Global War on Terrorism: Reported Obligations for the Department 
of Defense (18-MAY-07, GAO-07-783R).				 
                                                                 
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. So far in  
fiscal year 2007, Congress has provided DOD with $70 billion in  
annual appropriations for GWOT. To continue its GWOT operations, 
DOD has requested an additional $93.4 billion in supplemental	 
appropriations for fiscal year 2007 and $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. 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 February 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-07-783R					        
    ACCNO:   A69773						        
  TITLE:     Global War on Terrorism: Reported Obligations for the    
Department of Defense						 
     DATE:   05/18/2007 
  SUBJECT:   Budget obligations 				 
	     Cost analysis					 
	     Defense cost control				 
	     Defense economic analysis				 
	     Defense operations 				 
	     Defense procurement				 
	     Military appropriations				 
	     Military operations				 
	     Supplemental appropriations			 
	     Terrorism						 
	     Warfare						 
	     DOD Operation Iraqi Freedom			 
	     Global War on Terrorism				 
	     Operation Enduring Freedom 			 
	     Operation Noble Eagle				 

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GAO-07-783R

   

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May 18, 2007

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

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. So far in fiscal year 2007, Congress has
provided DOD with $70 billion in annual appropriations^2 for GWOT. To
continue its GWOT operations, DOD has requested an additional $93.4
billion in supplemental appropriations for fiscal year 2007 and $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

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 February
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.

^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 That portion of annual appropriations designated for GWOT, also known
as Title IX or bridge funding, was provided by Congress to pay for ongoing
military operations during the first part of the fiscal year.

^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).

^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 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).

Scope and Methodology

To conduct our work, we analyzed applicable annual and supplemental
appropriations from fiscal year 2001 through February 2007 and DOD's
monthly Supplemental and Cost of War Execution Reports from September 2001
to February 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. Factors
contributing to DOD's challenges in reporting reliable cost data include
long standing deficiencies in DOD's financial management systems.

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. 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 our
findings later this year.

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

^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).

Summary

From fiscal year 2001 through April 2007, Congress has provided DOD with
about $454 billion^9 for its efforts in support of GWOT. DOD has reported
obligations of about $407.1 billion for military operations in support of
the war from fiscal years 2001 through 2006 and from the beginning of
fiscal year 2007 through February 2007, the latest available data. The
$46.9 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 February 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. DOD recently began including the obligations tied
to this operation, about $3 billion, as part of its total available
funding, which is included in the $454 billion.

^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 February 2007

Notes: Fiscal year 2007 reflects DOD's reported obligations from October
2006 through February 2007. Reported GWOT obligations include Operation
Noble Eagle, Operation Enduring Freedom, and Operation Iraqi Freedom.
Figures include about $19.4 billion obligated in fiscal years 2002 and
2003, which was not included in DOD's cost-of-war reports. This includes
about $13.3 billion from the Defense Emergency Response Fund and $6.1
billion from Pub. L. No. 108-7 (Consolidated Appropriations Resolution,
2003). 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 February 2007, DOD's total reported obligations are already more
than half 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 February 2007--are approximately equal to
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 $304.6 billion for
operations in and around Iraq as part of Operation Iraqi Freedom, and
about $74.2 billion for operations in Afghanistan, the Horn of Africa, the
Philippines, and elsewhere as part of Operation Enduring Freedom. It also
includes about $28.3 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 February of fiscal
year 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
February 2007

Notes: Fiscal year 2007 reflects DOD's reported obligations from October
2006 through February 2007. Operation Iraqi Freedom began in fiscal year
2003; therefore no obligations were reported in fiscal years 2001 and 2002
for this operation. Figures include about $19.4 billion obligated in
fiscal years 2002 and 2003 that was not included in DOD's cost-of-war
reports. This includes about $4.1 billion for Operation Enduring Freedom,
$9.2 billion for Operation Noble Eagle, and $6.1 billion for Operation
Iraqi Freedom. 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 February total $55.3
billion. The Army accounts for the largest proportion of reported
obligations--about $41.6 billion, about ten times higher than the near
$4.3 billion in obligations reported for the Air Force, 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 $26.8 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 $16.4 billion. Figure 3 shows DOD's reported
obligations through February 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 February 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
$55.3 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, which accounts for the
large amount of investment obligations shown in fiscal year 2007.

Agency Comments and Our Evaluation

In written comments on a draft of this report, 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, and that we are continuing to evaluate
them. As we state in our scope and methodology section, we are currently
evaluating the attestation and variance analysis processes to gain
insights into their effect on data reliability. 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. 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
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at 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

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.

(350991)

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