This is the accessible text file for GAO report number GAO-05-767 
entitled 'Global War on Terrorism: DOD Should Consider All Funds 
Requested for the War When Determining Needs and Covering Expenses' 
which was released on September 28, 2005. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to Congressional Committees: 

September 2005: 

Global War on Terrorism: 

DOD Should Consider All Funds Requested for the War When Determining 
Needs and Covering Expenses: 

GAO-05-767: 

GAO Highlights: 

Highlights of GAO-05-767, a report to congressional committees: 

Why GAO Did This Study: 

To assist the Congress in its oversight role, GAO is undertaking a 
series of reviews on the costs of operations in support of the Global 
War on Terrorism (GWOT). In related work, GAO is raising concerns about 
the reliability of the Department of Defense’s (DOD) reported cost data 
and therefore is unable to ensure that DOD’s reported obligations for 
GWOT are complete, reliable, and accurate. In this report, GAO (1) 
identified funding for GWOT in fiscal years 2004 and 2005, (2) compared 
supplemental appropriations for GWOT in fiscal year 2004 to the 
military services’ reported obligations, and (3) compared supplemental 
appropriations for GWOT in fiscal year 2005 to the military services’ 
projected obligations. 

What GAO Found: 

In fiscal years 2004 and 2005, DOD received funding for GWOT through 
both funds included in its annual appropriation and supplemental 
appropriations. In fiscal years 2004 and 2005, the military services 
received about $52.4 billion and $62.1 billion, respectively, in 
supplemental appropriations for GWOT (1) military personnel and (2) 
operation and maintenance expenses. The Army, Air Force, and Navy also 
received in their annual appropriations a combined $7.9 billion in 
fiscal year 2004 and a combined $7.6 billion in fiscal year 2005, which 
DOD described as being intended to support GWOT. The military services 
absorbed the increase into their annual appropriations and allocated it 
based on their judgment of where the funds were most needed. DOD’s 
accounting systems, however, do not separately identify these 
additional appropriations, and there are no reporting requirements for 
DOD to identify to which appropriation accounts the funds were 
allocated; consequently, the military services have lost visibility 
over these funds and do not know the extent to which they are being 
used to support GWOT. Despite having asked for the increase to support 
GWOT, DOD is not explicitly counting these additional funds when 
considering the amount of funding available to cover GWOT expenses. 

For fiscal year 2004, regarding supplemental appropriations for GWOT 
military personnel expenses, the Navy and Marine Corps reported more in 
obligations than they received in supplemental appropriations, while 
the Army and Air Force received more in supplemental appropriations 
than their reported obligations. Each of the services reported more in 
GWOT operation and maintenance obligations than it received in 
supplemental appropriations. To cover the differences (gaps), DOD and 
the services exercised a number of authorities provided them, including 
transferring funds and reducing or deferring planned spending for 
peacetime operations. However, in considering the amount of funding 
available to cover the gaps, DOD did not explicitly take into account 
the funds provided through its annual appropriation that as previously 
noted it described as for the support of GWOT. If DOD had considered 
these funds, it could have reduced the Army’s GWOT gap and eliminated 
the GWOT gaps of the Air Force and Navy. 

For fiscal year 2005, the services’ forecasts of GWOT obligations for 
the full fiscal year as of June 2005 suggest a potential gap of $500 
million for military personnel for the Air Force and potential gaps of 
about $2.7 billion and about $1 billion, respectively, for operation 
and maintenance for the Army and Air Force. To cover expenses, DOD and 
the services again plan to take a variety of actions, including 
reprogramming funds and reducing or deferring planned spending. 
However, DOD is again not explicitly considering the funds provided 
through its annual appropriation, which it described as for the support 
of GWOT. If counted in fiscal year 2005, the amounts potentially could 
reduce the Army’s and eliminate the Air Force’s GWOT gaps and eliminate 
the need for reprogramming funds and reducing or deferring planned 
spending. 

What GAO Recommends: 

GAO recommends the Secretary of Defense adjust future requests for 
supplemental appropriations to reflect the additional funds DOD 
received in its annual appropriations to support GWOT and consider 
these additional funds when assessing how to cover its expenses for the 
war. DOD disagreed with GAO’s recommendations. Given that disagreement 
and the amount of funds available—more than $10 billion annually—GAO 
has added a matter for congressional consideration regarding directing 
DOD to explain how additional GWOT related funding in its annual 
appropriations supports GWOT. 

www.gao.gov/cgi-bin/getrpt?GAO-05-767. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Sharon L. Pickup at (202) 
512-9619 or pickups@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Funding for GWOT in Fiscal Years 2004 and 2005 Was Provided in Annual 
and Supplemental Appropriations: 

Most Fiscal Year 2004 Supplemental Appropriations for GWOT Were Less 
Than Reported Obligations; However, DOD Is Not Explicitly Counting 
Additional Funds Requested for GWOT in Its Annual Appropriation: 

Fiscal Year 2005 Reported Obligations for GWOT Could Exceed 
Supplemental Appropriations, Requiring the Military Services to Use 
Authorities Provided to Them to Cover the Differences: 

Conclusions: 

Recommendations for Executive Action: 

Matter for Congressional Consideration: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Defense: 

Tables: 

Table 1: Supplemental Appropriations Available to the Military Services 
for GWOT Military Personnel and Operation and Maintenance Expenses in 
Fiscal Years 2004 and 2005: 

Table 2: Annual Appropriations for the Military Services Included in 
Program Budget Decision 736 to Support GWOT in Fiscal Years 2004 and 
2005: 

Table 3: Military Personnel Fiscal Year 2004 GWOT Supplemental 
Appropriations and Reported Obligations: 

Table 4: Operation and Maintenance Fiscal Year 2004 GWOT Supplemental 
Appropriations and Reported Obligations: 

Table 5: Comparison of the Military Services' Combined Supplemental and 
Annual Appropriations for Military Personnel and Operation and 
Maintenance for GWOT in Fiscal Year 2004 to Reported Obligations: 

Figures: 

Figure 1: Military Services' Fiscal Year 2005 Reported Obligations of 
GWOT Military Personnel Supplemental Appropriations through May 2005: 

Figure 2: Military Services' Fiscal Year 2005 Reported Obligations of 
GWOT Operation and Maintenance Supplemental Appropriations through May 
2005: 

Abbreviations: 

DOD: Department of Defense: 

GWOT: Global War on Terrorism: 

LOGCAP: Logistics Civil Augmentation Program: 

Letter September 28, 2005: 

Congressional Committees: 

Since the September 11, 2001, terrorist attacks, the Congress has 
provided the Department of Defense (DOD) with more than $265 billion, 
as of August 2005, in supplemental appropriations to support military 
operations to combat terrorism worldwide. The Congress has also 
provided funds to combat terrorism in DOD's annual appropriation. 
Military operations to defend the United States from terrorist attacks 
are known as Operation Noble Eagle. Overseas military operations to 
combat terrorism are known as Operation Iraqi Freedom, which takes 
place in and around Iraq, and Operation Enduring Freedom, which takes 
place principally in Afghanistan. These operations are known 
collectively as the Global War on Terrorism (GWOT). 

To assist the Congress in its oversight role, we have conducted under 
the Comptroller General's statutory authority a series of reviews on 
the reported obligations and funding for military operations in support 
of GWOT[Footnote 1] and have addressed this report to the congressional 
committees of jurisdiction. 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.[Footnote 2] In 
July 2004, we issued a report that discussed fiscal year 2004 
obligations and funding through April 2004.[Footnote 3] This report 
completes our analysis of fiscal year 2004 and includes our assessment 
of the outlook for fiscal year 2005 obligations and funding for the war 
as of May 2005. In this report, we (1) identified funding for GWOT in 
fiscal years 2004 and 2005; (2) compared supplemental appropriations 
for GWOT in fiscal year 2004 to the military services' reported 
obligations and, if differences occurred, determined the actions DOD 
and the services took to cover them; and (3) compared supplemental 
appropriations for GWOT in fiscal year 2005 to the services' projected 
obligations. Where it appeared that obligations may exceed the 
supplemental appropriations provided in fiscal year 2005, we sought to 
identify the actions DOD and the services plan to take to cover the 
gaps. For purposes of this report, the term "gap" refers to comparisons 
between funds provided in supplemental appropriations and DOD's 
reported GWOT obligations--specifically to instances where DOD's 
reported GWOT obligations exceed the supplemental appropriations 
provided to the department during the fiscal year. Because operational 
conditions on the ground can vary substantially during the fiscal year, 
DOD's actual funding needs may be more or less than the amount 
initially estimated or received. As we discuss in this report, DOD may 
address these differences (gaps) by using its annual appropriations. 
There is no indication, however, that DOD incurred any Antideficiency 
Act violations. 

We limited our review to the obligation of funds appropriated for 
military personnel and operation and maintenance, for both active and 
reserve forces of the Army, Air Force, Navy, and Marine Corps, because 
they represented the majority of the funds obligated in fiscal years 
2004 and 2005, about 90 percent in each year. We did not review the 
obligation of funds for investment, which are used for procurement; 
military construction; and research, development, test, and evaluation. 

To identify funding DOD describes as intended for GWOT, we reviewed 
applicable annual and supplemental DOD appropriations in fiscal years 
2004 and 2005. To compare supplemental appropriations provided to the 
military services for GWOT to reported obligations in both fiscal years 
2004 and 2005, we reviewed applicable supplemental appropriations and 
compared them to the reported amounts obligated by each service. To 
identify DOD's reported GWOT obligations,[Footnote 4] we used DOD's 
Supplemental and Cost of War Execution Reports, which report DOD's 
monthly and cumulative GWOT obligations, and analyzed these data. These 
reports were called the Consolidated Department of Defense Terrorist 
Response Cost Reports through December 2004, and renamed beginning in 
January 2005. We excluded classified programs from our review, because 
obligations for those programs are not reported in DOD's Supplemental 
and Cost of War Execution Reports. To determine actions taken by DOD 
and the services to cover any identified gaps between reported 
obligations and supplemental appropriations for GWOT, we held 
discussions with DOD representatives from the Office of the Under 
Secretary of Defense (Comptroller) and the Army, Air Force, Navy, and 
Marine Corps. 

We have previously reported concerns regarding DOD's oversight and cost 
reporting of funds appropriated for contingency operations. For 
example, in May 2004 we reported that DOD's cost reporting for GWOT 
included large amounts of funds that have been reported as obligated in 
miscellaneous categories and thus provide little insight on how those 
funds have been spent,[Footnote 5] and in April 2003 we reported that 
DOD's ability to track the use of funds appropriated for GWOT has 
varying limitations depending on the appropriation.[Footnote 6] In 
response, DOD has taken a number of steps to improve its oversight and 
cost reporting of funds appropriated for contingency operations. These 
actions include revising the Department of Defense Financial Management 
Regulation in January 2005 to include new cost reporting categories 
that refine the reporting of obligations previously reported as 
miscellaneous. 

GWOT obligations provided in this report are DOD's claimed obligations 
as reported in the Supplemental and Cost of War Execution Reports. In 
related work,[Footnote 7] we have reported these data to be of 
questionable reliability. For example, we found financial management 
systems with acknowledged weaknesses, a lack of systematic processes to 
ensure accurate data entry, failure to use actual data when it was 
available, and improperly categorized costs. Therefore, we are unable 
to ensure that DOD's reported obligations for GWOT are complete, 
reliable, and accurate. Consequently, the gaps we identify between 
supplemental appropriations and DOD's reported obligations may not 
reliably reflect true differences between supplemental appropriations 
and obligations and therefore should be considered approximations. 
Despite the uncertainty about the obligation data, we are reporting the 
information because it is the only data available on overall GWOT costs 
and so the only way to approach an estimate of the costs of the war. 
Also, despite the uncertainty surrounding the true dollar figure for 
obligations, these data are used to advise the Congress on the cost of 
the war. As such, obligation data provided in this report reflect DOD 
reported obligations, however unreliable those reports may be. 

We conducted our review from November 2004 through August 2005 in 
accordance with generally accepted government auditing standards. 

Results in Brief: 

In fiscal years 2004 and 2005, DOD received funding to support GWOT in 
both its annual appropriation and in supplemental appropriations 
provided during those years. The military services received about $52.4 
billion and about $62.1 billion in fiscal years 2004 and 2005, 
respectively, in supplemental appropriations for GWOT military 
personnel and operation and maintenance expenses. At the same time, DOD 
requested that the Army, Air Force, and Navy receive a combined 
increase of about $7.9 billion in fiscal year 2004 and a combined 
increase of about $7.6 billion in fiscal year 2005 in their annual 
appropriations, which DOD said would be for support of GWOT. The 
military services absorbed the increase into their annual 
appropriations and allocated it based on their judgment of where the 
funds were most needed. DOD's accounting systems, however, do not 
separately identify these additional appropriations and there are no 
reporting requirements for DOD to identify to which appropriation 
accounts the funds were allocated; consequently, the military services 
have lost visibility over these funds and do not know the extent to 
which they are being used to support GWOT. Despite having asked for the 
increase to support GWOT, DOD is not explicitly counting these 
additional funds when considering funding for GWOT. 

In fiscal year 2004, the difference between supplemental appropriations 
available to the military services for GWOT military personnel and 
operation and maintenance expenses compared to reported obligations 
varied by service. For military personnel, the Navy and Marine Corps 
reported more in obligations than they had received in supplemental 
appropriations, resulting in differences or gaps of about $40 million 
and $30 million, respectively. Both the Army and Air Force received 
supplemental appropriations that exceeded their reported obligations 
for military personnel and the two services used these funds to cover 
operation and maintenance expenses related to GWOT, transferring $801 
million and $113 million, respectively. For operation and maintenance, 
each of the military services reported more in obligations than it 
received in supplemental appropriations. The Army reported the largest 
gap, about $4.3 billion, while the Air Force and Navy reported gaps of 
$579 million and about $618 million, respectively. The Marine Corps 
reported the smallest gap, about $195 million. Some service 
representatives noted that the gaps represented a small percentage of 
their annual military personnel and operation and maintenance 
appropriations. To cover the gaps, the Office of the Under Secretary of 
Defense (Comptroller) and the services exercised a number of 
authorities provided to them, including transferring funds and reducing 
or deferring planned spending for peacetime operations. For example, 
DOD covered about $3 billion of the gap though transfers from the 
services' working capital funds, while the military services deferred a 
portion of their equipment and depot maintenance activities; various 
procurement actions; infrastructure projects; and other activities, 
such as training, until fiscal year 2005 or later. However, DOD did not 
explicitly take into account the funds provided through its annual 
appropriation that it intended for support of GWOT. If counted in 
fiscal year 2004, these amounts could have reduced the Army's GWOT gap, 
allowing it to defer fewer activities, and eliminated the GWOT gaps of 
the Air Force and Navy. 

For fiscal year 2005, our analysis of reported obligations through May 
2005 and the military services' forecasts for the full fiscal year as 
of June 2005 suggest that in some appropriations accounts the military 
services' reported obligations for the war could exceed their 
supplemental appropriations. This could require them to again use other 
authorities provided to them to cover the differences. Our projections 
suggest the services should have sufficient supplemental appropriations 
for military personnel expenses, but that there could be gaps for 
operation and maintenance expenses for the Army and the Marine Corps. 
The services' more detailed forecasts suggest a gap for military 
personnel expenses for the Air Force of about $500 million, and gaps 
for operation and maintenance expenses for the Army and Air Force of 
about $2.7 billion and about $1 billion, respectively. Based on its 
midyear budget review, the Marine Corps believes that its current 
supplemental appropriations for the war will be sufficient to cover its 
reported obligations. To cover any gaps, DOD and the services plan to 
take a variety of actions, based on authorities provided to them, 
including reprogramming funds and reducing or deferring planned 
spending for peacetime operations. For example, in May 2005 more than 
$800 million was reprogrammed from the military personnel accounts of 
the Air Force, Navy, Marine Corps, and Army National Guard to meet the 
Army's GWOT needs, while the Air Force has begun taking steps to 
decrease its peacetime flying hours and reduce or defer current year 
depot maintenance activities. However, DOD is again not explicitly 
considering the funds provided in its annual appropriation, which it 
described as having been requested to support GWOT. If counted in 
fiscal year 2005, the amounts potentially could reduce the Army's and 
eliminate the Air Force's GWOT gaps and eliminate the need for 
reprogramming funds and reducing or deferring planned spending. As a 
result, the services continue to take actions that affect peacetime 
operations and run the risk of producing a large "bow wave" of higher 
spending pressures into the future. 

To improve the visibility and accountability of DOD's use of funds for 
GWOT, we recommend that in future requests for supplemental 
appropriations, the Secretary of Defense adjust such requests to 
reflect the additional funding DOD requested and received in its annual 
appropriations to support GWOT and provide the Congress with an 
explanation of these adjustments. We further recommend that in 
addressing any future GWOT funding needs the Secretary consider the 
additional GWOT funding provided through the department's annual 
appropriation when assessing how to cover expenses for the war and 
document its decisions. 

In written comments on a draft of this report, DOD did not concur with 
our recommendations. Regarding our recommendation that the Secretary of 
Defense adjust future supplemental appropriations requests to reflect 
the additional funding DOD requested and received in its annual 
appropriations to support GWOT and explain these adjustments to the 
Congress, DOD stated that its supplemental appropriations request 
accounts for all relevant adjustments to the annual appropriation bill. 
In fact, as stated in our report, although the Office of the Under 
Secretary of Defense (Comptroller) sought to adjust the department's 
supplemental appropriations request for fiscal year 2005 to reflect the 
additional funds DOD received in its annual appropriations that DOD 
identified as supporting GWOT, none of the military services provided 
the information requested. Instead, it was the Office of Management and 
Budget that actually made the adjustment in preparing the President's 
fiscal year 2005 supplemental appropriations request. We therefore 
believe that our recommendation has merit and have retained it. 
However, since DOD does not agree and the amount of funds available is 
substantial--more than $10 billion annually--we have added a matter for 
congressional consideration to consider directing DOD, when it submits 
future supplemental appropriations requests, to provide an explanation 
of how such requests reflect the additional funding DOD requested and 
received in its annual appropriations to support GWOT. With respect to 
our recommendation that the Secretary of Defense also consider the 
additional GWOT funding provided through DOD's annual appropriations in 
addressing any future GWOT funding needs, DOD commented that it 
considers all funding provided through the department's annual 
appropriation when addressing how to cover expenses for the war. We 
recognize that DOD reviews all available funding authorities when 
determining how to cover GWOT needs. However, since DOD has lost 
visibility of the funds provided through its annual appropriation that 
it requested to support GWOT, there is no documentation regarding how 
the department took these funds into account or whether it was applying 
the entire amount to cover its GWOT needs. We therefore continue to 
believe our recommendation has merit and have retained it, including 
expanding it to recommend that DOD also document its decisions. DOD's 
comments and our evaluation are discussed in detail in a later section 
of this report and the department's comments are reprinted in appendix 
II. 

Background: 

About 90 percent of the costs associated with GWOT fall into two 
accounts--military personnel and operation and maintenance. Military 
personnel funds provided to support GWOT cover the pay and allowances 
of mobilized reservists as well as special payments or allowances for 
all qualifying military personnel, both active and reserve, such as 
Imminent Danger Pay and Family Separation Allowance. Operation and 
maintenance funds provided to support GWOT are used for a variety of 
purposes, including transportation of personnel, goods, and equipment; 
unit operating support costs; and intelligence, communications, and 
logistics support. 

We have reported on several occasions, including in 1999 and 2003, that 
estimating the cost of ongoing military operations is 
difficult.[Footnote 8] This is because operational requirements can 
differ substantially during the fiscal year from what was assumed in 
preparing budget estimates. The result can be that operations can cost 
more or less than originally estimated. If operations cost more than 
originally estimated, DOD may use a number of authorities provided to 
it, including transferring and reprogramming funds and reducing or 
deferring planned spending for peacetime operations, to meet its needs. 
DOD uses "transfer authority" to shift funds between appropriation 
accounts, for example, between military personnel and operation and 
maintenance. Transfer authority is granted by the Congress to DOD 
usually pursuant to specific provisions in authorization or 
appropriation acts.[Footnote 9] The ability to shift funds within a 
specific appropriation account, like operation and maintenance, is 
referred to as "reprogramming." In general, DOD does not need statutory 
authority to reprogram funds within an account as long as the funds to 
be spent would be used for the same general purpose of the 
appropriation and the reprogramming does not violate any other specific 
statutory requirements or limitations. For example, DOD could reprogram 
operation and maintenance funds originally appropriated for training to 
cover increased fuel costs because both uses meet the general purpose 
of the operation and maintenance account, as long as the shift does not 
violate any other specific statutory prohibition or limitation. 

Funding for GWOT in Fiscal Years 2004 and 2005 Was Provided in Annual 
and Supplemental Appropriations: 

In fiscal years 2004 and 2005, the military services received about 
$52.4 billion and about $62.1 billion, respectively, in supplemental 
appropriations for GWOT military personnel and operation and 
maintenance expenses. The Army, Air Force, and Navy also received funds 
for GWOT through their annual appropriations. However, DOD and the 
military services have lost visibility over these funds provided 
through annual appropriations, including knowing how much, if any, was 
used to support GWOT in fiscal years 2004 and 2005. 

Supplemental Appropriations for GWOT: 

As shown in table 1, DOD received funding through supplemental 
appropriations to support GWOT in both fiscal years 2004 and 2005. 

Table 1: Supplemental Appropriations Available to the Military Services 
for GWOT Military Personnel and Operation and Maintenance Expenses in 
Fiscal Years 2004 and 2005: 

Dollars in millions. 

Supplemental appropriations: 

Pub. L. No. 108-106; 
Available in fiscal year 2004: $50,352; 
Available in fiscal year 2005: --. 

Pub. L. No. 108-287; 
Available in fiscal year 2004: $120; 
Available in fiscal year 2005: $17,251. 

Pub. L. No. 109-13; 
Available in fiscal year 2004: --; 
Available in fiscal year 2005: $44,504. 

Iraqi Freedom Fund transfers; 
Available in fiscal year 2004: $1,941; 
Available in fiscal year 2005: $348. 

Total; 
Available in fiscal year 2004: $52,413; 
Available in fiscal year 2005: $62,103. 

Source: GAO analysis of Pub. L. No. 108-106, Pub. L. No. 108-287, Pub. 
L. No. 109-13, and Iraqi Freedom Fund transfers appropriated in Pub. L. 
No. 108-106 and Pub. L. No. 108-11. 

Notes: Fiscal years 2004 and 2005 supplemental appropriations data 
exclude funding for classified programs. Fiscal year 2005 supplemental 
appropriations data are through August 2005. 

[End of table]

To pay for the military personnel and operation and maintenance costs 
of GWOT in fiscal year 2004, the Congress appropriated about $52.4 
billion to DOD. Of the $52.4 billion, the Congress provided the 
military services about $50.4 billion in the Emergency Supplemental 
Appropriations Act for Defense and for the Reconstruction of Iraq and 
Afghanistan, 2004.[Footnote 10] In addition, the services used $120 
million of the funds provided in late fiscal year 2004 through Title IX 
of the Department of Defense Appropriations Act, 2005.[Footnote 11]

DOD also transferred about $1.9 billion from funds originally 
appropriated to the Iraqi Freedom Fund. The Iraqi Freedom Fund provides 
2-year funds that can be transferred to the services' accounts for 
additional expenses for ongoing military operations in Iraq, operations 
authorized by the Authorization for Use of Military Force,[Footnote 12] 
and other operations and related activities in support of GWOT. Of the 
$1.9 billion, about $860 million was provided through the Emergency 
Wartime Supplemental Appropriations Act, 2003,[Footnote 13] while about 
$1.1 billion was provided through the Emergency Supplemental 
Appropriations Act for Defense and for the Reconstruction of Iraq and 
Afghanistan, 2004.[Footnote 14]

For fiscal year 2005, the military services had about $62.1 billion 
available to pay for the military personnel and operation and 
maintenance costs of GWOT. Of this, the Congress appropriated about 
$44.5 billion through the Emergency Supplemental Appropriations Act for 
Defense, the Global War on Terror, and Tsunami Relief, 2005.[Footnote 
15] The military services also had the remaining balance--about $17.3 
billion--that was provided through Title IX of the Department of 
Defense Appropriations Act, 2005, and was available for obligation in 
fiscal year 2005 to help pay for the military personnel and operation 
and maintenance costs of GWOT. In addition, as of July 2005, DOD had 
transferred about $348 million from funds originally appropriated to 
the Iraqi Freedom Fund. 

Some Annual Appropriations Described by DOD as for GWOT: 

In addition to funds DOD received through supplemental appropriations 
for GWOT, beginning in fiscal year 2003, the administration increased 
DOD's annual appropriation request by more than $10 billion per year. 
DOD described these funds as being intended to support GWOT. According 
to a representative from the Office of the Under Secretary of Defense 
(Comptroller), in December 2001 the President directed that his annual 
budget submission for DOD be increased by about $10 billion annually to 
support GWOT. Consequently, Program Budget Decision 736, entitled 
Continuing the War on Terrorism and dated January 31, 2002, was 
approved by the Under Secretary of Defense (Comptroller). Program 
Budget Decision 736 provided for increasing DOD's annual budget request 
in the amount of more than $10 billion per year plus inflation in 
fiscal years 2003 through 2007 to enhance the department's efforts to 
respond to, or protect against, acts or threatened acts of terrorism 
against the United States. According to a DOD representative, unless 
action is taken to reduce these funds in future budgets, Program Budget 
Decision 736 provides for a permanent increase of about $10 billion per 
year plus inflation to DOD's annual budget request to support military 
operations in the war on terrorism. 

As shown in table 2, in fiscal years 2004 and 2005, the Army, Air 
Force, and Navy received additional funds in their annual 
appropriations--a total of about $7.9 billion in fiscal year 2004 and 
about $7.6 billion in fiscal year 2005--which DOD described as for 
support of military operations in the war on terrorism. According to 
DOD representatives, the Marine Corps did not receive an increase to 
its annual appropriation through Program Budget Decision 736. 

Table 2: Annual Appropriations for the Military Services Included in 
Program Budget Decision 736 to Support GWOT in Fiscal Years 2004 and 
2005: 

Dollars in millions. 

Army; 
Available in fiscal year 2004: $1,331.7; 
Available in fiscal year 2005: $1,268.0. 

Air Force; 
Available in fiscal year 2004: $3,506.4; 
Available in fiscal year 2005: $3,512.3. 

Navy; 
Available in fiscal year 2004: $3,013.1; 
Available in fiscal year 2005: $2,818.1. 

Total; 
Available in fiscal year 2004: $7,851.2; 
Available in fiscal year 2005: $7,598.4. 

Source: GAO analysis of DOD data. 

Note: GAO did not audit these data. 

[End of table]

Under Program Budget Decision 736, a number of DOD programs were to 
receive increases in their proposed annual budgets in both fiscal years 
2004 and 2005.[Footnote 16] For example, in fiscal year 2004, Program 
Budget Decision 736 indicates that about $2.1 billion was for 
counterterrorism and force protection efforts, about $1.2 billion for 
combat air patrols over U.S. cities, and about $600 million for such 
things as depot maintenance and spare parts. Program Budget Decision 
736 indicates funds were to be provided to these programs and others in 
fiscal years 2005 through 2007 as well. According to representatives of 
the Office of the Under Secretary of Defense (Comptroller), some of the 
funds in Program Budget Decision 736 were intended to cover costs 
associated with Operation Noble Eagle while others were intended to 
cover costs associated with Operation Enduring Freedom. 

For fiscal years 2004 and 2005, an Office of the Under Secretary of 
Defense (Comptroller) representative stated the additional funds 
provided through Program Budget Decision 736 were in the military 
services' various appropriations accounts. However, the Office of the 
Under Secretary of Defense (Comptroller) has no specific information 
about which programs or activities actually received the funds or how 
they were eventually expended, including whether they were used in 
support of GWOT. Once the services received these additional funds, 
they allocated them to their appropriations accounts based on their 
judgment of where the funds were most needed. DOD's accounting systems 
do not separately identify which appropriations accounts received these 
funds, and there are no reporting requirements for DOD to identify to 
which appropriation accounts the funds were allocated. While the 
military services also stated they received their share of the Program 
Budget Decision 736 funds as part of their fiscal year 2004 and fiscal 
year 2005 annual appropriations and that some of the funds were used 
for war-related expenses, they too could not identify which programs or 
activities received the funds and could not document what portion of 
these funds were used for war-related expenses. As a result, although 
DOD requested these funds to support GWOT, DOD and the military 
services cannot be certain that they were actually used to support GWOT-
related activities.[Footnote 17]

In developing the fiscal year 2005 request for supplemental 
appropriations to support GWOT, DOD took steps to adjust the request to 
reflect the receipt of funds provided through Program Budget Decision 
736. In a November 2004 memorandum requesting that all DOD components 
provide their GWOT supplemental appropriations estimates for fiscal 
year 2005, the Office of the Under Secretary of Defense (Comptroller) 
stated the following with respect to funds that had already been 
provided through Program Budget Decision 736: 

* Funding for GWOT missions previously added to the baseline budget 
(e.g., Program Budget Decision 736, Continuing the War on Terrorism) 
should be explicitly identified as a reduction to funding requests in 
those areas, as appropriate. 

* Component requests must consider that that some funding is already in 
the baseline accounts. Program Budget Decision 736 provided funds for 
antiterrorism, continental United States combat air patrols, and force 
protection. The components' submissions should show the total 
requirement and note the level of funding already in the baseline for 
this purpose. The supplemental request will net out the available 
funding. 

In the November 2004 memorandum the Office of the Under Secretary of 
Defense (Comptroller) further stated that the emergency supplemental 
appropriations request will address the incremental costs above the 
baseline funding needed to support specific forces and capabilities 
required to execute Operation Iraqi Freedom, Operation Enduring 
Freedom, and portions (to be determined) of Operation Noble Eagle. DOD 
described Operation Noble Eagle as including defending the United 
States from airborne attacks and maintaining U.S. air sovereignty. This 
operation had been included in the supplemental appropriations request 
for fiscal year 2004. 

None of the military services provided the information requested in the 
November 2004 memorandum and instead the services requested funds for 
Operation Noble Eagle. Service budget representatives told us that 
Program Budget Decision 736 funds were considered as base program 
(e.g., annual appropriations) issues and not supplemental candidates. 
According to service budget representatives, they requested funds for 
Operation Noble Eagle in fiscal year 2005 that were in addition to the 
funds provided through Program Budget Decision 736. For example, the 
Navy requested $53.3 million for incremental requirements above its 
baseline request. The Army requested more than $1 billion in 
incremental requirements above its baseline. However, in preparing the 
fiscal year 2005 supplemental appropriations budget request, the Office 
of Management and Budget did not include Operation Noble Eagle in the 
President's budget request because funds had already been included in 
DOD's annual appropriation, as described in Program Budget Decision 
736. 

Most Fiscal Year 2004 Supplemental Appropriations for GWOT Were Less 
Than Reported Obligations; However, DOD Is Not Explicitly Counting 
Additional Funds Requested for GWOT in Its Annual Appropriation: 

In fiscal year 2004, the difference between supplemental appropriations 
available to the military services for GWOT military personnel and 
operation and maintenance expenses compared to reported obligations 
varied by service. For military personnel, the Navy and Marine Corps 
reported more in obligations than they received in supplemental 
appropriations, while for operation and maintenance each of the 
military services reported more in obligations than it received in 
supplemental appropriations. To cover the differences (gaps), DOD and 
the military services took several actions, including transferring 
funds and reducing or deferring planned spending for peacetime 
operations. In the case of the Army and Air Force, which each received 
supplemental appropriations that exceeded its reported obligations for 
military personnel, this included transferring $801 million and $113 
million, respectively, to cover their GWOT operation and maintenance 
expenses. In some instances, these actions reduced DOD's flexibility to 
cover potential gaps in fiscal year 2005. DOD did not explicitly take 
into account the GWOT funds provided through its annual appropriation 
that DOD requested for GWOT to help cover the gaps. If it had taken 
these funds into account it could have reduced the Army's GWOT gap, 
eliminated the GWOT gaps of the Air Force and Navy, and been able to 
defer fewer activities. 

Difference between Reported GWOT Obligations and Fiscal Year 2004 
Supplemental Appropriations for GWOT Varied by Service: 

Within the military personnel accounts, as shown in table 3, the Navy 
and Marine Corps reported more obligations in support of GWOT than they 
received in supplemental appropriations. However, these reported gaps 
were a relatively small portion of the services' annual military 
personnel appropriations. For example, the Navy's reported gap of $40.4 
million represents less than 1 percent of its annual military personnel 
appropriation. In fiscal year 2004, both the Army and Air Force 
received supplemental appropriations that exceeded their reported 
obligations for military personnel. The Army and Air Force used these 
funds to cover operation and maintenance expenses related to GWOT, as 
discussed below. 

Table 3: Military Personnel Fiscal Year 2004 GWOT Supplemental 
Appropriations and Reported Obligations: 

Dollars in millions. 

Total supplemental appropriations for GWOT; 
Army: $12,858.9; 
Air Force: $3,384.7; 
Navy: $816.1; 
Marine Corps: $888.6. 

Obligations reported; 
Army: $11,972.0; 
Air Force: $3,272.0; 
Navy: $856.5; 
Marine Corps: $918.3. 

Difference; 
Army: $886.9; 
Air Force: $112.7; 
Navy: $(40.4); 
Marine Corps: $(29.7). 

Source: GAO analysis of Pub. L. No. 108-106, Iraqi Freedom Fund 
transfers appropriated in Pub. L. No. 108-106 and Pub. L. No. 108-11, 
and the Consolidated Department of Defense Terrorist Response Cost 
Report as of September 30, 2004. 

Notes: GAO assessed the reliability of DOD's obligations data and found 
that while the data we report reflect the data used by DOD to advise 
the Congress on the cost of the war, they may not accurately reflect 
the true dollar value of GWOT obligations. Additionally, computed 
differences do not take into account GWOT funds requested in annual 
appropriations. Gaps are in parentheses. 

[End of table]

Within the operation and maintenance accounts, as shown in table 4, in 
fiscal year 2004 each of the military services reported more in GWOT 
obligations than it received in supplemental appropriations. The Army 
reported the largest gap, about $4.3 billion, while the Air Force and 
Navy reported gaps of $579 million and about $618 million, 
respectively. The Marine Corps reported the smallest gap, about $195 
million. 

Table 4: Operation and Maintenance Fiscal Year 2004 GWOT Supplemental 
Appropriations and Reported Obligations: 

Dollars in millions. 

Total supplemental appropriations for GWOT; 
Army: $25,603.5; 
Air Force: $5,552.8; 
Navy: $1,936.3; 
Marine Corps: $1,371.9. 

Obligations reported; 
Army: $29,907.7; 
Air Force: $6,131.8; 
Navy: $2,554.7; 
Marine Corps: $1,566.9. 

Difference; 
Army: $(4,304.2); 
Air Force: $(579.0); 
Navy: $(618.4); 
Marine Corps: $(195.1). 

Source: GAO analysis of Pub. L. No. 108-106, Iraqi Freedom Fund 
transfers appropriated in Pub. L. No. 108-106 and Pub. L. No. 108-11, 
and the Consolidated Department of Defense Terrorist Response Cost 
Report as of September 30, 2004. 

Notes: GAO assessed the reliability of DOD's obligations data and found 
that while the data we report reflect the data used by DOD to advise 
the Congress on the cost of the war, they may not accurately reflect 
the true dollar value of GWOT obligations. Additionally, computed 
differences do not take into account GWOT funds requested in annual 
appropriations. Numbers may not subtract due to rounding. Gaps are in 
parentheses. 

[End of table]

Variety of Actions Were Taken to Cover the Military Services' GWOT Gaps 
in Fiscal Year 2004: 

To cover the military services' gaps between reported fiscal year 2004 
obligations and supplemental appropriations, the Office of the Under 
Secretary of Defense (Comptroller) and the military services used a 
number of authorities provided to them, including transferring funds 
and reducing or deferring planned spending for peacetime operations. 
While involving hundreds of millions or sometimes billions of dollars, 
in discussing the actions taken to cover the gaps, some service 
representatives noted that the gaps represented a small percentage of 
their annual appropriations. Within the services' annual operation and 
maintenance accounts we found that the gaps varied by service, ranging 
from a low of 1.7 percent of the Air Force's annual operation and 
maintenance appropriation to a high of 13.7 percent of the Army's 
annual operation and maintenance appropriation. In the services' annual 
military personnel accounts, all the gaps were less than 1 percent of 
their annual military personnel appropriations. However, DOD did not 
explicitly take into account the funds provided through its annual 
appropriations that it intended for support of GWOT. As discussed 
earlier, since DOD's accounting systems do not separately identify the 
portion of the department's annual appropriations that were described 
as having been requested to support GWOT and there are no reporting 
requirements for DOD to identify to which appropriation accounts the 
funds were allocated, the military services have lost visibility over 
these funds and do not know the extent to which they are being used to 
support GWOT. Consequently, despite having asked for the increase, DOD 
is not explicitly counting these additional funds when considering 
funding for GWOT and alternatively took actions that affected its 
peacetime operations, which may create spending pressures in fiscal 
year 2005 and later. 

Military Service Actions to Address Fiscal Year 2004 GWOT Needs: 

Each of the military services projected a gap between reported 
obligations and supplemental appropriations at its midyear budget 
review. Service representatives told us these projected gaps were 
reduced over the course of fiscal year 2004 by reviewing their GWOT 
requirements and, in some instances, seeking to reduce or defer planned 
spending. With respect to the GWOT gaps faced by the services in fiscal 
year 2004, we were told the following: 

* For fiscal year 2004, the Army's reported obligations in its 
operation and maintenance account exceeded its supplemental 
appropriations by about $4.3 billion, substantially less than the $10.9 
billion it had projected in the account at its midyear budget review. 
To cover the $4.3 billion, DOD and the Army took a number of actions, 
including using internal resources and passing the remaining amount on 
to the Army's major commands to be absorbed by reducing or deferring 
planned peacetime spending to meet its GWOT needs. More specifically, 
to cover the Army's gap, the Under Secretary of Defense (Comptroller) 
transferred about $3 billion from the working capital funds[Footnote 
18] of the Army, Air Force, and Navy--including $1.3 billion from the 
Army, about $1.5 billion from the Air Force, and $200 million from the 
Navy. In addition, about $801 million was transferred from the Army's 
military personnel account to help cover the gap in the Army's 
operation and maintenance account, while about $500 million was 
transferred from other DOD-wide accounts. The major Army commands 
absorbed the remainder. For example, to cover its portion of the gap, 
the Army Materiel Command reprioritized or deferred about $184 million 
in depot maintenance until fiscal year 2005 for such programs as the 
Patriot and Hellfire missile systems. It also reduced or deferred the 
number of available training hours for some of its nondeployed units. 
However, Army Materiel Command representatives told us that in some 
instances, the training hours they deferred to help cover the fiscal 
year 2004 gap were deferred until fiscal year 2006. 

* The Air Force's gap in its operation and maintenance account of about 
$579 million was substantially less than the $1.5 billion it had 
projected in the two accounts at its midyear budget review. To cover 
the $579 million gap, the Air Force took a number of actions, including 
transferring $113 million in funds available in its overall military 
personnel appropriation account, decreasing peacetime flying hours, 
reducing depot maintenance, and deferring facility sustainment 
restoration and modernization projects until fiscal year 2005. The Air 
Force's major commands also absorbed a portion of the gap. For example, 
the Air Combat Command absorbed its share of the GWOT gap, about $92 
million, by reducing or deferring its fiscal year 2004 peacetime 
spending. Approximately $46 million, or half of the Air Combat 
Command's $92 million share of the gap, was covered by reducing its 
peacetime flying hour program by about 6,800 hours. While reducing its 
peacetime flying hours helped the Air Combat Command cover its portion 
of the gap, Air Combat Command representatives told us the reduced 
training opportunities created a training backlog, which could affect 
pilot readiness for future combat missions. 

* The Navy's combined gap for fiscal year 2004 of about $659 million in 
its military personnel and operation and maintenance accounts was less 
than its midyear projection of $931 million. To cover the $659 million 
gap, the Navy canceled some peacetime spending, including various 
nonreadiness operation and maintenance spending and various 
infrastructure projects. Of the Navy's major commands, the Atlantic 
Fleet and Pacific Fleet absorbed the largest share of the gap for 
fiscal year 2004. For example, the Atlantic Fleet absorbed about $110 
million by reducing air operations and ship depot maintenance 
activities. Navy budget representatives noted that the gap represented 
about 1 percent of the total baseline funding available for aircraft 
operations and ship depot maintenance for the Navy in that fiscal year. 
In addition, the Navy canceled or deferred procurement actions for the 
MH-60R Seahawk helicopter, V-22 Osprey, F/A-18 Hornet, and Joint 
Tactical Radio System. 

* The Marine Corps' combined gap in its military personnel and 
operation and maintenance appropriations accounts of about $225 million 
for GWOT in fiscal year 2004 was also less than the $446 million 
projected at its midyear budget review. To cover the $225 million gap, 
the Marine Corps reduced or deferred spending in noncritical areas, 
such as facility improvements. The Navy provided the Marine Corps with 
funds from its base operating support and facilities sustainment 
restoration and modernization appropriations accounts and with $121 
million that was transferred to the Navy from the U.S. Transportation 
Command's Working Capital Fund. According to Marine Corps 
representatives, a portion of the gap was also absorbed by the Marine 
Corps' annual military personnel and operation and maintenance 
appropriations accounts. 

The Navy provided us a detailed discussion of the process used in 
addressing gaps. A Navy budget representative said that the Navy 
analyzed its entire $116.8 billion in baseline funding (which includes 
both the original $114 billion baseline and the added $2.8 billion for 
Program Budget Decision 736 initiatives) as potential financing sources 
for its GWOT needs. According to the Navy representative the Navy's 
internal analysis first looked at funding flexibility in baseline 
programs resulting from changes in current year execution. For example, 
certain baseline program requirements change from year to year as a 
result of development issues, schedule and implementation delays, 
manufacturing problems, changes in requirements or inventory levels, 
and labor disputes. The accumulated value of those changes in a given 
execution year, such as fiscal year 2004, may have made any financial 
resources excess to fiscal year 2004 requirements available to fund 
GWOT needs. Although their specific identification as such would be 
lacking, they stated that previously baselined Program Budget Decision 
736 requirements could have been included, by implication, as part of 
those deliberations. For example, by the end of fiscal year 2004, based 
on delayed execution, about $136 million was reallocated from base 
infrastructure support, maintenance, and repair[Footnote 19] to fund 
Operation Iraqi Freedom costs. If insufficient funding sources were 
identified as part of an execution analysis, then it would be necessary 
to make affirmative decisions about reducing baseline programs to fund 
the balance of the GWOT needs. Those reductions, for the most part, had 
subsequent programmatic and financial impacts. Those changes required 
to support the increased GWOT needs were monitored and approved by the 
Office of the Under Secretary of Defense (Comptroller) staff during 
their annual budget and execution reviews. Some of the changes were 
recoverable (such as specific procurement and depot maintenance items 
considered deferrable and that could be funded with a subsequent year's 
money) and some changes were nonrecoverable (items considered 
nondeferrable current expenses, where the performance period has 
lapsed, but for which a subsequent year's funding is now available to 
fully meet that year's requirements). For example, of the Navy and 
Marine Corps' approximately $1.6 billion in absorbed costs in all 
appropriation accounts for the Department of the Navy ($1.4 billion was 
for Navy items, $200 million was for Marine Corps items), nearly 40 
percent of the fiscal year 2004 requirements were considered 
recoverable with subsequent year's funding. This included $200 million 
for drawing down the Navy Working Capital Fund, which was included in 
the Navy's fiscal year 2005 supplemental appropriations request. 

As previously discussed, DOD used the military services' working 
capital funds as a source of cash to provide funds for GWOT 
expenditures in fiscal year 2004. DOD's working capital funds finance 
the operations of two fundamentally different types of support 
organizations: stock fund activities, which provide spare parts and 
other items to military units and other customers, and industrial 
activities, which provide depot maintenance, research and development, 
and other services, such as those provided by the Defense Financial 
Accounting Service, Defense Information Systems Agency, Defense 
Commissary Agency, and U.S. Transportation Command. In fiscal year 
2004, DOD transferred about $3 billion from the military services' 
working capital funds to help cover the Army's gap between reported 
obligations and supplemental appropriations. 

While such transfers from the services' working capital funds helped 
DOD cover its fiscal year 2004 gap, the transfers have left few working 
capital funds available to be used in fiscal year 2005. For example, to 
help cover the Army's operation and maintenance gap, about $980 million 
was transferred from the U.S. Transportation Command's Transportation 
Working Capital Fund during fiscal year 2004. This transfer was made 
possible due to a surplus of transportation charges collected from the 
military services by the U.S. Transportation Command during the year. 
However, a U.S. Transportation Command representative told us the 
transfers have left the fund's balance below the minimum goal of $517 
million.[Footnote 20] Specifically, with the transfer of almost $1 
billion in fiscal year 2004 to help cover the Army's operation and 
maintenance gap, as of July 2005, there was only $168 million remaining 
in the fund, well below the minimum goal for the year. Further, the 
representative stated that the projected fund balance for the end of 
fiscal year 2005 is about $231 million, still below the minimum goal. 

DOD Did Not Explicitly Account for Funds Provided through Its Annual 
Appropriation That It Described as for GWOT When Determining How to 
Cover Its Fiscal Year 2004 Gaps: 

In determining how to cover the gaps between the services' supplemental 
appropriations and reported GWOT obligations for military personnel and 
operation and maintenance expenses, DOD did not explicitly take into 
account the almost $7.9 billion in funds the Army, Air Force, and Navy 
received in their annual appropriations through Program Budget Decision 
736 to help fund GWOT. This includes $1.3 billion received by the Army, 
$3.5 billion received by the Air Force, and $3 billion received by the 
Navy. If counted in fiscal year 2004 and applied to the services' 
military personnel and operation and maintenance accounts, these 
amounts could have reduced the Army's need to transfer funds from other 
activities and eliminated the GWOT gaps for the Air Force and the Navy, 
as shown in table 5. However, the services acknowledge that they have 
lost visibility over the Program Budget Decision 736 funds after fiscal 
year 2003 and do not know whether any of the funds were used in support 
of GWOT. 

Table 5: Comparison of the Military Services' Combined Supplemental and 
Annual Appropriations for Military Personnel and Operation and 
Maintenance for GWOT in Fiscal Year 2004 to Reported Obligations: 

Dollars in millions. 

Military personnel and operation and maintenance: 

Supplemental appropriations for GWOT; 
Army: $38,462.4; 
Air Force: $8,937.5; 
Navy: $2,752.4; 
Marine Corps: $2,260.5. 

Annual appropriations for GWOT; 
Army: $1,331.7; 
Air Force: $3,506.4; 
Navy: $3,013.1; 
Marine Corps: $0.0. 

Total supplemental and annual appropriations for GWOT; 
Army: $39,794.1; 
Air Force: $12,443.9; 
Navy: $5,765.5; 
Marine Corps: $2,260.5. 

Total obligations reported; 
Army: $41,879.7; 
Air Force: $9,403.8; 
Navy: $3,411.2; 
Marine Corps: $2,485.2. 

Difference; 
Army: $(2,085.6); 
Air Force: $3,040.1; 
Navy: $2,354.3; 
Marine Corps: $(224.7). 

Source: GAO. 

Notes: GAO assessed the reliability of DOD's obligations data and found 
that while the data we report reflect the data used by DOD to advise 
the Congress on the cost of the war, they may not accurately reflect 
the true dollar value of GWOT obligations. Gaps are in parentheses. GAO 
did not audit these data. 

[End of table]

We discussed our analysis with DOD representatives at each of the 
services' budget offices, who disagreed with our depiction of Program 
Budget Decision 736. These representatives believed that our analysis 
should take into account the fact that the funds provided through 
Program Budget Decision 736 were included in DOD's baseline budget and 
therefore were already taken into account when considering funds 
available for GWOT. Service budget representatives made the following 
observations regarding the Program Budget Decision 736 funds: 

* Once merged into those baseline budgets, full justification for 
funding is provided in the annual President's budget request. For 
example, increased funding for additional security personnel and 
physical security equipment were merged with existing program lines and 
not subsequently separately identified as to how they were initially 
funded or sustained over the years. 

* Once the Program Budget Decision 736 funds were in the baseline 
budget, they were not in support of specific contingency operations, 
for which the Department of Defense Financial Management Regulation, 
Volume 12, Chapter 23, Contingency Operations, requires separate 
documentation and execution tracking, and no such requirement exists 
for "baselined" funds, other than the annual justification exhibits. 
That is, Chapter 23 only requires reporting incremental costs (costs 
not already in the baseline), and not total costs. 

* Subsequent to Program Budget Decision 736 additional requirements 
were placed on the services fiscal year 2004-2009 spending program 
without accompanying funds. To meet these requirements service budget 
representatives said that they looked in part to the funds provided in 
Program Budget Decision 736. 

We recognize that DOD's annual budget submissions include justification 
for all the department's activities, including those funded through 
Program Budget Decision 736. However, the funds provided through 
Program Budget Decision 736 were identified as being in support of 
GWOT. While service budget representatives noted that the documentation 
and tracking requirements contained in the Department of Defense 
Financial Management Regulation, Volume 12, Chapter 23, Contingency 
Operations, do not apply to the funds provided through Program Budget 
Decision 736, we believe that DOD should have been tracking these funds 
in light of their connection to GWOT. While the services' budget 
representatives told us that they took the funds provided through 
Program Budget Decision 736 into account in addressing GWOT funding 
needs, we note that once these funds were merged into the services' 
baseline budgets visibility was lost so there is no assurance as to how 
the funds were taken into account or used. 

Fiscal Year 2005 Reported Obligations for GWOT Could Exceed 
Supplemental Appropriations, Requiring the Military Services to Use 
Authorities Provided to Them to Cover the Differences: 

Our analysis of the military services' reported obligations for the 
first 8 months of fiscal year 2005 and the military services' forecasts 
as of June 2005 of full fiscal year 2005 costs suggest the services' 
military personnel and operation and maintenance GWOT obligations could 
exceed available supplemental appropriations for the war in some 
accounts. Our projections of reported GWOT obligations through May 2005 
suggest the services should have sufficient supplemental appropriations 
for military personnel expenses in fiscal year 2005 but that there 
could be gaps for operation and maintenance expenses for the Army and 
the Marine Corps. The services' more detailed forecasts suggest a gap 
for military personnel expenses for the Air Force of about $500 
million, and gaps for operation and maintenance expenses for the Army 
and Air Force of about $2.7 billion and about $1 billion, respectively. 
The Marine Corps expects its supplemental appropriations will be 
sufficient to cover its GWOT costs. To cover any gaps and meet its GWOT 
needs, DOD and the services plan to take a variety of actions, 
including reprogramming funds from annual appropriations and reducing 
or deferring planned spending for peacetime operations. 

Supplemental Appropriations for GWOT Military Personnel Costs in Fiscal 
Year 2005 Should Be Sufficient for All Services Except for the Air 
Force: 

Our assessment of reported obligations in fiscal year 2005 through May 
2005 suggests that the military services should have sufficient 
supplemental appropriations for military personnel expenses in fiscal 
year 2005. As figure 1 shows, with 8 months, or about 67 percent, of 
the fiscal year gone, the Marine Corps has obligated 46 percent of its 
available supplemental appropriations; the Army 54 percent; and the Air 
Force and Navy 58 percent each. 

Figure 1: Military Services' Fiscal Year 2005 Reported Obligations of 
GWOT Military Personnel Supplemental Appropriations through May 2005: 

[See PDF for image] 

Notes: May 2005 represents 67 percent of the fiscal year. Reported 
obligations include those from both the active and reserve components. 
GAO assessed the reliability of DOD's obligations data and found that 
while the data we report reflect the data used by DOD to advise the 
Congress on the cost of the war, they may not accurately reflect the 
true dollar value of GWOT obligations. Additionally, computed 
differences do not take into account GWOT funds requested in annual 
appropriations. Dollars are in thousands. 

[End of figure] 

Projections of GWOT Obligations through May 2005 Suggest Supplemental 
Appropriations for Some Operation and Maintenance Accounts Are Not 
Likely to Be Sufficient: 

Our assessment of reported obligations within the military services' 
operation and maintenance accounts through May 2005 suggests that the 
supplemental appropriations provided to the services for GWOT should be 
sufficient for the Air Force and Navy but not for the Army and Marine 
Corps. As shown in figure 2, the percentage of available supplemental 
appropriations obligated in the services' operation and maintenance 
accounts as of May 2005, ranged from 49 percent for the Navy and 52 
percent for the Air Force to 71 percent for the Army and the Marine 
Corps. We recognize that funds are not obligated equally each month 
throughout the fiscal year. However, we believe that the further into 
the fiscal year the closer to 100 percent obligations should be 
relative to appropriations if all appropriated funds are likely to be 
obligated. Consequently, given these obligation rates, we believe that 
if the Army and Marine Corps continue to obligate funds at the current 
rate or higher, their reported obligations within the operation and 
maintenance accounts could exceed available supplemental appropriations 
in fiscal year 2005, requiring them to use other authorities provided 
to them to cover the difference. However, as discussed below, the Air 
Force believes it will have an operation and maintenance gap, while the 
Marine Corps believes it will have sufficient funds for operation and 
maintenance. 

Figure 2: Military Services' Fiscal Year 2005 Reported Obligations of 
GWOT Operation and Maintenance Supplemental Appropriations through May 
2005: 

[See PDF for image] 

Notes: May 2005 represents 67 percent of the fiscal year. Reported 
obligations include those from both the active and reserve components. 
GAO assessed the reliability of DOD's obligations data and found that 
while the data we report reflect the data used by DOD to advise the 
Congress on the cost of the war, they may not accurately reflect the 
true dollar value of GWOT obligations. Additionally, computed 
differences do not take into account GWOT funds requested in annual 
appropriations. Dollars are in thousands. 

[End of figure] 

Fiscal Year 2005 Midyear Budget Review Forecasts of the Military 
Services: 

Each of the military services completed a midyear budget review for the 
Office of the Under Secretary of Defense (Comptroller), including a 
forecast of its full fiscal year 2005 GWOT needs. The Army concluded 
that it would not have sufficient supplemental appropriations to cover 
its projected GWOT operation and maintenance obligations, while the Air 
Force indicated its combined military personnel and operation and 
maintenance obligations would exceed available supplemental 
appropriations. With respect to the Army's and Air Force's midyear 
budget review projections: 

* The Army forecast a GWOT gap of about $2.7 billion in its operation 
and maintenance account, of which a large component--about $1 billion-
-is attributed to higher fuel costs due to, among other things, the 
increase in June 2005 of DOD's composite fuel rate from $56.28 per 
barrel to $73.08. Other components of the forecasted gap include 
support of the Army's modular force initiative;[Footnote 21] higher 
spending in the second half of fiscal year 2005 as compared to the 
first half, resulting from deferred spending early in the fiscal year; 
and higher spending on recruiting and retention efforts, primarily for 
the Army Reserve. According to the Army, the modular force initiative 
and its reconstitution and reset efforts are being treated as GWOT 
costs in fiscal year 2005. 

* The Air Force forecast a GWOT gap of about $500 million in its 
military personnel account and about $1 billion in its operation and 
maintenance account, for a total gap of about $1.5 billion. Air Force 
representatives attributed the gap in its military personnel account 
primarily to having higher-than-anticipated end-strength levels, and 
stated that the $1 billion gap in its operation and maintenance account 
is to replenish the Transportation Working Capital Fund, which was 
drawn down last year to help cover the Army's fiscal year 2004 GWOT 
gap. Regarding the projected military personnel gap, Air Force 
representatives stated that funds were subsequently transferred to pay 
for prior obligations at higher-than-anticipated end-strength levels. 
Since then, the Air Force has corrected the end-strength imbalance and 
expects to be within end strength for GWOT during the remainder of the 
fiscal year. As a result of these actions, Air Force representatives no 
longer project a military personnel gap for GWOT in fiscal year 2005. 

The Navy projected a small gap of about $36 million for GWOT at the 
time of its midyear budget review, which it has since covered with cost 
savings from shifting the bulk of its transportation of equipment and 
supplies from air to sea. The Marine Corps indicated that its 
supplemental appropriations should be sufficient to cover reported GWOT 
obligations for fiscal year 2005. In considering the services' midyear 
budget reviews, our analysis of the Navy and Marine Corps GWOT 
obligations indicates substantial under execution in the Navy's 
operation and maintenance account and the Marine Corps's military 
personnel account. In response, the Navy stated that it expects its 
rate of obligating GWOT funds to increase toward the end of fiscal year 
2005 due to, among other things, providing additional support in 
theatre and on the ground in Iraq as part of Joint Sourcing.[Footnote 
22] According to a Navy representative, the Navy had about 5,000 
personnel stationed on the ground in Kuwait, Iraq, and Afghanistan at 
the end of fiscal year 2004. By the end of fiscal year 2005, the Navy 
plans to have about 8,500 personnel in theatre with the additional 
personnel having begun to deploy in May 2005. The Marine Corps stated 
it expects to obligate an additional $220 million in military personnel 
funds due to the new death gratuity benefit, while another $265 million 
in military personnel funds will be used to replenish the Marine 
Corps's annual appropriation for funds reprogrammed earlier in the 
fiscal year to buy additional body-armor and other equipment to counter 
the use of improvised explosive devices in Iraq. 

DOD Plans to Take a Variety of Actions to Address Its Fiscal Year 2005 
GWOT Needs: 

To cover the forecasted GWOT needs for fiscal year 2005, DOD, the Army, 
and the Air Force have identified a number of steps they plan to take. 
These include exercising a number of authorities provided to them, such 
as transferring and reprogramming funds from annual appropriations and 
reducing or deferring planned spending for peacetime operations. 

The Army, the service with the largest forecasted gap in its operation 
and maintenance account, plans to take a variety of actions to meet its 
fiscal year 2005 GWOT funding needs. Some actions include taking steps 
to transfer or reprogram funds. For example, DOD reprogrammed more than 
$800 million in funds in May 2005 from the military personnel accounts 
of the Air Force,[Footnote 23] Navy, Marine Corps, and Army National 
Guard, and $250 million from the Army's Working Capital Fund, to the 
Army to meet urgent GWOT needs. Other actions the Army plans to take to 
help fund GWOT in fiscal year 2005 involve reducing or deferring 
current costs. For example, the Army reports that it has been able to 
reduce its fiscal year 2005 Logistics Civil Augmentation Program 
(LOGCAP)[Footnote 24] contract costs by about $890 million by reviewing 
and reducing current LOGCAP requirements. In discussing its plans to 
meet its fiscal year 2005 GWOT needs, the Army plans to use any surplus 
funds in its working capital fund to help cover any fiscal year 2005 
GWOT gaps. However, due to the transfers from the services' working 
capital funds to cover the fiscal year 2004 gaps, as discussed above, 
few assets remain elsewhere to cover the Army's fiscal year 2005 GWOT 
gap. Should the Army's GWOT gap be larger than forecasted, the Army may 
have to absorb the difference in its annual appropriation. 

The Air Force also plans to take a variety of actions to address the 
gap between its supplemental appropriations and reported operation and 
maintenance obligations for GWOT. These include decreasing peacetime 
flying hours by $700 million, reducing or deferring depot maintenance 
activities by $400 million, and freezing activities involving facility 
sustainment and restoration modernization projects. Other areas that 
could be targeted for cost reductions or deferments include noncritical 
travel and other supplies and equipment. 

DOD Is Not Explicitly Considering Funds in Its Annual Appropriations 
for GWOT to Cover Its Projected Fiscal Year 2005 Gaps: 

To meet its GWOT needs in fiscal year 2005, DOD is again not explicitly 
considering the Program Budget Decision 736 funds to support GWOT that 
were provided to the military services through their annual 
appropriations. However, as discussed earlier, unlike in fiscal year 
2004, in fiscal year 2005 some of the funds provided in Program Budget 
Decision 736 are being used to fund Operation Noble Eagle, which had 
previously been funded as part of GWOT through supplemental 
appropriations. In fiscal year 2004 DOD had included $2.2 billion in 
its budget request for Operation Noble Eagle. Adjusting for Operation 
Noble Eagle at the fiscal year 2004 funding level would result in more 
than $5.4 billion in funds included in Program Budget Decision 736 in 
support of GWOT for the military services remaining available in fiscal 
year 2005. If counted in fiscal year 2005, the amounts potentially 
could reduce the need for reprogrammings from other activities and 
could reduce the Army's and eliminate the Air Force's GWOT gaps. 
Instead, as in fiscal year 2004, the Office of the Under Secretary of 
Defense (Comptroller) and the military services will again meet those 
needs by taking actions that may affect DOD's peacetime operations, 
such as reducing or deferring planned spending. In some instances, 
these funding reductions and deferments could add to future spending 
pressures in fiscal year 2006 or potentially in later years and run the 
risk of producing a large "bow wave" of requirements. This can have 
both short-term and long-term impacts. In the short term, deferring 
spending can lead to higher costs than expected later in the current 
fiscal year, which may need to be covered by additional transfers and 
reprogrammings. In the long term, continued deferments can lead to 
higher costs. 

Conclusions: 

The extent to which one considers that GWOT funding has been sufficient 
depends on whether one counts both funding provided through 
supplemental appropriations and funding included in DOD's annual 
appropriation, which DOD requested for GWOT. The administration 
increased DOD's annual appropriation request by more than $10 billion 
annually beginning in fiscal year 2003 to support GWOT, with the 
military services receiving about $7.9 billion of that amount in fiscal 
year 2004 and about $7.6 billion in fiscal year 2005. The military 
services absorbed the increase into their annual appropriations and 
allocated it based on their judgment of where the funds were most 
needed. Since DOD's accounting systems do not separately identify these 
additional appropriations and there are no reporting requirements for 
DOD to identify to which appropriation accounts the funds were 
allocated, the military services have lost visibility over these funds 
and do not know the extent to which they are being used to support 
GWOT. Consequently, despite having asked for the increase, DOD is not 
explicitly counting the more than $10 billion when considering funding 
for GWOT. In fiscal year 2004, the military services reported 
obligations in support of GWOT that were above the supplemental funds 
appropriated by the Congress. In response, DOD used authorities granted 
to it, including transferring funds and reducing or deferring planned 
spending for peacetime operations, to cover the gaps. However, if the 
additional funds that were included in DOD's annual appropriation to 
help fund the war are included in the analysis, those funds could 
potentially have reduced the Army's gap and eliminated the gap for the 
Air Force and Navy in fiscal year 2004. In fiscal year 2005, the Army 
and the Air Force are again projecting obligations for the war above 
their supplemental appropriations, and DOD is taking steps to cover the 
gaps. As was the case in fiscal year 2004, the additional funds that 
were included in DOD's annual appropriation to help fund the war 
potentially could reduce or eliminate the projected gaps for the Army 
and Air Force. With military operations in Iraq and Afghanistan 
ongoing, and the likely need for DOD to request additional funds to 
support GWOT, it is important that DOD fulfill its role as a steward of 
taxpayer funds by taking steps to account for all the funds it receives 
for the war. 

Recommendations for Executive Action: 

To improve the visibility and accountability of DOD's use of funds for 
GWOT, we recommend that the Secretary of Defense, in future requests 
for supplemental appropriations, adjust such requests to reflect the 
additional funds DOD requested and received in its annual 
appropriations to support GWOT and provide the Congress with an 
explanation of these adjustments. We further recommend that in 
addressing any future GWOT funding needs the Secretary consider the 
additional GWOT funds provided through the department's annual 
appropriation when assessing how to cover expenses for the war and 
document its decisions. 

Matter for Congressional Consideration: 

Because DOD did not concur with our recommendation to adjust its future 
supplemental appropriations requests to reflect the additional funds 
the department requested and received in its annual appropriations to 
support GWOT and explain these adjustments to the Congress, we have no 
confidence that the Congress will receive the information that we 
believe the Congress needs to properly assess DOD's requests for 
supplemental appropriations to support the war. Further, because the 
amount of funds DOD is receiving to support GWOT through its annual 
appropriations is substantial--more than $10 billion annually--the 
Congress should consider directing DOD, when it submits future 
supplemental appropriations requests, to provide an explanation of how 
such requests reflect the funds DOD requested and already received in 
its annual appropriations to support GWOT. 

Agency Comments and Our Evaluation: 

DOD provided written comments on a draft of this report. Its comments 
are discussed below and are reprinted in appendix II. 

DOD did not concur with our recommendations. DOD further commented that 
the report confuses a Program Budget Decision, which is an internal 
document, with the President's budget, which is the official 
explanation of DOD's budget request, and that funds are not 
appropriated in accordance with a Program Budget Decision. In addition, 
DOD commented that the report's focus on the Program Budget Decision 
results in the inaccurate conclusion that if DOD had considered these 
funds it could have reduced the Army's GWOT gap and eliminated the GWOT 
gaps of the Air Force and Navy. In that regard, DOD stated that the 
only resources available to the department are those appropriated by 
the Congress and these funds were considered when determining the needs 
and expenses of the war. 

We recognize that a Program Budget Decision is an internal document and 
that the President's budget is the official explanation of DOD's budget 
request and that funds appropriated are determined by the Congress--not 
by either a Program Budget Decision or the President's budget. In our 
report, we refer to Program Budget Decision 736 and the President's 
budget not to establish how much money the Congress appropriated to 
support GWOT, but to establish how much money DOD intended for GWOT. As 
stated in our report, according to a representative from the Office of 
the Under Secretary of Defense (Comptroller), in December 2001 the 
President directed that his annual budget submission for DOD be 
increased by about $10 billion annually to support GWOT. Consequently, 
Program Budget Decision 736, entitled Continuing the War on Terrorism 
and dated January 31, 2002, was approved by the Under Secretary of 
Defense (Comptroller). Program Budget Decision 736 provided for 
increasing DOD's annual budget request in the amount of more than $10 
billion per year plus inflation in fiscal years 2003 through 2007 to 
enhance the department's efforts to respond to, or protect against, 
acts or threatened acts of terrorism against the United States. We 
therefore believe that since the funds referenced in Program Budget 
Decision 736 were specifically identified as being requested in support 
of GWOT, DOD should maintain visibility over how these funds were used 
to support GWOT. We believe that if DOD asks for a significant increase 
in appropriations and explains that the increase is needed to support 
GWOT, DOD should be able to show that it actually used those funds for 
GWOT. 

DOD did not concur with our recommendations that the Secretary of 
Defense (1) adjust future supplemental appropriations requests to 
reflect the additional funds DOD received in its annual appropriations 
to support GWOT and explain these adjustments to the Congress and (2) 
also consider the additional GWOT funds provided through DOD's annual 
appropriations in addressing any future GWOT funding needs. In 
commenting on our first recommendation, DOD stated that the 
department's supplemental appropriations request accounts for all 
relevant adjustments to the annual appropriation bill. DOD also 
commented that it builds and submits supplemental appropriations 
requests based on the incremental cost of the operation, which it 
described as those additional costs to the DOD component conducting the 
operation that are not covered in their existing budgets and would not 
have been incurred had they not been supporting the contingency. It is 
not apparent, however, that DOD's request for supplemental 
appropriations for fiscal year 2004 in fact reflected amounts already 
appropriated. The President's fiscal year 2005 supplemental 
appropriations request did reflect amounts already enacted, but only 
because the Office of Management and Budget, not DOD, made the 
adjustments. 

As we discuss in this report, DOD included a $10 billion increase in 
its fiscal year 2004 annual appropriations in order to support GWOT. In 
its Program Budget Decision 736, DOD stated that $1.2 billion of that 
amount would be used for combat air patrols over U.S. cities, which is 
part of Operation Noble Eagle. At the same time, in its fiscal year 
2004 supplemental appropriations request for GWOT, DOD included funding 
for Operation Noble Eagle, but without explaining why it needed amounts 
in addition to those that the Congress already provided. 

In addition, although DOD stated that the department's supplemental 
appropriations request accounts for all relevant adjustments to the 
annual appropriation bill, as stated in our report, in a November 2004 
memorandum issued by the Office of the Under Secretary of Defense 
(Comptroller) the Comptroller's office sought to adjust DOD's 
supplemental appropriations request for fiscal year 2005 to reflect 
funds already provided. In that memorandum, the Office of the Under 
Secretary of Defense (Comptroller) stated that funding in fiscal year 
2005 for GWOT missions previously added to the baseline budget (e.g., 
Program Budget Decision 736, Continuing the War on Terrorism) should be 
explicitly identified as a reduction to funding requests in those 
areas, as appropriate. The memorandum further requested that the 
components' submissions should show the total requirement and note the 
level of funding already in the baseline for this purpose. The 
memorandum directed that the services' supplemental appropriations 
requests net out the available funding and address the incremental 
costs above the baseline funding needed to support specific forces and 
capabilities required to execute Operation Iraqi Freedom, Operation 
Enduring Freedom, and portions (to be determined) of Operation Noble 
Eagle. However, as stated in our report, none of the military services 
provided the information requested in the November 2004 memorandum and 
instead the military services requested supplemental appropriations for 
Operation Noble Eagle. Nevertheless, in preparing the fiscal year 2005 
supplemental appropriations request, the Office of Management and 
Budget did not include Operation Noble Eagle in the President's budget 
request because funds had already been included in DOD's annual 
appropriation, pursuant to DOD's request, as described in Program 
Budget Decision 736. 

We believe that our recommendation has merit and have retained it. In 
addition, since DOD does not agree with the recommendation and the 
amount of funds at issue is substantial--more than $10 billion 
annually--we have added a matter for congressional consideration. 
Specifically, the Congress should direct DOD, when it submits future 
supplemental appropriations requests, to provide an explanation of how 
such requests reflect the additional funds that were addressed in 
Program Budget Decision 736 and which DOD requested and received in its 
annual appropriations to support GWOT. 

With respect to our second recommendation, DOD commented that it 
considers all funds provided through the department's annual 
appropriation when addressing how to cover expenses for the war. We 
recognize that DOD reviews all funds when determining how to cover its 
GWOT needs. However, DOD, as it explained in Program Budget Decision 
736, intended increased annual appropriations to support GWOT, but then 
lost visibility of the funds requested. There is no documentation, 
therefore, regarding how the department took the funds that it 
requested into account or whether it was applying the entire amount to 
cover its GWOT needs. We believe that since DOD stated that the 
additional annual funds were needed to support GWOT, and DOD continues 
to include this funding in its request for annual appropriations, to 
fulfill its role as a steward of taxpayer funds DOD should explicitly 
maintain visibility over how these funds are used to support GWOT and 
consider the entire amount to be available for GWOT. We therefore 
continue to believe our recommendation has merit and have retained it, 
including expanding it to recommend that DOD also document its 
decisions. 

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

If you have any questions regarding this report, please contact me at 
(202) 512-9619 or [Hyperlink, pickups@gao.gov]. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Principal contributors to this report 
were Steve Sternlieb, Assistant Director; Richard K. Geiger; Wesley A. 
Johnson; James Nelson; and David Mayfield. 

Signed by: 

Sharon L. Pickup: 
Director, Defense Capabilities and Management: 

List of Congressional Committees: 

The Honorable John Warner: 
Chairman: 
The Honorable Carl Levin: 
Ranking Minority Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Judd Gregg: 
Chairman: 
The Honorable Kent Conrad: 
Ranking Minority Member: 
Committee on the Budget: 
United States Senate: 

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

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

The Honorable Jim Nussle: 
Chairman: 
The Honorable John M. Spratt, Jr.: 
Ranking Minority Member: 
Committee on the Budget: 
House of Representatives: 

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

[End of section]

Appendixes: 

Appendix I: Scope and Methodology: 

To identify funding for the Global War on Terrorism (GWOT), we reviewed 
applicable annual and supplemental Department of Defense (DOD) 
appropriations in fiscal years 2004 and 2005. We also reviewed DOD 
reports on the transfer of funds from the Iraqi Freedom Fund to support 
GWOT activities, and DOD reports on the transfer or reprogramming of 
funds among various appropriation accounts or budget activities to 
support GWOT. In addition, we reviewed material related to the decision 
to add funds to DOD's annual appropriation to support GWOT, 
specifically Program Budget Decision 736, entitled Continuing the War 
on Terrorism, dated January 31, 2002, and approved by the Under 
Secretary of Defense (Comptroller). 

To assess the extent of differences between supplemental appropriations 
and reported obligations for GWOT, we compared supplemental 
appropriations provided to the military services to reported 
obligations in fiscal year 2004 and reported obligations through May 
2005 and assessed obligations through May 2005 for fiscal year 
2005.[Footnote 25] Specifically, we identified applicable supplemental 
appropriations in fiscal years 2004 and 2005 and compared them to the 
reported amounts obligated by each service in DOD's Supplemental and 
Cost of War Execution Reports.[Footnote 26] We limited our review to 
the obligation of funds appropriated for military personnel and 
operation and maintenance for the Army, Air Force, Navy, and Marine 
Corps, for both active and reserve forces, because they represented the 
majority of the funds obligated in fiscal years 2004 and 2005, about 90 
percent in each year. We excluded classified programs from our review, 
because obligations for those programs are not reported in DOD's 
Supplemental and Cost of War Execution Reports. We did not review the 
obligation of funds for investment, which are used for procurement; 
military construction; and research, development, test, and evaluation. 
In addition, for fiscal year 2005, we reviewed the latest available 
obligation data and held discussions with the military services on the 
results of their midyear budget reviews. We compared the services' 
reported military personnel and operation and maintenance obligations 
through May 2005, the latest available obligation data at the time of 
our review, to the supplemental appropriations provided to calculate 
the proportion of funds obligated through May. We then compared those 
proportions to the proportion of the fiscal year that has elapsed 
through May--which represents 67 percent of the fiscal year--to assess 
whether based on obligations through May funding is likely to be 
adequate. We recognize that funds are not obligated equally each month 
throughout the fiscal year. However, we believe that the further into 
the fiscal year the closer to 100 percent obligations should be 
relative to appropriations if all appropriated funds are likely to be 
obligated. 

GWOT obligations provided in this report are DOD's claimed obligations 
as reported in the Supplemental and Cost of War Execution Reports. In 
related work,[Footnote 27] we have reported these data to be of 
questionable reliability. For example, we found financial management 
systems with acknowledged weaknesses, a lack of systematic processes to 
ensure accurate data entry, failure to use actual data when it was 
available, and improperly categorized costs. Therefore, we are unable 
to ensure that DOD's reported obligations for GWOT are complete, 
reliable, and accurate. Consequently, the gaps we identify between 
supplemental appropriations and DOD's reported obligations may not 
reliably reflect true differences between supplemental appropriations 
and obligations and therefore should be considered approximations. 
Despite the uncertainty about the obligation data, we are reporting the 
information because it is the only data available on overall GWOT costs 
and the only way to approach an estimate of the costs of the war. Also, 
despite the uncertainty surrounding the true dollar figure for 
obligations, these data are used to advise the Congress on the cost of 
the war. As such, obligation data provided in this report reflect DOD 
reported obligations, however unreliable those reports may be. 

To determine actions taken by DOD and the services to cover any 
identified gaps between reported obligations and supplemental 
appropriations for GWOT, we held discussions with DOD representatives 
from the Office of the Under Secretary of Defense (Comptroller) and the 
Army, Air Force, Navy, and Marine Corps. At the major command level, we 
discussed with service representatives any actions taken to cover gaps 
and the impacts of actions taken to cover those gaps on their budgeted 
peacetime operations. 

We interviewed DOD representatives regarding GWOT obligations and 
funding for fiscal years 2004 and 2005 in the following locations: 

* Office of the Under Secretary of Defense (Comptroller), Washington, 
D.C. 

* Department of the Army, Headquarters, Washington, D.C. 

* Army Forces Command and Headquarters, Third Army, Fort McPherson, 
Georgia. 

* Army Installation Management Agency, Arlington, Virginia. 

* Army Materiel Command, Fort Belvoir, Virginia. 

* Army Pacific Command, Fort Shafter, Hawaii. 

* Department of the Air Force, Headquarters, Washington, D.C. 

* Air Force Air Combat Command, Langley Air Force Base, Virginia. 

* Air Force Air Mobility Command, and Headquarters, U.S. Transportation 
Command, Scott Air Force Base, Illinois. 

* Department of the Navy, Headquarters, Washington, D.C. 

* Navy Atlantic Fleet Command, Norfolk Naval Base, Virginia. 

* Navy Pacific Fleet Command, Pearl Harbor, Hawaii. 

* Marine Corps, Headquarters, Washington, D.C. 

* Marine Corps Forces, Pacific, Camp Smith, Hawaii. 

We performed our work from November 2004 through August 2005 in 
accordance with generally accepted government auditing standards. 

[End of section]

Appendix II: Comments from the Department of Defense: 

UNDER SECRETARY OF DEFEN5E: 
COMPTROLLER: 
1100 DEFENSE PENTAGON: 
WASHINGTON, DC 20301-1100: 

SEP 6 2005: 

Mr. David Walker: 
Comptroller General: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Room 7100: 
Washington, DC 20548: 

Dear Mr. Walker: 

This is the Department of Defense (DoD) response to the Government 
Accountability Office (GAO} Draft Report GAO-OS-767, titled "GLOBAL WAR 
ON TERRORISM: DoD Should Consider All Funds Requested for the War When 
Determining Needs and Covering Expenses," dated August 18, 2005, (GAO 
Code 350616). The Department appreciates the opportunity to review the 
draft report and provide comments. 

The Department disagrees with the recommendations made in the GAO draft 
report. The report confuses a Program Budget Decision (PBD), which is 
an internal management document, with the President's Budget (PB), 
which is the official explanation of the Department of Defense (DoD) 
budget request. Funds are not appropriated in accordance with a PBD. 

The report's focus on the PBD results in the inaccurate conclusion 
that, "if DoD had considered these funds, it could have reduced the 
Army's GWOT gap and eliminated the GWOT gaps of the Air Force and 
Navy." A PBD is not a source of funding. The only resources available 
to the Department are those appropriated by the Congress, and these 
funds were considered when determining the needs and expenses of the 
war. 

Thank you for the opportunity to provide the Department's response. 

Sincerely,

Signed by: 

David L. Norquist: 
Acting Principal Deputy: 

Enclosures: As stated: 

Department of Defense Comments GAO-OS-767 (GAO Code 350616): 

SUBJECT: GAO Draft Report, August 18, 2005, titled "GLOBAL WAR ON 
TERRORISM: DOD Should Consider All Funds Requested for the War When 
Determining Needs and Covering Expenses." (GAO Code 350616): 

DISCUSSION: 

* The GAO report outlined two recommendations. 

* The Department of Defense (DoD) nonconcurs on the findings. 

* A restatement of the recommendation and the Department's comments 
follows: 

RECOMMENDATION l: The GAO recommended that the Secretary of Defense 
adjust future requests for supplemental appropriations to reflect the 
additional funding it requested and received in its annual 
appropriations to support the Global War on Terrorism and provide the 
Congress with an explanation of these adjustments. 

DoD COMMENT TO RECOMMENDATION l: Nonconcur. The Department's 
supplemental request accounts for all relevant adjustments to the 
annual appropriation bill. The Department of Defense builds and submits 
supplemental requests based on the incremental cost of the operation. 
Incremental costs are those additional costs to the DoD Component 
conducting the operation that are not covered in their existing budgets 
and would not have been incurred had they not been supporting the 
contingency. 

RECOMMENDATION 2: The GAO recommended that the Secretary of Defense, in 
addressing any future Global War on Terrorism (GWOT) funding needs, 
consider the additional Global War on Terrorism funding provided 
through the Department's annual appropriation when addressing how to 
cover expenses for the war. 

DoD COMMENT TO RECOMMENDATION 2: Nonconcur. The Department considers 
all funding provided through the Department's annual appropriation when 
addressing how to cover expenses for the war. All of the military 
departments conduct extensive internal reviews of all their funds for 
assets (savings) and offsets (directed programmatic cuts) which can be 
reprogrammed to finance unanticipated GWOT costs. 

[End of section] 

(350616): 

FOOTNOTES

[1] GAO, Military Operations: Fiscal Year 2004 Costs for the Global War 
on Terrorism Will Exceed Supplemental, Requiring DOD to Shift Funds 
from Other Uses, GAO-04-915 (Washington, D.C. July 21, 2004), and 
Military Operations: DOD's Fiscal Year 2003 Funding and Reported 
Obligations in Support of the Global War on Terrorism, GAO-04-668 
(Washington, D.C. May 13, 2004). 

[2] Department of Defense Financial Management Regulation, 7000.14-R, 
vol. 1, Definitions, p. xvii (December 2001). 

[3] See GAO-04-915. 

[4] DOD's financial systems only capture total obligations, and the 
services use various management information systems to identify 
incremental obligations and to estimate costs. 

[5] See GAO-04-668. 

[6] GAO, Defense Budget: Tracking of Emergency Response Funds for the 
War on Terrorism, GAO-03-346 (Washington, D.C. Apr. 30, 2003). 

[7] 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). 

[8] GAO, Military Operations: Some Funds for Fiscal Year 1999 
Contingency Operations Will Be Available for Future Needs, GAO/NSIAD-99-
244BR (Washington, D.C. Sept. 21, 1999), and Military Operations: 
Fiscal Year 2003 Obligations Are Substantial, but May Result in Less 
Obligations Than Expected, GAO-03-1088 (Washington, D.C. Sept. 17, 
2003). 

[9] An example of specific transfer authority is found in Section 8006 
of the Department of Defense Appropriations Act, 2004 (Pub. L. No. 108-
87 (Sept. 30, 2003)), which allows DOD to transfer excess cash balances 
from the Defense Working Capital Fund to the operation and maintenance 
appropriations in amounts as determined by the Secretary with the 
approval of the Office of Management and Budget. 

[10] Pub. L. No. 108-106 (Nov. 6, 2003). 

[11] Pub. L. No. 108-287, Title IX (Aug. 5, 2004). DOD was provided $25 
billion through Title IX of the Department of Defense Appropriations 
Act, 2005, of which about $17.4 billion was provided for military 
personnel and operation and maintenance expenses. These funds were 
available for use in fiscal years 2004 and 2005. 

[12] Pub. L. No. 107-40 (Sept. 18, 2001). 

[13] Pub. L. No. 108-11, Title I, ch. 3 (Apr. 16, 2003). 

[14] Pub. L. No. 108-106 (Nov. 6, 2003). 

[15] Pub. L. No. 109-13 (May 11, 2005). 

[16] Program Budget Decision 736 also indicates some funds were 
provided to the Department of Energy. 

[17] Although DOD requested the funds associated with Program Budget 
Decision 736 to enhance the department's efforts to combat terrorism, 
the Congress did not legally restrict DOD from using them for non-GWOT 
activities. 

[18] A working capital fund is a revolving fund that relies on sales 
revenue rather than direct congressional appropriations to finance its 
operations. Customers, in this case, the military services, use 
appropriated funds, primarily operation and maintenance appropriations, 
to finance orders placed with a working capital fund. Working capital 
funds are intended to generate sufficient revenue to cover full 
operational costs and operate on a break-even basis over time, that is, 
neither to make a profit nor incur a loss. 

[19] The $136 million was initially provided as part of baseline 
funding for physical security improvements. 

[20] See Department of Defense Financial Management Regulation, 7000.14-
R, vol. 2B, ch. 9, para. 090103. The minimum goal represents 7 to 10 
days of operational costs and cash adequate to meet 6 months of capital 
disbursements. 

[21] The Army's modular force initiative, which has been referred to as 
the largest Army reorganization in 50 years, encompasses the Army's 
total force--active Army, National Guard, and Army Reserve--and 
directly affects not only the Army's combat units, but related support 
and command and control. The foundation of the Army modular force 
initiative is the creation of brigade combat teams--brigade-sized units 
that will have a common organizational design and will increase the 
pool of available units for deployment. 

[22] Joint Sourcing refers to the use of Navy and Air Force personnel 
to support and meet the requirements of the Army. Personnel provided 
through Joint Sourcing include medical, supply, logistics, 
intelligence, and security personnel; construction battalions; military 
police; and others. 

[23] Although the Air Force reported a projected gap in supplemental 
appropriations for military personnel through the end of the fiscal 
year, some funds were reprogrammed from the Air Force to prevent the 
Army from running out of operating funds in May 2005. 

[24] LOGCAP is an Army program that plans for the use of a private 
sector contractor to support worldwide contingency operations. Examples 
of the types of support available include laundry and bath, food 
service, sanitation, billeting, maintenance, and power generation. 
LOGCAP has been used extensively to support U.S. forces in recent 
operations in southwest Asia, with more than $15 billion in estimated 
work as of January 2005. 

[25] DOD's financial systems only capture total obligations, and the 
services use various management information systems to identify 
incremental obligations and to estimate costs. 

[26] Through December 2004, these reports were called the Consolidated 
Department of Defense Terrorist Response Cost Reports. Beginning in 
January 2005, DOD renamed these reports the Supplemental and Cost of 
War Execution Reports. 

[27] 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). 

GAO's Mission: 

The Government Accountability Office, the investigative arm of 
Congress, exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO's commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO's Web site (www.gao.gov) contains 
abstracts and full-text files of current reports and testimony and an 
expanding archive of older products. The Web site features a search 
engine to help you locate documents using key words and phrases. You 
can print these documents in their entirety, including charts and other 
graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as "Today's Reports," on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order 
GAO Products" heading. 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548: 

To order by Phone: 

Voice: (202) 512-6000: 

TDD: (202) 512-2537: 

Fax: (202) 512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470: 

Public Affairs: 

Jeff Nelligan, managing director,

NelliganJ@gao.gov

(202) 512-4800

U.S. Government Accountability Office,

441 G Street NW, Room 7149

Washington, D.C. 20548: