As it does now, the United States will fund its share of NATO enlargement primarily through contributions to the three common budgets. NSIP pays for infrastructure items that are over and above the needs of the member nations, including communications links to NATO headquarters or reinforcement reception facilities, such as increased apron space at existing airfields. The military budget pays for NATO Airborne Early Warning Force program and military headquarters costs, and the civil budget pays primarily for NATO’s international staff and operation and maintenance costs of its civilian facility in Brussels. For fiscal year 1997, the U.S. contribution for the three common budgets was about $470 million: $172 million for the NSIP, $252 million for NATO’s military budget, and $44.5 million for NATO’s civil budget. Any increases to the U.S. budget accounts would be reflected primarily through increased funding requests for the DOD military construction budget from which the NSIP is funded, the Army operations and maintenance budget from which the military budget is funded (both part of the National Defense 050 budget function), and the State Department’s contributions to international organizations from which the civil budget is funded (part of the International Affairs 150 budget function). While NATO will not have finalized its common infrastructure requirements for new members until December 1997 or decided whether or how much to increase the common budgets until June 1998, DOD and State Department officials told us that the civil and NSIP budgets are likely to increase by only 5 to 10 percent and the military budget will probably not increase at all. This would mean an increase of about $20 million annually for the U.S. contribution to NATO. However, as we indicated, NATO has yet to make decisions on these matters. In addition, the United States could choose to help new members in their efforts to meet their NATO membership obligations through continued Foreign Military Financing grants and/or loans, International Military Education and Training grants, and assistance for training activities. The three candidate countries and other PFP countries have been receiving assistance through these accounts since the inception of the PFP program, and this has enabled some of these countries to be more prepared for NATO membership. In fiscal year 1997, over $120 million was programmed for these activities, and about $60 million of this amount went to the three candidates for NATO membership. Any increased funding for such assistance would be funded through the International Affairs and Defense budget functions. It is through NATO’s defense planning process that decisions are made on how the defense burden will be shared, what military requirements will be satisfied, and what shortfalls will exist. NATO’s New Strategic Concept, adopted in Rome in 1991, places greater emphasis on crisis management and conflict prevention and outlines the characteristics of the force structure. Key features include (1) smaller, more mobile and flexible forces that can counter multifaceted risks, possibly outside the NATO area; (2) fewer troops stationed away from their home countries; (3) reduced readiness levels for many active units; (4) emphasis on building up forces in a crisis; (5) reduced reliance on nuclear weapons; and (6) immediate and rapid reaction forces, main defense forces (including multinational corps), and augmentation forces. Although NATO has not defined exactly the type and amount of equipment and training needed, it has encouraged nations to invest in transport, air refueling, and reconnaissance aircraft and improved command and control equipment, among other items. NATO’s force-planning and goal-setting process involves two interrelated phases that run concurrently: setting force goals and responding to a defense planning questionnaire. The force goals, which are developed every 2 years, define NATO’s requirements. The major NATO commanders propose force goals for each nation based on command requirements. Each nation typically has over 100 force goals. NATO and national officials frequently consult one another while developing force goals and national defense plans. NATO commanders are unlikely to demand that member nations establish units or acquire equipment they do not have. In its annual response to NATO’s defense planning questionnaire, each member verifies its commitment for the previous year, defines its commitment for the next year, and lays out plans for the following 5 years. Alliance members review each nation’s questionnaire and, in meetings, can question national plans and urge member nations to alter their plans. After finishing their reviews, generally in October or November, NATO staff write a report summarizing each nation’s plans and assessing national commitments to NATO. Once NATO members approve this report, it becomes the alliance’s consensus view on each country’s strengths and weaknesses and plan to support the force structure. It is through this process that NATO determines what shortfalls exist, for example, in combat support and combat service support capabilities. According to U.S. officials, NATO is preparing several reports to be presented for approval at the defense ministerial meetings in December 1997. One report will discuss the additional military capability requirements existing alliance members will face as a result of the alliance’s enlargement. According to officials at the U.S. mission and Supreme Headquarters Allied Powers Europe, it is unlikely that any additional military capability requirements will be placed on NATO members over and above the force goals they have already agreed to provide. In other words, if current force goals are attained, NATO will have sufficient resources to respond to likely contingencies in current and new member countries. Therefore, it can be concluded that although enlargement of the alliance is another reason for current allies to attain their force goals, it will not add any new, unknown costs to existing members’ force plans. Other reports resulting from this process will discuss the requirements for commonly funded items in the new nations and their estimated costs. These items include infrastructure that will enable the new allies to receive NATO reinforcements in times of crisis, communication systems between NATO and their national headquarters, and a tie-in to NATO’s air defense system. How these projects will be financed by NATO, for example, whether they will be financed within existing budgets or by increasing the size of NATO’s common budgets, will not be determined until June 1998. Therefore, the impact of these costs on the U.S. contributions to NATO’s common budgets and the U.S. budget will be unknown until next spring. Another report will present an assessment of the capabilities and shortfalls in the military forces of Poland, Hungary, and the Czech Republic. NATO does not and will not estimate the costs of the shortfalls of either the current or the new member states, but once these shortfalls are identified, cost estimates can be made by others. However, even though new members’ capabilities and shortfalls will be identified in December, these countries’ force goals will not be set until the spring. These force goals will, in effect, be a roadmap for the new members on how to address their shortfalls. (See app. I for a timeline illustrating these events.) When the DOD, CBO, and Rand studies were completed, many key cost determinants had not been established. Consequently, each study made a series of key assumptions that had important implications for each studies’ results. DOD made the following key assumptions: Specific nations would be invited to join NATO in the first round of enlargement. NATO would continue to rely on its existing post-Cold War strategy to carry out its collective defense obligations (that is, each member state would have a basic self-defense capability and the ability to rapidly receive NATO reinforcements). NATO would not be confronted by a significant conventional military threat for the foreseeable future, and such a threat would take many years to develop. NATO would continue to use existing criteria for determining which items would be funded in common and which costs would be allocated among members. Using these assumptions, DOD estimated the cost of enlarging NATO would range from about $27 billion to $35 billion from 1997 to 2009. The estimate was broken down as follows: about $8 billion to $10 billion for improvements in current NATO members’ regional reinforcement capabilities, such as developing mobile logistics and other combat support capabilities; about $10 billion to $13 billion for restructuring and modernizing new members’ militaries (for example, selectively upgrading self-defense capabilities); and about $9 billion to $12 billion for costs directly attributable to NATO enlargement (for example, costs of ensuring that current and new members’ forces are interoperable and capable of combined NATO operations and of upgrading or constructing facilities to receive NATO reinforcements). DOD estimated the U.S. share of these costs would range from about $1.5 billion to $2 billion—averaging $150 million to $200 million annually from 2000 to 2009. The estimated U.S. share chiefly consisted of a portion of direct enlargement costs commonly funded through NATO’s Security Investment Program. DOD assumed that the other costs would be borne by the new members and other current member states and concluded that they could afford these costs, although this would be challenging for new members. (See app. II.) In our review of DOD’s study of NATO enlargement, we (1) assessed the reasonableness of DOD’s key assumptions, (2) attempted to verify pricing information used as the basis for estimating enlargement costs, (3) looked into whether certain cost categories were actually linked to enlargement, and (4) identified factors excluded from the study that could affect enlargement costs. We concluded that DOD’s assumptions were reasonable. The assumption regarding the threat was probably the most significant variable in estimating the cost of enlargement. Based on information available to us, we concluded that it was reasonable to assume the threat would be low and there would be a fairly long warning time if a serious threat developed. This assumption, and the assumption that the post-Cold War strategic concept would be employed, provided the basis for DOD’s judgments concerning required regional reinforcement capabilities, new members’ force modernization, and to a large extent those items categorized as direct enlargement costs.