From the end of the Persian Gulf War in February 1991 through June 2003, the DOD reported that it had obligated over $86.203 billion for incremental costs it had incurred for its overseas contingency operations. These operations included the enforcement of no-fly zones, humanitarian assistance, and peace enforcement operations, as well as operations to combat terrorism. In fiscal year 2003, these costs were incurred preparing for and undertaking GWOT, including the 2003 war against Iraq. In addition, U.S. military forces are continuing to participate in contingency operations in the Balkans. Figure 1 shows the location of DOD’s contingency operations for fiscal year 2003. Most of the costs associated with GWOT fall into two accounts—operation and maintenance and military personnel. Operation and maintenance account funds obligated in support of 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. Military personnel funds obligated in support of 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. The services were appropriated about $34 billion to their operation and maintenance accounts and about $15 billion to their military personnel accounts for fiscal year 2003 to support the war in Iraq and Operations Enduring Freedom and Noble Eagle. It appears that while the funds obligated for these operations—about $39 billion as of the end of June 2003—are substantial, the proportion of appropriated funds that have been obligated as of that date is lower than the proportion of the fiscal year elapsed as of that same date except for the Marine Corps. In this regard, through June 2003, which represents three-fourths of the fiscal year, three of the four services had not obligated more than 68 percent of the operation and maintenance funds appropriated for GWOT, while the Marine Corps had obligated 78 percent. To support GWOT in fiscal year 2003, Congress appropriated $68.7 billion to DOD in the Consolidated Appropriations Resolution, 2003, and Emergency Wartime Supplemental Appropriations Act, 2003. According to the conference report that accompanied the legislation, Congress included $6.1 billion for Operations Noble Eagle and Enduring Freedom in the Consolidated Appropriations Resolution of February 2003. In March 2003, the President requested that Congress appropriate $74.8 billion for GWOT, including the conduct of military operations in Iraq and reconstruction and relief there. Of this amount, $62.6 billion was identified in the President’s budget for DOD’s GWOT military operations. In developing the President’s request, DOD assumed, among other things, that the war with Iraq would be a short conflict, would involve a two-front war using Turkey as a staging area, and there would be a rapid redeployment and demobilization of Reserve and National Guard troops following the cessation of combat operations. In April 2003, Congress appropriated $79.2 billion, including $62.6 billion for DOD to cover all GWOT, including the war with Iraq, in the Emergency Wartime Supplemental Appropriations Act of April 2003. Although the services received their Consolidated Appropriations Resolution, 2003, funds for fiscal year 2003 in February 2003, they did not receive their first allocation of funds from the Emergency Supplemental until May 2003 and their second allocation until July 2003. Before receiving these monies, the services used funds from the Consolidated Appropriations and their base programs, obligating $25.9 billion for GWOT. DOD’s statement of its requirements for the supplemental appropriation included reimbursing the services’ accounts for costs incurred and financing the costs associated with military operations against Iraq. Neither the President’s request for funds nor the appropriations act allocated the funds to specific operations. Of the funds appropriated to DOD by the Emergency Wartime Supplemental, $46.699 billion was appropriated directly to the services’ and other defense agencies’ appropriations accounts and $15.679 billion to a transfer fund called the Iraqi Freedom Fund. Tables 1 and 2 show the operation and maintenance and the military personnel appropriations provided to the services for GWOT. To assess the extent to which funds appropriated for GWOT have been obligated, we compared the latest available obligation reports for GWOT with the funds appropriated to each of the services’ operation and maintenance and military personnel accounts. We then compared the proportion of the funds obligated to the proportion of the fiscal year that had elapsed to ascertain if funds were obligated at a level commensurate with that point in the fiscal year. We recognize that funds are not obligated equally each month throughout the fiscal year but 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. The results of this analysis are discussed in the following sections of this report. We discussed our analysis with DOD representatives at the Office of the Secretary of Defense (Comptroller) and each of the services’ budget offices, who disagreed with our methodology. These representatives believed that the analysis should take into account the fact that the supplemental appropriation was not available until mid-April 2003 and that funds were not provided to the services until the beginning of May 2003. We recognize that the supplemental funding was not provided to the services until May 2003. At the same time, DOD had to conduct Operations Noble Eagle and Enduring Freedom from the first day of fiscal year 2003 and subsequently prepare for war in Iraq, deploy over 100,000 military personnel to the Persian Gulf, and conduct major combat operations, all before receiving supplemental funding. As discussed earlier, to fund these operations in advance of receiving supplemental funding, the services used funds from the Consolidated Appropriations and their base programs. In doing so, DOD reported that it had obligated $25.9 billion for GWOT in fiscal year 2003 through April 2003. Therefore, we believe that assessing how much of the services’ direct GWOT appropriations have been obligated relatively late in the fiscal year provides a reasonable measure of how quickly the services are obligating their GWOT appropriations and the likelihood that they will obligate all the funds appropriated to them. Our analysis suggests that the services have no need for further transfers from the Iraqi Freedom Fund in fiscal year 2003, that all the funds transferred to their operation and maintenance accounts may not be obligated, and that any transferred funds unobligated at the end of the fiscal year should be transferred back to the Iraqi Freedom Fund. Our analysis of the percentage of fiscal year 2003 GWOT operation and maintenance funds obligated by the services compared with the proportion of the fiscal year elapsed (i.e., October 1, 2002, through June 2003, the latest month for which obligation data are available for all the services) shows that the proportion of available appropriations that have been obligated as of a particular date is lower than the proportion of the fiscal year elapsed as of that same date for three of the four military services, notwithstanding that funds obligated to date include those required to cover the preparation of military forces for the war with Iraq and the expense of transporting them and their equipment from the United States and elsewhere to the Persian Gulf. Therefore, we believe the actual operation and maintenance obligations made in fiscal year 2003 could be less than the funds available for obligation in fiscal year 2003. By the end of June 2003, only one of the services, the Marine Corps, had obligated more than 75 percent of the funds appropriated for operation and maintenance, while the other three services had obligated between 65 and 68 percent, although three-fourths of the fiscal year had already elapsed, raising doubts about whether all the services will be able to obligate their entire fiscal year 2003 GWOT operation and maintenance funds in the remaining 3 months of fiscal year 2003. For example, the Army, by the end of June 2003, had obligated 65 percent of its directly appropriated funds for GWOT. Figure 2 displays the obligations through June 2003 for each of the military services. As can be seen in figure 2, the percentage of directly appropriated operation and maintenance funds that were obligated as of June 30, 2003, ranged from a low of 65 percent for the Army to a high of 78 percent for the Marine Corps. Based on our analysis, we believe that in fiscal year 2003 the services, with the possible exception of the Marine Corps, may not obligate all operation and maintenance funds appropriated to them for GWOT. The services, however, believe that they will obligate all or almost all of these funds. This may in fact be the case, but except for the Marine Corps, if the services do obligate all these funds it will require a faster rate of obligation of funds—greater than the rate at which they have been obligating funds in recent months. We recognize that estimating the costs of ongoing military operations is difficult because operational requirements can differ substantially from what was assumed in developing budget estimates. This has been the case in Iraq, where actual operations have differed from some of the assumptions. For example, a second front using Turkey as a staging area never materialized, there has not been a rapid redeployment and demobilization of Reserve and National Guard troops, one major Army division expected to deploy did not, and transportation costs were lower than predicted. Some of these differences, such as the lack of a rapid redeployment and demobilization, are resulting in higher than expected costs, while other differences, for example, the decision to not deploy one of the Army’s divisions, are resulting in lower than expected costs. However, in light of the rate of obligations made through June and the information presented below, we continue to believe that actual obligations of GWOT operation and maintenance funds for fiscal year 2003 may be less than the total GWOT operation and maintenance appropriations available for obligation in fiscal year 2003. According to the Army’s obligation plan, the Army expects to obligate $6 billion during the last 3 months of fiscal year 2003.