemental  appropriations, and DOD is taking steps to cover the gaps. As was the case  in fiscal year 2004, the additional funds that were included in DOD’s annual  appropriation to help fund the war potentially could reduce or eliminate  the projected gaps for the Army and Air Force. With military operations in  Iraq and Afghanistan ongoing, and the likely need for DOD to request  additional funds to support GWOT, it is important that DOD fulfill its role as  a steward of taxpayer funds by taking steps to account for all the funds it  receives for the war.
section_title: Recommendations for Executive Action
paragraphs: To improve the visibility and accountability of DOD’s use of funds for  GWOT, we recommend that the Secretary of Defense, in future requests for  supplemental appropriations, adjust such requests to reflect the additional  funds DOD requested and received in its annual appropriations to support  GWOT and provide the Congress with an explanation of these adjustments.  We further recommend that in addressing any future GWOT funding needs  the Secretary consider the additional GWOT funds provided through the  department’s annual appropriation when assessing how to cover expenses  for the war and document its decisions.
section_title: Matter for Congressional Consideration
paragraphs: Because DOD did not concur with our recommendation to adjust its future  supplemental appropriations requests to reflect the additional funds the  department requested and received in its annual appropriations to support  GWOT and explain these adjustments to the Congress, we have no  confidence that the Congress will receive the information that we believe  the Congress needs to properly assess DOD’s requests for supplemental  appropriations to support the war. Further, because the amount of funds  DOD is receiving to support GWOT through its annual appropriations is  substantial—more than $10 billion annually—the Congress should consider  directing DOD, when it submits future supplemental appropriations  requests, to provide an explanation of how such requests reflect the funds  DOD requested and already received in its annual appropriations to  support GWOT.
section_title: Agency Comments and Our Evaluation
paragraphs: DOD provided written comments on a draft of this report. Its comments are  discussed below and are reprinted in appendix II.
DOD did not concur with our recommendations. DOD further commented  that the report confuses a Program Budget Decision, which is an internal  document, with the President’s budget, which is the official explanation of  DOD’s budget request, and that funds are not appropriated in accordance  with a Program Budget Decision. In addition, DOD commented that the  report’s focus on the Program Budget Decision results in the inaccurate  conclusion that if DOD had considered these funds it could have reduced  the Army’s GWOT gap and eliminated the GWOT gaps of the Air Force and  Navy. In that regard, DOD stated that the only resources available to the  department are those appropriated by the Congress and these funds were  considered when determining the needs and expenses of the war.
We recognize that a Program Budget Decision is an internal document and  that the President’s budget is the official explanation of DOD’s budget  request and that funds appropriated are determined by the Congress—not  by either a Program Budget Decision or the President’s budget. In our  report, we refer to Program Budget Decision 736 and the President’s budget  not to establish how much money the Congress appropriated to support  GWOT, but to establish how much money DOD intended for GWOT. As  stated in our report, according to a representative from the Office of the  Under Secretary of Defense (Comptroller), in December 2001 the President  directed that his annual budget submission for DOD be increased by about  $10 billion annually to support GWOT. Consequently, Program Budget  Decision 736, entitled Continuing the War on Terrorism and dated  January 31, 2002, was approved by the Under Secretary of Defense  (Comptroller). Program Budget Decision 736 provided for increasing  DOD’s annual budget request in the amount of more than $10 billion per  year plus inflation in fiscal years 2003 through 2007 to enhance the  department’s efforts to respond to, or protect against, acts or threatened  acts of terrorism against the United States. We therefore believe that since  the funds referenced in Program Budget Decision 736 were specifically  identified as being requested in support of GWOT, DOD should maintain  visibility over how these funds were used to support GWOT. We believe  that if DOD asks for a significant increase in appropriations and explains  that the increase is needed to support GWOT, DOD should be able to show  that it actually used those funds for GWOT.
DOD did not concur with our recommendations that the Secretary of  Defense (1) adjust future supplemental appropriations requests to reflect  the additional funds DOD received in its annual appropriations to support  GWOT and explain these adjustments to the Congress and (2) also consider  the additional GWOT funds provided through DOD’s annual appropriations  in addressing any future GWOT funding needs. In commenting on our first  recommendation, DOD stated that the department’s supplemental  appropriations request accounts for all relevant adjustments to the annual  appropriation bill. DOD also commented that it builds and submits  supplemental appropriations requests based on the incremental cost of the  operation, which it described as those additional costs to the DOD  component conducting the operation that are not covered in their existing  budgets and would not have been incurred had they not been supporting  the contingency. It is not apparent, however, that DOD’s request for  supplemental appropriations for fiscal year 2004 in fact reflected amounts  already appropriated. The President’s fiscal year 2005 supplemental  appropriations request did reflect amounts already enacted, but only  because the Office of Management and Budget, not DOD, made the  adjustments.
As we discuss in this report, DOD included a $10 billion increase in its  fiscal year 2004 annual appropriations in order to support GWOT. In its  Program Budget Decision 736, DOD stated that $1.2 billion of that amount  would be used for combat air patrols over U.S. cities, which is part of  Operation Noble Eagle. At the same time, in its fiscal year 2004  supplemental appropriations request for GWOT, DOD included funding for  Operation Noble Eagle, but without explaining why it needed amounts in  addition to those that the Congress already provided.
In addition, although DOD stated that the department’s supplemental  appropriations request accounts for all relevant adjustments to the annual  appropriation bill, as stated in our report, in a November 2004  memorandum issued by the Office of the Under Secretary of Defense  (Comptroller) the Comptroller’s office sought to adjust DOD’s  supplemental appropriations request for fiscal year 2005 to reflect funds  already provided. In that memorandum, the Office of the Under Secretary  of Defense (Comptroller) stated that funding in fiscal year 2005 for GWOT  missions previously added to the baseline budget (e.g., Program Budget  Decision 736, Continuing the War on Terrorism) should be explicitly  identified as a reduction to funding requests in those areas, as appropriate.  The memorandum further requested that the components’ submissions  should show the total requirement and note the level of funding already in  the baseline for this purpose. The memorandum directed that the services’  supplemental appropriations requests net out the available funding and  address the incremental costs above the baseline funding needed to  support specific forces and capabilities required to execute Operation Iraqi  Freedom, Operation Enduring Freedom, and portions (to be determined) of  Operation Noble Eagle. However, as stated in our report, none of the  military services provided the information requested in the November 2004  memorandum and instead the military services requested supplemental  appropriations for Operation Noble Eagle. Nevertheless, in preparing the  fiscal year 2005 supplemental appropriations request, the Office of  Management and Budget did not include Operation Noble Eagle in the  President’s budget request because funds had already been included in  DOD’s annual appropriation, pursuant to DOD’s request, as described in  Program Budget Decision 736.
We believe that our recommendation has merit and have retained it. In  addition, since DOD does not agree with the recommendation and the  amount of funds at issue is substantial—more than $10 billion annually— we have added a matter for congressional consideration. Specifically, the  Congress should direct DOD, when it submits future supplemental  appropriations requests, to provide an explanation of how such requests  reflect the additional funds that were addressed in Program Budget  Decision 736 and which DOD requested and received in its annual  appropriations to support GWOT.
With respect to our second recommendation, DOD commented that it  considers all funds provided through the department’s annual  appropriation when addressing how to cover expenses for the war. We  recognize that DOD reviews all funds when determining how to cover its  GWOT needs. However, DOD, as it explained in Program Budget Decision  736, intended increased annual appropriations to support GWOT, but then  lost visibility of the funds requested. There is no documentation, therefore,  regarding how the department took the funds that it requested into account  or whether it was applying the entire amount to cover its GWOT needs. We  believe that since DOD stated that the additional annual funds were needed  to support GWOT, and DOD continues to include this funding in its request  for annual appropriations, to fulfill its role as a steward of taxpayer funds  DOD should explicitly maintain visibility over how these funds are used to  support GWOT and consider the entire amount to be available for GWOT.  We therefore continue to believe our recommendation has merit and have  retained it, including expanding it to recommend that DOD also document  its decisions.
We are sending copies of this report to other interested congressional  committees; the Secretary of Defense; the Under Secretary of Defense  (Comptroller); and the Director, Office of Management and Budget. Copies  of this report will also be made available to others upon request. In  addition, this report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you have any questions regarding this report, please contact me at (202)  512-9619 or pickups@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Principal contributors to this report were Steve Sternlieb,  Assistant Director; Richard K. Geiger; Wesley A. Johnson; James Nelson;  and David Mayfield.
section_title: Scope and Methodology
paragraphs: To identify funding for the Global War on Terrorism (GWOT), we reviewed  applicable annual and supplemental Department of Defense (DOD)  appropriations in fiscal years 2004 and 2005. We also reviewed DOD reports  on the transfer of funds from the Iraqi Freedom Fund to support GWOT  activities, and DOD reports on the transfer or reprogramming of funds  among various appropriation accounts or budget activities to support  GWOT. In addition, we reviewed material related to the decision to add  funds to DOD’s annual appropriation to support GWOT, specifically  Program Budget Decision 736, entitled Continuing the War on Terrorism,  dated January 31, 2002, and approved by the Under Secretary of Defense  (Comptroller).
To assess the extent of differences between supplemental appropriations  and reported obligations for GWOT, we compared supplemental  appropriations provided to the military services to reported obligations in  fiscal year 2004 and reported obligations through May 2005 and assessed  obligations through May 2005 for fiscal year 2005. Specifically, we  identified applicable supplemental appropriations in fiscal years 2004 and  2005 and compared them to the reported amounts obligated by each  service in DOD’s Supplemental and Cost of War Execution Reports. We  limited our review to the obligation of funds appropriated for military  personnel and operation and maintenance for the Army, Air Force, Navy,  and Marine Corps, for both active and reserve forces, because they  represented the majority of the funds obligated in fiscal years 2004 and  2005, about 90 percent in each year. We excluded classified programs from  our review, because obligations for those programs are not reported in  DOD’s Supplemental and Cost of War Execution Reports. We did not  review the obligation of funds for investment, which are used for  procurement; military construction; and research, development, test, and  evaluation. In addition, for fiscal year 2005, we reviewed the latest available  obligation data and held discussions with the military services on the  results of their midyear budget reviews. We compared the services’  reported military personnel and operation and maintenance obligations  through May 2005, the latest available obligation data at the time of our  review, to the supplemental appropriations provided to calculate the  proportion of funds obligated through May. We then compared those  proportions to the proportion of the fiscal year that has elapsed through  May—which represents 67 percent of the fiscal year—to assess whether  based on obligations through May funding is likely to be adequate. We  recognize that funds are not obligated equally each month throughout the  fiscal year. However, we believe that the further into the fiscal year the  closer to 100 percent obligations should be relative to appropriations if all  appropriated funds are likely to be obligated.
GWOT obligations provided in this report are DOD’s claimed obligations as  reported in the Supplemental and Cost of War Execution Reports. In  related work, we have reported these data to be of questionable reliability.  For example, we found financial management systems with acknowledged  weaknesses, a lack of systematic processes to ensure accurate data entry,  failure to use actual data when it was available, and improperly categorized  costs. Therefore, we are unable to ensure that DOD’s reported obligations  for GWOT are complete, reliable, and accurate. Consequently, the gaps we  identify between supplemental appropriations and DOD’s reported  obligations may not reliably reflect true differences between supplemental  appropriations and obligations and therefore should be considered  approximations. Despite the uncertainty about the obligation data, we are  reporting the information because it is the only data available on overall  GWOT costs and the only way to approach an estimate of the costs of the  war. Also, despite the uncertainty surrounding the true dollar figure for  obligations, these data are used to advise the Congress on the cost of the  war. As such, obligation data provided in this report reflect DOD reported  obligations, however unreliable those reports may be.
To determine actions taken by DOD and the services to cover any identified  gaps between reported obligations and supplemental appropriations for  GWOT, we held discussions with DOD representatives from the Office of  the Under Secretary of Defense (Comptroller) and the Army, Air Force,  Navy, and Marine Corps. At the major command level, we discussed with  service representatives any actions taken to cover gaps and the impacts of  actions taken to cover those gaps on their budgeted peacetime operations.
We interviewed DOD representatives regarding GWOT obligations and  funding for fiscal years 2004 and 2005 in the following locations:   Office of the Under Secretary of Defense (Comptroller), Washington,  D.C.
Department of the Army, Headquarters, Washington, D.C.
Army Forces Command and Headquarters, Third Army, Fort  McPherson, Georgia.
Army Installation Management Agency, Arlington, Virginia.
Army Materiel Command, Fort Belvoir, Virginia.
Army Pacific Command, Fort Shafter, Hawaii.
Department of the Air Force, Headquarters, Washington, D.C.
Air Force Air Combat Command, Langley Air Force Base, Virginia.
Air Force Air Mobility Command, and Headquarters, U.S. Transportation  Command, Scott Air Force Base, Illinois.
Department of the Navy, Headquarters, Washington, D.C.
Navy Atlantic Fleet Command, Norfolk Naval Base, Virginia.
Navy Pacific Fleet Command, Pearl Harbor, Hawaii.
Marine Corps, Headquarters, Washington, D.C.
Marine Corps Forces, Pacific, Camp Smith, Hawaii.
We performed our work from November 2004 through August 2005 in  accordance with generally accepted government auditing standards.