In late 2001, as the United States focused on toppling the Taliban regime and fighting al Qaeda in Afghanistan, Pakistan’s importance as an ally in the global war on terror increased. According to Defense, Pakistan’s military operations and other contributions to Operation Enduring Freedom in Afghanistan quickly threatened to become unsustainable on its $2.5 billion defense budget. As a result, Defense requested supplemental funding from Congress to provide payments to Pakistan for logistical and military support in connection with Operation Enduring Freedom. In response, Congress passed the Defense Appropriations Act for Fiscal Year 2002, stipulating that the “Defense Emergency Response Fund” could be used by the Secretary of Defense to reimburse coalition partners for logistical and military support to U.S. military operations. This funding became known as Coalition Support Funds. To provide Defense with maximum flexibility, Congress passed the Defense Appropriations Act for Fiscal Year 2002, which granted the Secretary of Defense the authority to make CSF payments notwithstanding any other provision of law in such amounts as the Secretary may determine in his discretion, based on documentation determined by the Secretary to adequately account for the logistical and military support provided by partner nations. Any such determination by the Secretary shall be final and conclusive. The act did, however, require Defense to provide a 15-day notification of upcoming CSF reimbursements. Congress continued to provide funding for Pakistan through Defense without requiring specific accountability controls until 2008. Subsequent legislation required Defense to provide quarterly reports to the House and Senate Committees on Appropriations and the House and Senate Armed Services Committees on the use of funds made available for payments to Pakistan and other CSF recipients. Despite these revisions to the reporting requirements, Congress has consistently left decision-making on the suitability of documentation to the discretion of the Secretary of Defense. Defense, on its own, has instituted guidance that goes beyond what is mandated in law. According to Defense, CSF is critical to ensure Pakistan’s continued support of U.S. efforts to combat terrorism. Defense officials stated that without CSF or a similar mechanism to reimburse Pakistan for support in Operation Enduring Freedom, Pakistan could not afford to deploy military forces along the Pakistan-Afghanistan border to support U.S. military operations in Afghanistan. Defense also indicates that 84 percent of all containerized cargo and approximately 40 percent of all fuel for U.S. and coalition forces operating in Afghanistan passes through Pakistan. According to Defense officials, CSF has been a major factor in Pakistan’s ongoing cooperation in support of U.S. goals in Pakistan and Afghanistan. Defense has used CSF to reimburse Pakistan for Operation Al Mizan, a major deployment of the Pakistan army in the North West Frontier Province and the Federally Administered Tribal Areas (FATA) that border Afghanistan that began in 2001 and has continued in various phases to this date. Defense also states that CSF payments to Pakistan have played a key role in supporting U.S. national security goals in Pakistan to combat terrorists that threaten U.S. interests in America, Pakistan, Afghanistan, and Western Europe. The CSF reimbursements to Pakistan from October 2001 through June 2007 (the latest period of support reimbursed by Defense) are shown in figure 1. In a February 2002 internal memo, the Comptroller expressed dissatisfaction with Defense’s ability to verify the costs claimed in Pakistan’s December 2001 reimbursement claim. The Comptroller noted that the reimbursement claim contained total costs but no supporting details. For example, the claim reported a total cost for army airlift without providing information on number of sorties flown, the dates, costs, time frames, purpose, number or types of aircraft flown, or number of man-hours involved. According to the February 2002 memo, the government of Pakistan was unprepared or unable to reconstruct these costs in a verifiable manner in line with standard U.S. government accounting practices and expectations. Staff at CENTCOM in Tampa, Florida, and at ODRP in the embassy were unable to fill in such details. Despite this concern, the Defense Office of General Counsel concluded, based on the statutory authority provided to the Secretary of Defense, that the Secretary of Defense could legally reimburse all of the cost categories identified by the Comptroller as legally defensible. The United States eventually reimbursed Pakistan $300 million. In 2003, at the request of the Comptroller, the Defense Inspector General performed an audit of the CSF oversight process for all countries seeking CSF reimbursements. The report found deficiencies in both Defense’s CSF guidance, as well as the supporting documentation CSF recipients provided to support their claims. It recommended improvements in Defense’s analysis of CSF reimbursement requests and greater documentation requirements for countries seeking reimbursement. In response, the Comptroller published guidance in December 2003 to clarify the roles and responsibilities of CENTCOM and other regional combatant commanders and of the Comptroller in the CSF oversight process. The 2003 guidance notes that Congress provided the Secretary of Defense with the authority to determine how much to reimburse partner countries, and how much documentation was required to adequately account for the support provided. However, the guidance also stated that CENTCOM and the Comptroller are to obtain sufficient documentation to validate that Pakistani military support had been provided and that costs were incurred, reasonable, and appropriate under the CSF program. Table 1 summarizes the review criteria in the December 2003 Comptroller guidance. We address the implementation of these and other criteria in greater detail later in this report. Under the December 2003 guidance and oversight process, Pakistan would first submit its claim for reimbursement to ODRP at the U.S. Embassy in Islamabad. According to Comptroller guidance, ODRP would assist the Pakistani military in formulating the reimbursement claim before sending the claim to CENTCOM in Tampa, Florida. CENTCOM would then conduct its own review in an attempt to link claimed expenses to U.S. military operations before forwarding the claim package to the Comptroller. Under this process, ODRP and CENTCOM staff can make recommendations to defer or disallow costs based on their analysis of the Pakistan submission; however, the Comptroller makes the final recommendation to the Secretary of Defense on which costs should be paid, deferred, or disallowed. The Department of State, the Office of Management and Budget, and Congress also have a role in the CSF oversight process after the Comptroller has finished its review. The Department of State and the Under Secretary of Defense for Policy must each verify that the CSF reimbursement is consistent with the U.S. government’s national security policy and does not adversely affect the balance of power in the region. In addition, Defense is required to consult with the Director of the Office of Management and Budget during the CSF process. Defense is also required to provide a 15-day notification of the upcoming reimbursement, as well as quarterly reports to the House and Senate Committees on Appropriations and the House and Senate Armed Services Committees on the use of funds made available for payments to Pakistan and other CSF recipients. Congress passed the National Defense Authorization Act for Fiscal Year 2008, which now requires Defense to submit an itemized description of logistic support, supplies, and services “provided by Pakistan to the United States for which the United States provided reimbursement” during the period beginning February 1, 2008 and ending September 30, 2009. The CSF process is detailed in figure 2. In July 2006, the Comptroller provided the Pakistani government with a cost template and information intended to clarify the types of costs that were reimbursable under CSF and the information the Comptroller required to support Pakistan’s reimbursement claims. Furthermore, according to Defense, the Office of the Under Secretary of Defense for Policy emphasized the importance of enhancing transparency within Pakistan’s CSF claims in a June 2007 letter to the Pakistan Ministry of Defense. We found that Defense did not consistently apply existing CSF guidance and that certain deficiencies existed in their oversight procedures. We reviewed the Pakistani claims for January 2004 through June 2007, as well as related CENTCOM and Comptroller memos, to determine if DOD had consistently applied the Comptroller criteria issued in December 2003. The memos prepared by the Comptroller generally included the four macro- level analytical reviews outlined in the criteria; however, implementation of these criteria was not sufficient to validate claimed costs. For example, the Comptroller generally performed a comparison of total claimed costs to the estimated U.S. cost to provide the same services; however, there was not enough information in the Pakistani claims to determine that the claimed amount and the estimated U.S. cost included the same expenses or that the claimed costs were valid. Defense guidance developed by the Comptroller calls for obtaining sufficient information to validate Pakistani claims to determine that costs were incurred, reasonable, and appropriate. However, Defense did not fully implement this criteria. For example, Defense reimbursed Pakistan over $2 billion for claims from January 2004 through June 2007 without obtaining detailed documentation that would allow a third party to recalculate the costs. In addition, Defense often did not adequately document the basis for their decisions to allow or disallow claims, and we found inconsistencies in Defense payments that were not explained. As a result, Defense may have paid costs that were (1) not incremental, (2) not based on actual activity, or (3) potentially duplicative. We also found that additional oversight controls were needed. Specifically, while Comptroller guidance calls for a historical comparison of claimed costs, the guidance does not indicate why or how the comparison should be performed. Additionally, Defense did not verify the currency conversion rates used by Pakistan from January 2004 through June 2007 and, as a result, may have overpaid Pakistani claims due to the devaluation of the Pakistan rupee. The Comptroller’s CSF guidance states that Pakistani claims should include associated invoices. In the absence of such support, CENTCOM officials should obtain from Pakistan a detailed description of how these costs were computed.