Peace Operations: DOD's Incremental Costs and Funding for Fiscal Year
1994 (Briefing Report, 04/18/95, GAO/NSIAD-95-119BR).

Pursuant to a congressional request, GAO provided information on the
incremental costs of the Department of Defense's (DOD) peace operations
during fiscal year (FY) 1994, focusing on: (1) whether supplemental
appropriations fully covered DOD incremental costs; (2) the impacts on
the services from funding shortages and overages; and (3) how DOD spent
the reimbursements received from the United Nations.

GAO found that: (1) DOD reported about $1.9 billion in incremental costs
for peace operations during FY 1994; (2) Congress provided an emergency
supplemental appropriation which covered almost two-thirds of these
costs and DOD covered another $233 million by invoking its Feed and
Forage Act authority, using the balance of the Defense Emergency
Response Fund account, and using authorized reprogramming funds; (3) DOD
absorbed the remaining $476 million mainly by reducing operation and
maintenance funding; (4) the FY 1995 supplemental appropriation provided
about $299 million to DOD for peace operations that occurred in FY 1994,
leaving DOD with a total funding shortfall of about $177 million; (5)
reductions in operation and maintenance accounts adversely affected most
units that did not participate in peace operations; (6) although
participating units were not affected by funding shortages, they
experienced operational impacts, such as missed training opportunities;
and (7) although DOD received about $98 million from the United Nations
for the operation in Somalia during FY 1993, these funds were deposited
into FY 1994 appropriation accounts and could not be traced to specific
expenditures.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-95-119BR
     TITLE:  Peace Operations: DOD's Incremental Costs and Funding for 
             Fiscal Year 1994
      DATE:  04/18/95
   SUBJECT:  Military operations
             Military appropriations
             Reimbursements to government
             Foreign military assistance
             United Nations
             Fiscal year
             International relations
             Cost analysis
             Funds management
             Military intervention
IDENTIFIER:  Somalia
             Defense Emergency Response Fund
             Bosnia
             Haiti
             
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Cover
================================================================ COVER


Report to Congressional Requesters

April 1995

PEACE OPERATIONS - DOD'S
INCREMENTAL COSTS AND FUNDING FOR
FISCAL YEAR 1994

GAO/NSIAD-95-119BR

Peace Operations


Abbreviations
=============================================================== ABBREV

  DERF - Defense Emergency Response Fund
  DOD - Department of Defense
  FORSCOM - Forces Command
  O&M - operation and maintenance
  USAFE - U.S.  Air Forces, Europe

Letter
=============================================================== LETTER


B-260764

April 18, 1995

The Honorable Herbert H.  Bateman
Chairman
The Honorable Norman Sisisky
Ranking Minority Member
Subcommittee on Military Readiness
Committee on National Security
House of Representatives

The Department of Defense (DOD) participated in peace operations in
several places, including Somalia, Bosnia, Haiti, and Southwest Asia,
during fiscal year 1994.  To help cover the incremental costs\1 of
these operations, Congress provided DOD with two supplemental
appropriations.  During fiscal year 1994, DOD also received
reimbursements from the United Nations for incremental costs incurred
in Somalia during fiscal year 1993. 

In response to your request, we are providing information on (1)
whether the supplemental appropriations fully covered DOD's
incremental costs, (2) what the impacts on the services were from
funding shortages and overages, and (3) how DOD spent the
reimbursements received from the United Nations.  On March 31, 1995,
we briefed your staff on these issues. 


--------------------
\1 As defined by the Omnibus Budget Reconciliation Act of 1990 (P.L. 
101-508), for use during Operation Desert Shield/Storm, incremental
costs are only those costs that would not have been incurred except
for the operation.  DOD is still using this definition. 


   BACKGROUND
------------------------------------------------------------ Letter :1

DOD received appropriations of $251.4 billion for fiscal year 1994,
of which $88.3 billion was for operation and maintenance (O&M). 
DOD's annual appropriations do not include funds for possible
contingency operations.  DOD does not budget for the incremental
costs of military operations or contingencies.  It budgets to be
ready to conduct such operations.  When the services have to conduct
these operations, the planned budget execution cycle is disrupted. 
DOD must then absorb the incremental costs of these operations, which
are mostly O&M items, within its existing appropriations or seek
supplemental appropriations. 

In an Emergency Supplemental Appropriations Act (P.L.  103-211, Feb. 
1994), Congress provided DOD $1,198.3 million for incremental costs
associated with ongoing operations in Somalia, Bosnia, Haiti, and
Southwest Asia.  Within the fiscal year 1995 defense appropriations
act, Congress provided DOD with additional supplemental
appropriations of $299.3 million through the Defense Emergency
Response Fund (DERF) for fiscal year 1994 incremental costs.  This
fund can be used to reimburse other appropriation accounts for costs
incurred in responding to emergencies. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

During fiscal year 1994, DOD reported $1,907.8 million in incremental
costs for peace operations.  As a means to reimburse DOD for some of
these costs, Congress provided DOD with emergency supplemental
appropriations in February 1994.  The supplemental appropriations
covered almost two-thirds of these incremental costs, leaving DOD
with a funding shortfall of $709.5 million near the end of fiscal
year 1994.  DOD covered $233.3 million of this shortfall by invoking
its Feed and Forage Act authority,\2 using funds from the fiscal year
1994 balance in the DERF account, and using authorized reprogramming
funds.  DOD absorbed the remaining $476.2 million primarily by
reducing O&M funding for such activities as military training,
equipment maintenance, and stock purchases. 

On September 30, 1994, the fiscal year 1995 defense appropriations
act provided additional supplemental appropriations of $299.3 million
through the DERF to further reimburse DOD for certain operations that
occurred in fiscal year 1994.  While this funding was technically
appropriated within fiscal year 1994, most of it was not obligated
during that year.  Including this second supplemental in a final
accounting for incremental peace operations in fiscal year 1994, DOD
sustained a funding shortfall of $176.9 million. 

Units participating in peace operations were fully funded for their
incremental costs.  To pay these units' costs, DOD used funds from
other service programs or units that did not participate.  Except for
the Air Force, service officials told us that reductions in O&M
accounts to cover peace operation incremental costs adversely
affected military readiness at several units.  While participating
units were not affected by funding shortages, as a result of their
deployment to peace operations, they experienced operational impacts
such as missed training opportunities. 

Unrelated to the supplemental appropriations, in fiscal year 1994,
DOD received $98.1 million in reimbursements from the United Nations
for assistance provided to the U.N.  operation in Somalia during
fiscal year 1993.  The majority of this amount was paid on March 29,
1994.  The funds were deposited to fiscal year 1994 appropriation
accounts and, according to DOD, cannot be traced to specific
expenditures. 


--------------------
\2 This authority (41 U.S.C.  11) permits DOD to incur obligations in
advance of appropriations or receipts to cover clothing, subsistence,
forage, fuel, quarters, transportation, and medical and hospital
supplies.  DOD is seeking fiscal year 1995 supplemental
appropriations to, among other things, liquidate the $126.3 million
in obligations. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

To analyze DOD's incremental costs and funding for peace operations,
we compared its reported incremental costs to approved supplemental
funding and other funding sources, reviewed funding documents, and
interviewed officials in DOD, each service headquarters, selected
major commands, and selected units and bases.  We did not
independently verify the accuracy of DOD's reported incremental costs
because, as we have previously reported, the services do not have
systems that capture actual incremental costs.\3

Only the total obligations are captured by the accounting systems. 
The services use various management information systems to identify
incremental obligations and to estimate incremental costs. 

To obtain information on the impact of funding shortfalls, we
reviewed service documents and met with officials in each of the
military services, including selected major commands and units.  We
also discussed these matters with officials from the Office of the
Secretary of Defense. 

To analyze the U.N.  reimbursement, we obtained records showing
expenditures in fiscal year 1993 and accounts credited in fiscal year
1994. 

We performed our work between June 1994 and March 1995 in accordance
with generally accepted government auditing standards.  We reviewed
the information in this briefing report with DOD officials and made
changes where appropriate. 


--------------------
\3 Peace Operations:  Information on U.S.  and U.N.  Activities
(GAO/NSIAD-95-102BR, Feb.  13, 1995). 


---------------------------------------------------------- Letter :3.1

As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days from its issue date.  At that time, we will send copies
to the Chairmen of the House Committee on National Security, the
Senate and House Committees on Appropriations, and the Senate
Committee on Armed Services and to the Secretaries of Defense, the
Army, the Air Force, and the Navy.  Copies will be made available to
others upon request. 

If you or your staff have any questions concerning this report,
please contact me at (202) 512-3504.  The major contributors to this
report are listed in appendix I. 

Richard Davis
Director, National Security
 Analysis


BACKGROUND
============================================================ Chapter I


   REPORTED INCREMENTAL COSTS FOR
   FISCAL YEAR 1994 OPERATIONS
---------------------------------------------------------- Chapter I:1



   (See figure in printed
   edition.)

   Note:  With the exception of
   the operations in Cuba, Korea,
   and that part of the Haitian
   operation involving migrant
   processing, which were
   unilateral U.S.  military
   operations, these operations
   supported U.N.-authorized peace
   operations.

   (See figure in printed
   edition.)


U.S.  military forces participated in several contingency operations
during fiscal year 1994.  These operations included (1) activities in
support of U.N.  peace operations in Bosnia, Haiti, Somalia, and
Southwest Asia; (2) the increased deployment of military capability
to South Korea in response to heightened tensions; and (3) the
enforcement of a revised U.S.  migration policy designed to prevent
Cuban migrants from reaching the United States.  The map shows where
these operations occurred and the Department of Defense's (DOD)
reported incremental costs for each operation. 

DOD does not budget for the cost of contingency operations. 
Therefore, a common characteristic of each operation is that it was
not included in DOD's budget for fiscal year 1994.  DOD had to absorb
the cost of these operations within its existing budget or seek
supplemental appropriations.  During fiscal year 1994, DOD received
supplemental appropriations for some of these operations. 

We were asked in part to assess whether the supplemental
appropriations provided were adequate to cover DOD's estimated costs,
and, if inadequate, to ascertain the impact on DOD.  In recent years,
there has been a proliferation of terms used to describe military
operations other than war that are unplanned or not budgeted for in
advance by DOD.  Included are peacekeeping, peace enforcing, and
humanitarian operations.  To assess the adequacy of supplemental
appropriations for these operations and the impact of any shortfalls,
we included the cost of each contingency operation for which DOD
reported incremental costs because (1) each was not included in DOD's
fiscal year 1994 budget and (2) DOD had to cover the cost in some
way.  The bulk of the reported incremental costs was for U.S. 
forces' operations in support of U.N.  peace operations.  We also
included the incremental costs of U.S.  forces engaged in enforcing
U.S.  policy concerning Cuban migration, which was a unilateral U.S. 
military operation. 

DOD's reported incremental costs do not include all peace operations. 
DOD includes in its annual budget costs of the long-standing U.S. 
military presence in Korea and U.S.  participation in the
Multinational Force and Observer Mission in the Sinai, which provides
a buffer between Egypt and Israel in compliance with the Camp David
Accords. 


COST AND FUNDING
=========================================================== Chapter II


   SUMMARY OF INCREMENTAL COSTS
   AND FUNDING DURING FISCAL YEAR
   1994
--------------------------------------------------------- Chapter II:1



   (See figure in printed
   edition.)


For fiscal year 1994, DOD reported $1,907.8 million for peace
operations-related incremental costs.  In February 1994, Congress
provided DOD with emergency supplemental appropriations of $1,198.3
million to reimburse it for these incremental costs.  The
supplemental appropriations covered almost two-thirds of these
incremental costs, leaving DOD with a funding shortfall of $709.5
million during fiscal year 1994. 

DOD covered $233.3 million of its initial funding shortfall in three
ways--by invoking its Feed and Forage Act authority, using funds from
the fiscal year 1994 balance in the Defense Emergency Response Fund
(DERF) account,\1 and using authorized reprogramming funds. 

DOD used its Feed and Forage Act authority to help fund the cost of
operations that supported the restoration of democracy in Haiti. 
Specifically, DOD used this authority to obligate $126.3 million more
than it was appropriated for fiscal year 1994.  Of this amount, $123
million was for Army operation and maintenance (O&M) expenses; the
balance of $3.3 million was obligated to pay expenses of activated
Army reservists. 

DOD also offset incremental costs associated with ongoing operations
in Haiti with funds from the DERF account.  In 1989, Congress
appropriated $100 million for this fund to cover emergency costs of
natural and man-made disasters.  At the beginning of fiscal year
1994, $94.7 million remained in the fund.  DOD used $64.7 million of
this amount to support maritime interdiction, the enforcement of
sanctions, and the processing of migrants based on DOD's
determination that these operations were in support of a man-made
disaster.\2

In May 1994, under DOD's existing reprogramming authority, the Army
used $42.3 million in funds provided through congressionally approved
reprogramming action to cover increased operations in Korea. 

The remaining $476.2 million funding shortfall near the end of fiscal
year 1994 was absorbed within DOD's existing appropriations.  The
majority of this was absorbed within its O&M appropriation through a
variety of actions, including the deferral of maintenance,
nonreplenishment of supplies, and cancellation of training. 


--------------------
\1 The DERF is a DOD management fund that can be used to reimburse
other appropriation accounts for costs incurred in responding to
emergencies.  The money appropriated to the DERF is available for
expenses occurring during any fiscal year. 

\2 The remaining $30 million was used for various global disaster
relief missions, which DOD did not consider to be unfunded
contingency operations. 


   FINAL FISCAL YEAR 1994
   INCREMENTAL COSTS ABSORBED BY
   DOD
--------------------------------------------------------- Chapter II:2



   (See figure in printed
   edition.)


On September 30, 1994, DOD had a funding shortfall of $476.2 million. 
At that time, the fiscal year 1995 defense appropriations act
provided additional supplemental appropriations of $299.3 million
through the DERF to further reimburse DOD for certain operations that
occurred in fiscal year 1994.  While this funding was technically
appropriated within fiscal year 1994, most of it was not obligated
during that year.  For example, only $19.6 million was obligated in
fiscal year 1994 for immediate military personnel requirements within
the Navy.  The balance, $279.7 million, was available in fiscal year
1995 for programs that were deferred in support of contingency
operations during fiscal year 1994. 

Including this second supplemental in a final accounting for
incremental peace operations in fiscal year 1994, DOD sustained a
funding shortfall of $176.9 million. 


   INDIVIDUAL SERVICES'
   INCREMENTAL COSTS AND FUNDING
   DURING FISCAL YEAR 1994
--------------------------------------------------------- Chapter II:3



   (See figure in printed
   edition.)


The Army's reported incremental costs were $802.1 million.  Within
fiscal year 1994, it received $447.2 million of the February 1994
supplemental appropriations and $4 million from the DERF balance
available at the beginning of the fiscal year.  It was also allowed
to incur obligations in excess of its appropriations by $126.3
million under authority of the Feed and Forage Act.  In addition, the
Army received an additional $42.3 million from reprogrammed funds for
increased operations in Korea.  Thus, it had to absorb $182.3 million
within its fiscal year 1994 appropriations. 

The Air Force's reported incremental costs were $670.8 million.  The
service received $605.3 million of the supplemental appropriations
and $5.6 million in DERF funds available at the beginning of the
fiscal year.  Thus, it had to absorb $59.9 million within its fiscal
year 1994 appropriations. 

The Navy's reported incremental costs were $378.4 million.  The Navy
received $124.2 million of the supplemental appropriations and $53.1
million from DERF funds available at the beginning of the fiscal
year.  Thus, it had to absorb $201.1 million within its fiscal year
1994 appropriations.\3

The Marine Corps reported incremental costs of $10.9 million.  It
received $2 million of DERF funds available at the beginning of the
fiscal year and had to absorb $8.9 million within its fiscal year
1994 appropriations. 

Other DOD agencies, including the U.S.  Special Operations Command,
Defense Health Program, Defense Intelligence Agency, and Defense
Mapping Agency, collectively reported $45.6 million in incremental
costs.  They received $21.6 million from the supplemental
appropriations and had to absorb $24 million within the fiscal year
1994 appropriations. 


--------------------
\3 On September 30, 1994, the Navy obligated $19.6 million from the
supplemental funding provided through the DERF on that date for
immediate military personnel requirements. 


   INCREMENTAL COSTS AND FUNDING
   FOR UNITS DEPLOYED TO PEACE
   OPERATIONS
--------------------------------------------------------- Chapter II:4



   (See figure in printed
   edition.)


According to DOD officials, units participating in contingency
operations received funds to cover their reported incremental costs. 
Examples of unit incremental costs and funding follow: 

  The Army's 10th Mountain Division provided troops, supplies, and
     equipment for the Somalia operation.  It also provided
     accounting services for all other Army units operating in
     Somalia.  The incremental costs paid through the 10th Mountain
     Division were $103.9 million, all of which were reimbursed by
     the Army Forces Command (FORSCOM). 

  The Air Force's Aviano, Italy, Air Base incurred $16.1 million in
     incremental costs, most of which was related to Bosnia for
     providing contract quarters, leasing office space, and funding
     temporary duty.  Its total reimbursements from U.S.  Air Forces,
     Europe (USAFE) were $18.2 million, $2.1 million more than the
     costs.  According to Air Force officials, USAFE advised them to
     retain the excess to avoid multiple accounting transactions. 
     The excess funds were used for other O&M requirements, unrelated
     to peace operations, which would otherwise have been funded by
     USAFE.  The base also incurred expenses for flying hours, but
     USAFE accounted for these costs and reimbursements separately. 

  The USS America aircraft carrier was deployed to the Mediterranean
     Sea when it was ordered to Somalia.  It incurred incremental
     costs of $914,000 for passage through the Suez Canal and was
     fully reimbursed by the Navy's Commander-in-Chief, Atlantic
     Fleet. 

  A Marine Corps transportation and refueling squadron, which
     operates C-130 aircraft, incurred $1.3 million in incremental
     costs for operations in Bosnia.  It was fully reimbursed for
     fuel, maintenance repair parts, and aircrew travel costs from
     the Naval Air Forces, Atlantic. 

While units that deployed to peace operations were fully reimbursed
for their costs, we recently reported that such operations have
stressed key military capabilities.\4 Repeated use of deployed
forces, particularly certain Army support forces such as
quartermaster and transportation units and specialized Air Force
units as well as European-based Air Force units, had resulted in some
units and personnel deploying more than once to an operation or to
consecutive operations, increased the tempo of operations, and
reduced the time available to prepare for combat missions. 
Furthermore, the Air Force's participation in these operations had
resulted in extended tours of duty, missed training, increased
maintenance on aircraft, and cannibalization of aircraft. 


--------------------
\4 Peace Operations:  Heavy Use of Key Capabilities May Affect
Response to Regional Conflicts (GAO/NSIAD-95-51, Mar.  8, 1995). 


IMPACTS OF FUNDING SHORTFALLS
========================================================== Chapter III


   SUMMARY OF IMPACTS ON SERVICES
-------------------------------------------------------- Chapter III:1



   (See figure in printed
   edition.)


To the extent supplemental appropriations and other sources of
funding were not sufficient to cover incremental costs, the services
had to absorb costs in their annual appropriations.  For the most
part, the shortages in funding for peace operations were relatively
small when compared to overall service accounts.  For instance, the
initial $709.5 million shortage in congressional funding in fiscal
year 1994 represented less than 1 percent of DOD's O&M expenses of
$88.3 billion for fiscal year 1994.  However, because services and
major commands borrow funds from the fourth quarter to cover funding
shortfalls and because some of those funds cannot be used to fund
peace operations on relatively short notice, the relative amounts
available for funding such operations become more constricted within
that quarter. 

The impact of funding shortfalls reported by the services was not
solely due to peace operations.  Army officials reported, for
example, that Congress did not fund locality pay and foreign national
pay raises, totaling $193 million, which the Army had to absorb
within its annual appropriations, and that the Army had not received
$27 million in congressionally directed transfers\5 from National
Defense Stockpile Fund revenues. 

Since the services took steps to ensure that units participating in
peace operations received additional funds, shortfalls primarily
affected bases or units that did not participate in the operations. 

Units receive their annual funding on a quarterly basis.  To cover
incremental costs, DOD initially absorbs the incremental costs from
third and fourth quarter allocations.  If DOD does not receive
additional funds to cover these costs and reinstate the borrowed
quarterly allocation, the impact is felt toward the end of the fiscal
year when units must make do with the lowered funding allocations. 
However, units also regularly receive periodic budget adjustments
from higher military commands for a variety of reasons unrelated to
peace operations.  While these units know how much funding they are
allocated and how much they anticipate, they do not know whether any
shortfall is due to peace operations or other reasons. 


--------------------
\5 These transfers were based on anticipated revenues that did not
materialize. 


   IMPACTS ON THE ARMY
-------------------------------------------------------- Chapter III:2



   (See figure in printed
   edition.)

During fiscal year 1994, the Army absorbed most of its shortage of
$182.3 million in funding for peace operations within its O&M
accounts, which totaled $18 billion.  As discussed earlier, the
impact of funding shortfalls reported by the services was not solely
due to the need to fund peace operations.  Army officials reported,
for example, that they had to absorb costs for pay raises and that it
had not received expected revenues from the National Defense
Stockpile Fund. 

FORSCOM units, among other things, were forced to scale back training
and leave inventories unreplenished.  For example, the 2nd Armored
Division was unable to complete an advanced maneuver exercise due to
a lack of training funds, which cover its costs for fuel, spare
parts, and maintenance used in such exercises.  Since such training
is scheduled months in advance, the cycle is disrupted and missed
training cannot be immediately rescheduled.  According to 2nd Armored
Division documents, the division funded $57.4 million for training
and ended the year with $8.3 million in unfunded training
requirements.  The division reported a lowered readiness rating,\6
which division officials attributed to the training deficit and
personnel problems. 

FORSCOM also deferred replenishment of stocks to authorized levels
beginning in the mid-third quarter.  Furthermore, in September 1994,
FORSCOM approved a complete halt to reordering or replenishing
supplies of low priority items for the 1st Infantry Division.  Since
supplies are funded within the division's training budget, this
allowed the division the flexibility it needed with its available
resources to continue to purchase high priority supplies and maintain
its training schedule.\7 The 1st Infantry Division had a training
budget of $29.3 million and ended the year with $7.5 million in
unfunded supply requirements. 

The U.S.  Army, Europe's 1st Armored Division as a whole was forced
to reduce major scheduled training exercises and its units reduced or
canceled local training exercises due to funding shortfalls.  For
example, the division reduced one of its two major gunnery exercises
by not taking all of its equipment and reduced its major maneuvering
exercise from 10 to 7 days.  As for the division's units, (1) an
aviation brigade commander canceled the majority of fourth quarter
battalion-level training events for three of the brigade's four
battalions and (2) a tank battalion conducted its training exercises
in high mobility multi-wheeled vehicles instead of its tanks because
they were less expensive to operate. 


--------------------
\6 The division still possessed the resources and training necessary
to undertake many, but not all, portions of its wartime mission. 

\7 Due to funding shortages and reprogramming requirements at the
beginning of the fiscal year, the division already was operating
under a reduced training schedule. 


   IMPACTS ON THE AIR FORCE
-------------------------------------------------------- Chapter III:3



   (See figure in printed
   edition.)


The Air Force shortfall during fiscal year 1994 was $59.9 million,
and its total incremental costs were $670.8 million.  This shortfall
was substantially less than the shortfall for the Navy and the Army. 
While Air Force officials stated that the Air Force experienced
limited or no major funding-related impacts on operational programs
during the fiscal year because of peace operations, certain actions
were taken to minimize potential impacts.  These actions included
reducing the size and scope of acquisition programs and reducing the
funding of several O&M accounts.  As noted earlier, however, Air
Force units that participated in peace operations did experience
several adverse operational impacts.  These impacts resulted from the
high tempo of operations rather than from a shortage of funds. 

In fiscal year 1995, $69.4 million of the $299.3 million in the
second supplemental appropriation that was provided to the DERF was
allocated to the Air Force.  Of that amount, $35.1 million was
allocated to the major commands that shifted fiscal year 1994 funds
to cover incremental costs.  Specifically, in fiscal year 1994, the
Air Mobility Command shifted $21 million from asset depreciation
accounts, which were established for such assets as vehicles and
equipment;\8 the Air Combat Command shifted $4.5 million from
facility projects; and USAFE shifted $9.6 million from facility
projects.  The remaining $34.3 million was given to the Air Mobility
Command for fiscal year 1994 airlift costs relating to operations in
Rwanda. 

The total reimbursements to the Air Force in fiscal years 1994 and
1995 were $9.5 million more than its reported incremental costs for
fiscal year 1994.  Near the end of fiscal year 1994, DOD requested
the service to estimate additional funds needed for peace operations. 
The Air Force's actual costs were later found to be less than its
preliminary estimates.  DOD officials stated that this overage was
applied to other areas within the Air Force that had shortages. 


--------------------
\8 The command operates under the Defense Business Operations Fund
and therefore charged military activities rates that recovered the
full costs of operations.  The asset depreciation account allowed the
command to recognize the expense of decreasing property value of
assets and set aside funds to replace the items.  A fiscal year 1995
revision to the accounting system eliminated the command's use of
this account. 


   IMPACTS ON THE NAVY
-------------------------------------------------------- Chapter III:4



   (See figure in printed
   edition.)


The overall peace operations shortfall for the Navy as fiscal year
1994 ended was $201.1 million.  Because the Navy received $19.6
million in funding for its military personnel account on the last day
of fiscal year 1994, it ended the year with a shortfall of $181.5
million of its $20.8 billion total O&M account.  The Navy absorbed
most of this within its O&M account by reducing planned expenditures
for air and ship operations, ship maintenance, facilities
maintenance, weapons maintenance engineering support, and submarine
inactivations. 

For example, the Commander-in-Chief, Atlantic Fleet, absorbed $65
million within the fleet's O&M account.  About $36.5 million was
taken from the $930.5 million budgeted for the ship depot maintenance
program.  As a result, the Atlantic Fleet reduced maintenance on
three ships and rescheduled planned limited maintenance on six ships
to the next fiscal year.  According to fleet officials, continued
limited maintenance will result in the reduction of the ships'
capability and useful lives.  Moreover, Navy officials reported that
shifting maintenance into the next fiscal year increased costs by $3
million because of increases for material, salaries, and scope of
work changes. 

The Atlantic Fleet also took $16.3 million from the $827.6 million
budgeted for the Naval Air Forces, Atlantic, flying hour program. 
During the last quarter of the year, Naval Air Forces, Atlantic,
grounded one aircraft carrier's air wing for 1 month and reduced
flying for the remainder of the quarter.  According to Navy
officials, the reduced flying caused readiness ratings to drop. 

The remaining $12.2 million was taken from other Atlantic Fleet
programs such as supply and equipment purchases, counternarcotics
programs, and base operations. 


   IMPACTS ON THE MARINE CORPS
-------------------------------------------------------- Chapter III:5



   (See figure in printed
   edition.)


Overall, the Marine Corps absorbed $8.9 million within its $1.9
billion O&M account for fiscal year 1994.  The service reduced
funding for such things as flying hours, training, and equipment
maintenance.  Marine Corps officials told us that this reduction
contributed to some units' lowered readiness ratings and to reduced
equipment maintenance. 

For example, the Marine Forces Command, Atlantic, absorbed $1.4
million within the $285.4 million budgeted for its flying hour
program by transferring over 5,000 training flying hours from
nondeployed squadrons to units supporting contingency operations. 
The command stated that because of this transfer, 11 of 30 squadrons
reported significantly reduced readiness ratings for the last
quarter.  Command officials reported that it will be mid-fiscal year
1995 before these squadrons' readiness levels return to normal. 

The Marine Forces Command, Atlantic, also absorbed $3.5 million
within the $106.4 million budgeted for ground operating forces'
training, equipment, and maintenance of equipment programs. 
Regularly scheduled preventive maintenance for such items as trucks,
engines, generators, and artillery parts was foregone in fiscal year
1994.  Marine Corps officials reported this will eventually result in
more costly corrective maintenance or degraded equipment. 


U.N.  REIMBURSEMENTS
=========================================================== Chapter IV


   DISTRIBUTION OF FISCAL YEAR
   1994 U.N.  REIMBURSEMENTS
--------------------------------------------------------- Chapter IV:1



   (See figure in printed
   edition.)


The United Nations reimburses governments for support provided under
different types of agreements.  DOD provided some of the assistance
to the United Nations for operations in Somalia under the Foreign
Assistance Act (sec.  607).  The act allows U.N.  reimbursements
received within 180 days of the end of the fiscal year in which the
support was provided to be credited to the current year appropriation
that originally funded the support.  Unless the agreements providing
the reimbursement call for payment of interest, payments received
after that date are to be deposited in the U.S.  Treasury. 

Within the 180-day time period in fiscal year 1994, the United
Nations reimbursed DOD $98.1 million for assistance DOD provided in
fiscal year 1993.  DOD received the majority of the funds on March
29, 1994, 1 day prior to the time when the funds would have to have
been deposited in the U.S.  Treasury. 

DOD records show that, in fiscal year 1994, most of the funds were
credited to the types of accounts that originally funded the goods
and services.  According to DOD officials, reimbursements received
from the United Nations generally are used to execute programs that
had to be deferred in order to provide support to the United Nations. 
The following table compares the fiscal year 1993 expense category
for each service to fiscal year 1994 appropriation accounts credited. 
According to DOD, expenditures of these funds cannot be traced beyond
each service's appropriation account shown in the table. 


   DOD ACCOUNTS CREDITED WITH U.N. 
   REIMBURSEMENTS
--------------------------------------------------------- Chapter IV:2



   (See figure in printed
   edition.)

\a Officials at these commands could not readily identify accounts
credited because funds were processed through an intragovernment
revolving fund. 

\b We did not determine the accounts credited because only a small
amount of credits was given to multiple agencies. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix I

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Steven H.  Sternlieb, Assistant Director
Lisa M.  Quinn, Evaluator

NORFOLK FIELD OFFICE

Lindsay B.  Harwood, Evaluator-in-Charge
J.  Larry Peacock, Evaluator
Carleen C.  Bennett, Evaluator

EUROPEAN OFFICE

Joanne L.  Jurmu, Evaluator

