Summary
To support the Global War on Terrorism in fiscal year 2004, the Congress appropriated $65 billion to the Department of Defense (DOD) in an emergency supplemental appropriations act. To assist the Congress in its oversight role, GAO reviewed (1) the adequacy of current funding for fiscal year 2004 war-related activities and (2) actions DOD is undertaking to cover anticipated shortfalls, if any. Based on the body of work GAO has done on the cost of contingency operations, GAO is also making observations on efforts to require greater accountability to the Congress on the use of funds appropriated to DOD for contingency operations.
GAO's analysis of reported obligations for the first seven months of fiscal year 2004 through April 2004 and the military services' forecasts as of June 2004 of their likely costs for the Global War on Terrorism for operation and maintenance and military personnel through the end of fiscal year 2004 suggests that anticipated costs will exceed the supplemental funding provided for the war by about $12.3 billion for the current fiscal year. DOD and the services are taking a variety of actions to cover anticipated shortfalls in their war-related funding. These actions include taking steps to reduce costs, transferring funds among appropriations accounts, and deferring some planned activities to use those funds to support the war. Also, DOD plans to ask the Congress for additional transfer authority, which would give it sufficient authority to move funds from one service to another and get funds to the operation and maintenance accounts that have the greatest shortfalls. The deferral of activities planned for fiscal year 2004 adds to the requirements that will need to be funded in fiscal year 2005 and potentially later years and could result in a "bow wave" effect in future fiscal years. GAO's past work has shown that current cost reporting includes 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. This is likely to result in reduced transparency and accountability to the Congress and the American people. Recent congressional actions have signaled the Congress' intent to require greater accountability regarding the use of GWOT funds. For example, in action on the President's $25 billion request for an Iraqi Freedom Fund Contingent Emergency Reserve in fiscal year 2005, the House Committee on Appropriations included provisions in its bill for cost reporting related to the use of these funds. But additional actions are necessary.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Sharon L. Pickup
Government Accountability Office: Defense Capabilities and Management
(757) 552-8100
Matters for Congressional Consideration
Recommendation: To better assess the adequacy of previously provided funding, the Congress may wish to expand its reporting requirements for DOD on the use of GWOT funds to include reports at the half year and the end of the third quarter of each fiscal year that include an assessment of the adequacy of funding for GWOT in that fiscal year, including (a) if funding appears to be insufficient, the Secretary of Defense's plan for covering any shortfall and (b) if funding appears to exceed forecasted costs, the procedures that will be followed to ensure that any excess funds are not used for non-GWOT purposes.
Status: Not Implemented
Comments: Congress did not expand the reporting requirement for DOD.
Recommendations for Executive Action
Recommendation: In light of the fact that we have reported for years on the large amounts of reported obligations in the miscellaneous categories of the Consolidated DOD Terrorist Response Cost Reports, the Secretary of Defense should review recent Consolidated DOD Terrorist Response Cost Reports to identify the larger groupings of reported obligations within the "other supplies and equipment," "other services and miscellaneous contracts," and "other military personnel" cost categories.
Agency Affected: Department of Defense
Status: Implemented
Comments: In January 2005, the Office of the Secretary of Defense-Comptroller (OUSD-C)issued a revised version of Vol. 12, Chapter 23, of the Financial Management Regulations which included new cost reporting categories that refine the capture of obligations previously reported in the larger "miscellaneous" categories. The OUSD-C directed the Defense Financial Accounting Service to implement these changes to the Cost Categories and Cost Breakdown Structure for contingency operations effective for the October 31, 2004, version of the Consolidated Department of Defense Terrorist Response Cost Report, and the Consolidated Department of Defense Contingency Cost Report. These changes have been verified in the October, November, and December 2004 versions of the Consolidated Department of Defense Terrorist Response Cost Reports.
Recommendation: In light of the fact that we have reported for years on the large amounts of reported obligations in the miscellaneous categories of the Consolidated DOD Terrorist Response Cost Reports, the Secretary of Defense should revise Chapter 23 of the Financial Management Regulations to include these groupings as reporting categories so that the amounts classified in the "other" categories are minimized.
Agency Affected: Department of Defense
Status: Implemented
Comments: In January 2005, the Office of the Secretary of Defense-Comptroller (OUSD-C)issued a revised version of Vol. 12, Chapter 23, of the Financial Management Regulations which included new cost reporting categories that refine the capture of obligations previously reported in the larger "miscellaneous" categories. The OUSD-C directed the Defense Financial Accounting Service to implement these changes to the Cost Categories and Cost Breakdown Structure for contingency operations effective for the October 31, 2004, version of the Consolidated Department of Defense Terrorist Response Cost Report, and the Consolidated Department of Defense Contingency Cost Report. These changes have been verified in the October, November, and December 2004 versions of the Consolidated Department of Defense Terrorist Response Cost Reports.
Recommendation: In light of the fact that we have reported for years on the large amounts of reported obligations in the miscellaneous categories of the Consolidated DOD Terrorist Response Cost Reports, the Secretary of Defense should direct the military services to begin reporting obligations using these new cost categories as soon as they are identified.
Agency Affected: Department of Defense
Status: Implemented
Comments: In January 2005, the Office of the Secretary of Defense-Comptroller (OUSD-C)issued a revised version of Vol. 12, Chapter 23, of the Financial Management Regulations which included new cost reporting categories that refine the capture of obligations previously reported in the larger "miscellaneous" categories. The OUSD-C directed the Defense Financial Accounting Service to implement these changes to the Cost Categories and Cost Breakdown Structure for contingency operations effective for the October 31, 2004, version of the Consolidated Department of Defense Terrorist Response Cost Report, and the Consolidated Department of Defense Contingency Cost Report. These changes have been verified in the October, November, and December 2004 versions of the Consolidated Department of Defense Terrorist Response Cost Reports.
