Global War on Terrorism: Reported Obligations for the Department 
of Defense (26-JUL-07, GAO-07-1056R).				 
                                                                 
Since 2001, Congress has provided the Department of Defense (DOD)
with hundreds of billions of dollars in supplemental and annual  
appropriations for military operations in support of the Global  
War on Terrorism (GWOT). DOD's reported annual costs for GWOT	 
have shown a steady increase from about $0.2 billion in fiscal	 
year 2001 to about $98.4 billion in fiscal year 2006. In fiscal  
year 2007, Congress provided DOD with about $161.8 billion in	 
annual and supplemental appropriations for GWOT. To continue its 
GWOT operations, DOD has requested $141.7 billion in		 
appropriations for fiscal year 2008. The United States' 	 
commitments to GWOT will likely involve the continued investment 
of significant resources, requiring decision makers to consider  
difficult trade-offs as the nation faces an increasing long-range
fiscal challenge. The magnitude of future costs will depend on	 
several direct and indirect cost variables and, in some cases,	 
decisions that have not yet been made. DOD's future costs will	 
likely be affected by the pace and duration of operations, the	 
types of facilities needed to support troops overseas,		 
redeployment plans, and the amount of equipment to be repaired or
replaced. Future cost variables for other U.S. government	 
agencies include the efforts to help form national and provincial
governments and build management capacity as well as capable and 
loyal security forces in both Afghanistan and Iraq.		 
Reconstruction activities to restore, sustain, and protect	 
critical infrastructure will also impose costs. Also, healthcare 
costs will likely increase as more servicemembers require	 
treatment from injuries and mental health conditions such as	 
post-traumatic stress disorder. DOD compiles and reports monthly 
and cumulative incremental obligations incurred to support GWOT  
in a monthly Supplemental and Cost of War Execution Report. DOD  
leadership uses this report, along with other information, to	 
advise Congress on the costs of the war and to formulate future  
GWOT budget requests. DOD reports these obligations by		 
appropriation, contingency operation, and military service or	 
defense agency. The monthly cost reports are typically compiled  
in the 45 days after the end of the reporting month in which the 
obligations are incurred. DOD has prepared monthly reports on the
obligations incurred for its involvement in GWOT since fiscal	 
year 2001. Section 1221 of the National Defense Authorization Act
for Fiscal Year 2006 requires us to submit quarterly updates to  
Congress on the costs of Operation Iraqi Freedom and Operation	 
Enduring Freedom based on DOD's monthly Supplemental and Cost of 
War Execution Reports. This report, which responds to this	 
requirement, contains our analysis of DOD's reported obligations 
for military operations in support of GWOT through April 2007.	 
Specifically, we assessed (1) DOD's appropriations and reported  
obligations for military operations in support of GWOT to date	 
and (2) DOD's fiscal year 2007 reported obligations for GWOT by  
military service and appropriation account.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1056R					        
    ACCNO:   A73450						        
  TITLE:     Global War on Terrorism: Reported Obligations for the    
Department of Defense						 
     DATE:   07/26/2007 
  SUBJECT:   Cost analysis					 
	     Cost of war					 
	     Defense capabilities				 
	     Defense cost control				 
	     Defense economic analysis				 
	     Defense operations 				 
	     Military appropriations				 
	     Military operations				 
	     Supplemental appropriations			 
	     Iraq War and reconstruction			 
	     Financial analysis 				 
	     Cost growth					 
	     Global War on Terrorism				 
	     Operation Enduring Freedom 			 

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July 26, 2007

Congressional Committees

Subject: Global War on Terrorism: Reported Obligations for the Department
of Defense

Since 2001, Congress has provided the Department of Defense (DOD) with
hundreds of billions of dollars in supplemental and annual appropriations
for military operations in support of the Global War on Terrorism
(GWOT).^1 DOD's reported annual costs for GWOT have shown a steady
increase from about $0.2 billion in fiscal year 2001 to about $98.4
billion in fiscal year 2006. In fiscal year 2007, Congress provided DOD
with about $161.8 billion in annual and supplemental appropriations^2 for
GWOT. To continue its GWOT operations, DOD has requested $141.7 billion in
appropriations for fiscal year 2008. The United States' commitments to
GWOT will likely involve the continued investment of significant
resources, requiring decision makers to consider difficult trade-offs as
the nation faces an increasing long-range fiscal challenge. The magnitude
of future costs will depend on several direct and indirect cost variables
and, in some cases, decisions that have not yet been made. DOD's future
costs will likely be affected by the pace and duration of operations, the
types of facilities needed to support troops overseas, redeployment plans,
and the amount of equipment to be repaired or replaced. ^3 Future cost
variables for other U.S. government agencies include the efforts to help
form national and provincial governments and build management capacity as
well as capable and loyal security forces in both Afghanistan and Iraq.
Reconstruction activities to restore, sustain, and protect critical
infrastructure will also impose costs. Also, healthcare costs will likely
increase as more servicemembers require treatment from injuries and mental
health conditions such as post-traumatic stress disorder.

^1 After the terrorist attacks of September 11, 2001, the President
announced a Global War on Terrorism, requiring the collective instruments
of the entire federal government to counter the threat of terrorism.
Ongoing military and diplomatic operations overseas, especially in Iraq
and Afghanistan, constitute a key part of GWOT. These operations involve a
wide variety of activities, such as combating insurgents, civil affairs,
capacity building, infrastructure reconstruction, and training military
forces of other nations.

^2 Of the $161.8 billion, Congress provided $67.4 billion in Title IX of
the Department of Defense Appropriation Act, 2007 as bridge funding to
support ongoing operations early in the fiscal year. Congress provided the
remaining $94.4 billion in the U.S. Troop Readiness, Veterans' Care,
Katrina Recovery, and Iraq Accountability Act, 2007.

^3 For more information see GAO, Securing, Stabilizing, and Rebuilding
Iraq: Key Issues for Congressional Oversight, GAO-07-308SP (Washington,
D.C.: Jan. 9, 2007), and Global War on Terrorism: Observations on Funding,
Costs, and Future Commitments, GAO-06-885T (Washington, D.C.: July 18,
2006).

DOD compiles and reports monthly and cumulative incremental obligations^4
incurred to support GWOT in a monthly Supplemental and Cost of War
Execution Report. DOD leadership uses this report, along with other
information, to advise Congress on the costs of the war and to formulate
future GWOT budget requests. DOD reports these obligations by
appropriation, contingency operation,^5 and military service or defense
agency. The monthly cost reports are typically compiled in the 45 days
after the end of the reporting month in which the obligations are
incurred.^6 DOD has prepared monthly reports on the obligations incurred
for its involvement in GWOT since fiscal year 2001.

Section 1221 of the National Defense Authorization Act for Fiscal Year
2006^7 requires us to submit quarterly updates to Congress on the costs of
Operation Iraqi Freedom and Operation Enduring Freedom based on DOD's
monthly Supplemental and Cost of War Execution Reports. This report, which
responds to this requirement, contains our analysis of DOD's reported
obligations for military operations in support of GWOT through April 2007.
Specifically, we assessed (1) DOD's appropriations and reported
obligations for military operations in support of GWOT to date and (2)
DOD's fiscal year 2007 reported obligations for GWOT by military service
and appropriation account.

Scope and Methodology

To conduct our work, we analyzed applicable annual and supplemental
appropriations from fiscal year 2001 through April 2007 and DOD's monthly
Supplemental and Cost of War Execution Reports from September 2001 to
April 2007. Specifically, we identified appropriated amounts intended for
GWOT and reported GWOT obligations for each operation, military service,
and appropriation account. Our prior work^8 has found the data in DOD's
monthly Supplemental and Cost of War Execution Report to be of
questionable reliability. Consequently, we are unable to ensure that DOD's
reported obligations for GWOT are complete, reliable, and accurate, and
they therefore should be considered approximations.

^4 According to Department of Defense Financial Management Regulation,
7000.14-R, Volume 1, Definitions, p. xvii (December 2001), 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.

^5 DOD defines contingency operations to include small, medium, and
large-scale campaign-level military operations, including support for
peacekeeping operations, major humanitarian assistance efforts,
noncombatant evacuation operations, and international disaster relief
efforts.

^6 Volume 12, Chapter 23, of DOD's Financial Management Regulation,
7000.14-R. This regulation generally establishes financial policy and
procedures related to DOD contingency operations. Volume 6A, Chapter 2,
and Volume 3, Chapter 8, of the DOD Financial Management Regulation also
include provisions to ensure the accuracy of cost reporting.

^7 Pub. L. No. 109-163, S 1221(c) (2006).

^8 For more information see GAO, Global War on Terrorism: DOD Needs to
Improve the Reliability of Cost Data and Provide Additional Guidance to
Control Costs, GAO-05-882 (Washington, D.C.: Sept. 21, 2005), and Global
War on Terrorism: Fiscal Year 2006 Obligation Rates Are Within Funding
Levels and Significant Multiyear Procurement Funds Will Likely Remain
Available for Use in Fiscal Year 2007, GAO-07-76 (Washington, D.C.: Nov.
13, 2006).

DOD is taking steps to improve GWOT cost reporting. Specifically, over the
years, we have made a series of recommendations to the Secretary of
Defense intended to improve the transparency and reliability of DOD's GWOT
obligations and DOD has implemented many of these recommendations. For
example we have recommended that DOD (1) revise the cost reporting
guidance so that large amounts of reported obligations are not shown in
"other" miscellaneous categories and (2) take steps to ensure that
reported GWOT obligations are reliable. In response, DOD has modified the
guidance to more clearly define some of the cost categories and is taking
additional steps, which we have not yet fully evaluated, to strengthen the
oversight and program management of the cost reporting. Until all DOD's
efforts are more fully implemented, it is too soon to know the extent to
which these changes will improve DOD's cost reporting. While establishing
sound cost reporting procedures and oversight is clearly important, the
reliability of the cost-of-war reports is also dependent on the quality of
DOD's accounting data. Factors contributing to DOD's challenges in
reporting reliable cost data include long standing deficiencies in DOD's
financial management systems. We are aware that DOD has efforts underway
to improve these systems as well.

We are continuing to review the fiscal year 2007 funding requirements and
reported obligations, the reliability of the obligations, and DOD's
ongoing efforts to improve its cost reporting, which include procedures
for attesting to the accuracy of data and analyzing variances. We will
report on this review later this year. We are also beginning a review of
the process, including models and other tools, used to estimate GWOT
funding requirements.

We conducted our work from June 2007 through July 2007 in accordance with
generally accepted government auditing standards.

Summary

From fiscal year 2001 through July 2007, Congress has provided DOD with
about $542.9 billion^9 for its efforts in support of GWOT. DOD has
reported obligations of about $429.1 billion for military operations in
support of the war from fiscal years 2001 through 2006 and from the
beginning of fiscal year 2007 through April 2007, the latest available
data. The $113.8 billion difference between DOD's GWOT appropriations and
reported obligations can generally be attributed to certain fiscal year
2007 appropriations and multiyear funding for procurement; military
construction; and research, development, test, and evaluation from
previous GWOT-related appropriations that have yet to be obligated, and
obligations for classified activities, which are not included in DOD's
reported obligations.^10 DOD's total reported obligations related to GWOT
have demonstrated a steady annual increase each fiscal year through 2006.
Figure 1 shows DOD's reported GWOT obligations by fiscal year, from fiscal
year 2001 through fiscal year 2006 and from the beginning of fiscal year
2007 through April 2007.

^9 From fiscal year 2001 through fiscal year 2004, military operations in
defense of the homeland (Operation Noble Eagle) were funded through
supplemental appropriations. Since fiscal year 2005, DOD has funded these
operations through its regular budget, and these amounts cannot be
separately identified. Therefore, the $542.9 billion includes funding for
Operation Noble Eagle only from fiscal years 2001 through 2004.

^10 Appropriations for military personnel and operation and maintenance
are usually available for 1 year, while appropriations for research and
development funds are usually available for 2 years; procurement funds
(with the exception of shipbuilding funds, which are sometimes longer) for
3 years; and military construction funds for 5 years.

Figure 1: DOD's Reported GWOT Obligations for Fiscal Years 2001 through
2006 and from the Beginning of Fiscal Year 2007 through April 2007

Notes: The fiscal year 2007 figure reflects DOD's reported obligations
from October 2006 through April 2007. Reported GWOT obligations include
Operation Noble Eagle, Operation Enduring Freedom, and Operation Iraqi
Freedom, and generally reflect costs reported in DOD's cost-of-war
reports. However, the fiscal year 2002 and 2003 figures include about
$20.1 billion which, according to DOD officials, was not reported in DOD's
cost-of-war reports. GAO has assessed the reliability of DOD's obligation
data and found significant problems, such that these data may not
accurately reflect the true dollar value of GWOT obligations.

Through April 2007, DOD's total reported obligations are already more than
three quarters of the total amount of obligations it reported for all of
fiscal year 2006. In addition, DOD's reported investment
obligations--which include procurement; research, development, test, and
evaluation; and military construction, through April 2007--are
approximately one and a half times higher than its reported obligations
for investments during all of fiscal year 2006. As a result, total
reported obligations for fiscal year 2007 may well exceed the amount
reported for fiscal year 2006.

DOD's reported obligations to date include about $324.9 billion for
operations in and around Iraq as part of Operation Iraqi Freedom, and
about $76.5 billion for operations in Afghanistan, the Horn of Africa, the
Philippines, and elsewhere as part of Operation Enduring Freedom. It also
includes about $27.7 billion for operations in defense of the homeland as
part of Operation Noble Eagle. Figure 2 shows DOD's reported GWOT
obligations for Operation Iraqi Freedom, Operation Enduring Freedom, and
Operation Noble Eagle from fiscal year 2001 through April 2007.

Figure 2: DOD's Reported GWOT Obligations by Operation for Fiscal Years
2001 through 2006 and from the Beginning of Fiscal Year 2007 through April
2007

Notes: The fiscal year 2007 figure reflects DOD's reported obligations
from October 2006 through April 2007. Operation Iraqi Freedom began in
fiscal year 2003; therefore no obligations were reported in fiscal years
2001 and 2002 for this operation. Reported GWOT obligations generally
reflect costs reported in DOD's cost-of-war reports. However, the fiscal
year 2002 and 2003 figures include about $20.1 billion which, according to
DOD officials, was not reported in DOD's cost-of-war reports. GAO has
assessed the reliability of DOD's obligation data and found significant
problems, such that these data may not accurately reflect the true dollar
value of GWOT obligations.

As figure 2 shows, from fiscal years 2003 through 2006 DOD's reported
obligations for Operation Iraqi Freedom consistently increased both in
dollar amount and as a proportion of total reported GWOT obligations. In
contrast, DOD's reported obligations for Operation Noble Eagle have
consistently decreased since fiscal year 2003, while those for Operation
Enduring Freedom have remained within a range of $10.3 billion to $15.9
billion each fiscal year.

DOD's reported fiscal year 2007 obligations as of April 2007 total $76.6
billion. The Army accounts for the largest proportion of reported
obligations--about $55.0 billion, nearly eight times higher than the
almost $6.9 billion in obligations reported for the Marine Corps, the
service with the next greatest reported amount. Among appropriation
accounts, operation and maintenance, which include items such as support
for housing, food, and services; the repair of equipment; and
transportation to move people, supplies, and equipment, accounts for the
largest reported obligations--about $38.9 billion. Obligations for
investment, which include procurement; research, development, test, and
evaluation; and military construction, account for more than a quarter of
reported obligations or about $21.6 billion. Figure 3 shows DOD's reported
obligations through April of fiscal year 2007, by military service and
appropriation account.

Figure 3: DOD's Reported GWOT Obligations for Fiscal Year 2007, by
Military Service and Appropriation Category, as of April 2007

Notes: GAO has assessed the reliability of DOD's obligation data and found
significant problems, such that these data may not accurately reflect the
true dollar value of GWOT obligations. Obligation figures may not add to
$76.6 billion because of rounding.

In previous work,^11 we reported that significant amounts of multiyear
procurement funding provided in the fiscal year 2006 supplemental
appropriation would likely not be obligated by DOD in fiscal year 2006 and
would remain available for use in fiscal year 2007. A large amount of
these multiyear funds has since been obligated.

Agency Comments and Our Evaluation

In written comments on a draft of this report, DOD did not take exception
to any of the updated cost information presented in this report. DOD did
express concern, as it did in responding to our prior update in May 2007,
about our observations on the reliability of its reported cost
information. Specifically DOD stated that it has already taken action to
address concerns we have raised regarding the reliability of the data
presented in DOD's Supplemental and Cost of War Execution Reports,
including requiring component organizations to attest to the accuracy of
the data submitted, report data variances and the methodology for
computing the data, and increased management oversight of the cost
reporting process. DOD also expressed concern that we continue to
represent the data in these cost-of-war reports as being of questionable
reliability. We agree that DOD has taken steps to improve cost reporting,
which we acknowledge in our report. We also note DOD is just beginning to
implement many of these efforts. As we state in our scope and methodology
section, we are currently evaluating the reliability of GWOT cost data, as
well as the attestation and variance analysis processes, to gain insights
into their effect on data reliability and will be reporting on the results
of our review later this year. Until all DOD's efforts are more fully
implemented, it is too soon to know the extent to which these changes will
improve DOD's cost reporting. Therefore, users of DOD's reported cost
information need to continue to exercise caution. While establishing sound
cost reporting procedures and oversight is clearly important, the
reliability of the cost-of-war reports is also dependent on the quality of
DOD's accounting data. As stated in our report, factors contributing to
DOD's challenges in reporting reliable cost data include long standing
deficiencies in DOD's financial management systems. We are aware that DOD
has efforts underway to improve these systems as well. DOD also provided
technical comments and we have incorporated them in the report as
appropriate. DOD's comments are included in appendix I in this report.

^11 GAO-07-76.

                                   - - - - -

We are sending copies of this report to 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 [10]http://www.gao.gov .

If you or your staff have any questions about this report, please contact
me at (202) 512-9619 or [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. Key contributors to this report are listed in appendix II.

Sharon Pickup
Director, Defense Capabilities and Management

List of Committees

The Honorable Carl Levin
Chairman
The Honorable John McCain
Ranking Member
Committee on Armed Services
United States Senate

The Honorable Daniel K. Inouye
Chairman
The Honorable Ted Stevens
Ranking Member
Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable Ike Skelton
Chairman
The Honorable Duncan Hunter
Ranking Member
Committee on Armed Services
House of Representatives

The Honorable John P. Murtha
Chairman
The Honorable C. W. Bill Young
Ranking Member
Subcommittee on Defense
Committee on Appropriations
House of Representatives

                    Appendix I:  Comments from the Department of Defense

                     Appendix II:  GAO Contact and Staff Acknowledgements

GAO Contact

Sharon Pickup (202) 512-9619

Acknowledgements

In addition to the contact listed above, Ann Borseth,
Assistant Director, Susan Ditto, George Duncan, Richard Geiger, Ron La Due
Lake, Brian Mateja, Lonnie McAllister, Christopher Miller, and Thomas
Twambly made key contributions to this report.

(350990)

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