Summary

Since fiscal year 1992, the Pentagon has reported more than $7 billion in incremental costs for its participation in contingency operations, ranging from peacekeeping missions in Haiti and the former Yugoslavia to deployments to the Middle East during the Persian Gulf War. Accurate reporting of these costs is crucial to effective congressional oversight of appropriated funds. GAO found inaccuracies in the Defense Department's (DOD) costs for contingency operations, representing about seven percent of the $4.1 billion in costs reported in fiscal years 1994 and 1995. In GAO's judgment, this variance in reported costs is indicative of a material weakness in the accounting systems. DOD guidance on reporting incremental costs is vague and incomplete, and weaknesses plague DOD's accounting system.

GAO found that: (1) DOD overstated about $104 million in incremental costs and understated or failed to report about $171 million in incremental costs; (2) DOD overstated costs primarily because the services failed to adjust reported incremental costs for normal costs they did not incur; (3) DOD understated costs primarily because the services failed to report certain incremental personnel and munitions costs; (4) it could not determine the accuracy of some reported costs because the services could not readily identify special pay and allowances related to contingency operations; (5) DOD revised its guidance for developing and reporting incremental costs, but the guidance generally remains vague and incomplete; (6) the financial management systems DOD uses to develop incremental cost data are deficient, unreliable, and a high-risk area; and (7) the problems in DOD reporting of incremental cost are indicative of a material weakness in DOD accounting systems.