Global War on Terrorism:

DOD Needs to Take Action to Encourage Fiscal Discipline and Optimize the Use of Tools Intended to Improve GWOT Cost Reporting

GAO-08-68: Published: Nov 6, 2007. Publicly Released: Nov 6, 2007.

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Since the September 2001 terrorist attacks, Congress has provided about $542.9 billion, as of May 2007, to the Department of Defense (DOD) for the Global War on Terrorism (GWOT). Prior GAO reports have found DOD's reported GWOT obligation data unreliable and problems with transparency over certain costs. DOD made changes to its reporting procedures, requiring components to perform a monthly variance analysis on obligation data and to include affirmation statements attesting to the accuracy of cost data. Under the Comptroller General's authority to conduct evaluations on his own initiative, GAO assessed (1) the outlook of DOD's reported GWOT obligations for fiscal year 2007 and funding requests for fiscal year 2008, (2) the effect of changes in DOD's GWOT funding guidance, and (3) DOD's progress in implementing variance analysis and affirmation statements. For this engagement, GAO analyzed fiscal year 2007 GWOTrelated appropriations and reported obligations, as well as DOD's corrective actions.

Through June 2007, DOD's reported obligations for fiscal year 2007 of $95.4 billion were almost equal to its total reported GWOT obligations for fiscal year 2006. After GWOT obligations are reported for the remaining 3 months of fiscal year 2007, which are now averaging $10.6 billion a month, total obligations will significantly exceed those for fiscal year 2006. Further, changes to the President's fiscal year 2008 GWOT request for DOD have been submitted to fund operational requirements that were not included in the original request. These include decisions in January 2007 to increase or "surge" troop levels in Iraq, and in September 2007 to begin to withdraw these troops during fiscal year 2008. These amendments, totaling nearly $47.6 billion, bring the total fiscal year 2008 GWOT funding request for DOD to about $189.3 billion. Changes in DOD's GWOT funding guidance have resulted in billions of dollars being added to GWOT funding requests for what DOD calls the "longer war against terror," making it difficult to distinguish between incremental costs to support specific contingency operations and base costs. Although emergency funding has historically been used to support unexpected costs of contingency operations, in October 2006, DOD revised guidance to allow for additional costs. As a result, the fiscal year 2007 and 2008 requests included funding for items generally requested in DOD's base budget, such as future weapon systems, transformation, and increases to military end strength. GAO believes similarities, in some cases, between DOD's GWOT and base funding requests, along with the duration of GWOT operations, indicate DOD has reached the point where it should build more funding into its base budget. Without clearly defining the "longer war against terror" and increasing the transparency between incremental and base costs, decision makers cannot assess priorities and potential trade-offs. If the administration believes the nation is engaged in a long-term conflict, the implications should be considered during annual budget deliberations. Continuing to fund GWOT through emergency requests reduces transparency and avoids the necessary reexamination of commitments, investment priorities, and trade-offs. DOD has achieved some positive results and GWOT cost reporting continues to evolve. More action is needed to optimize the tools intended to improve GWOT cost reporting. DOD has begun to improve transparency by requiring components to analyze variances in reported obligations and to disclose reasons for significant changes. GAO found that required explanations, in some instances, were not disclosed due to inadequate management oversight, and other types of analysis could help identify obligations omitted from reports, such as about $1.5 billion in Marine Corps obligations. Also, in some cases, components did not provide required affirmation statements to attest to accuracy nor were they required to disclose the basis for statements or note the outcome of variance analyses. Without more complete information and a more robust methodology, DOD does not yet have the data needed to assess reliability or to be confident adequate steps are taken to validate cost data.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To improve transparency and fiscal responsibility related to funding the war on terrorism, and to permit Congress and the administration to establish priorities and make trade-offs among those priorities in defense funding, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to issue guidance defining what constitutes the "longer war against terror," identify what costs are related to that longer war, and build these costs into the base defense budget.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: The Administration, in the publication "A New Era of Responsibility," stated that the fiscal year 2010 budget would transparently present the full costs of the defense base budget and the incremental costs of ongoing operations in Iraq and Afghanistan. In addition, the Department of Defense (DOD) and the Office of Management and Budget collaboratively developed the February 26, 2009, Criteria for War/Overseas Contingency Operations Funding Requests. That criteria defines the items appropriately funded in the base budget and the items appropriately funded in the Overseas Contingency Operations budget. Items such as family support initiatives and recruiting and retention bonuses are included in the base budget. This criteria was first applied to DOD's Fiscal Year 2010 budget request, which was submitted to Congress in May 2009.

    Recommendation: To improve transparency and fiscal responsibility related to funding the war on terrorism, and to permit Congress and the administration to establish priorities and make trade-offs among those priorities in defense funding, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to identify incremental costs of the ongoing GWOT operations that can be moved into the base budget.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: The Administration, in the publication "A New Era of Responsibility," stated that the fiscal year 2010 budget would transparently present the full costs of the defense base budget and the incremental costs of ongoing operations in Iraq and Afghanistan. In addition, the Department of Defense (DOD) and the Office of Management and Budget collaboratively developed the February 26, 2009, Criteria for War/Overseas Contingency Operations Funding Requests. That criteria defines the items appropriately funded in the base budget and the items appropriately funded in the Overseas Contingency Operations budget. Items such as family support initiatives and recruiting and retention bonuses are included in the base budget. This criteria was first applied to DOD's Fiscal Year 2010 budget request, which was submitted to Congress in May 2009.

    Recommendation: To improve transparency and fiscal responsibility related to funding the war on terrorism, and to permit Congress and the administration to establish priorities and make trade-offs among those priorities in defense funding, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, in consultation with the Office of Management and Budget, consider limiting emergency funding requests to truly unforeseen or sudden events.

    Agency Affected: Department of Defense

    Status: Closed - Not Implemented

    Comments: The Department of Defense (DOD) and the Office of Management and Budget collaboratively developed the February 26, 2009, Criteria for War/Overseas Contingency Operations Funding Requests. That criteria defines the items appropriately funded in the base budget and the items appropriately funded in the Overseas Contingency Operations budget. Items such as family support initiatives and recruiting and retention bonuses are included in the base budget. This criteria was first applied to DOD's Fiscal Year 2010 budget request, which was submitted to Congress in May 2009. While the criteria has been applied to DOD's budget requests since fiscal year 2010, DOD has not yet updated the DOD Financial Management Regulation 7000.14, Volume 12, Chapter 23 to reflect the framework for determining which costs should be aligned in the base budget and those that should be aligned to the Overseas Contingency Operations budget.

    Recommendation: To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, develop and implement written procedures for Defense Finance and Accounting Service (DFAS) to use in compiling the variance explanations and in performing quality assurance steps to monitor the process.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: Revised procedures for contingency operation cost report footnotes were issued by Office of the USD(C) on 4 Jan 2008, and distributed to DOD components by the GWOT Cost of War Program Management Office on 8 Jan 2008.

    Recommendation: To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, require DFAS to provide draft copies of the consolidated cost-of-war report to DOD components so that they can verify that all of their explanatory footnotes have been included.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: The Defense Finance and Accounting Service (DFAS) has taken steps to improve the Global War on Terrorism Cost of War footnote compilation process. As such, according to DOD, DFAS sends each component their portion of the draft footnotes for review prior to the office of the Under Secretary of Defense (Comptroller) releasing the monthly report. The Department has established a performance measure to track compliance with prescribed footnote requirements.

    Recommendation: To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, develop and implement written procedures for the DOD Comptroller to periodically perform a DOD-wide analysis of the cost-of-war report and supporting explanations to identify trends and root causes of systemic reporting problems that should be considered and corrected during efforts to improve the cost-of-war reporting process.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: In November 2009, the Defense Finance and Accounting Service (DFAS) issued Standard Operating Procedures for Contingency Operations Data Validation, Version 2. According to DOD, the procedures require DFAS to review the Components' variance explanations to ensure that the explanations are complete and reasonable, summarize and consolidate the footnote explanations and prepare a package for review by OUSD, Comptroller and senior leadership of DFAS. These actions essentially meet the intent of the recommendation.

    Recommendation: To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, conduct a study of the current formula for the variance analysis to determine whether it provides the most useful information for identifying anomalies and taking correcting action. At a minimum, such a study should consider the nature of the activity being analyzed, including whether the activity tends to be cyclical or more volatile, and whether a different baseline comparison, such as the average of the previous 12 months' obligations, would result in improved analysis of obligation information.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: According to DOD, as a result of the Variance Analysis/Affirmation Workgroup, the variance analysis methodology was changed in January 2008 to allow analysis based on a monthly spend plan or a 12-month average.

    Recommendation: To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, revise guidance over the monthly affirmation statements to include criteria or factors that should be considered during the monthly review process.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: According to DOD in August 2008, the Defense Finance and Accounting Service developed an affirmation checklist, which provides criteria for affirmation, to assist the components in completing their affirmation.

    Recommendation: To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, revise the guidance over the monthly affirmation statements to require disclosure of the basis for affirmation statements, including key points of related variance analysis, if any, and sources used to obtain information on the amount of reported obligations.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD agreed with our recommendation and stated efforts are underway to improve cost of war reporting and variance analysis and affirmation processes. According to DOD, the Defense Finance and Accounting Service developed an affirmation checklist, which provides criteria for affirmation, to assist the components in completing their affirmation. Additionally, the Under Secretary of Defense (Comptroller) issued revised instructions for contingency operations cost report footnotes to require Components to explain all sources and variable amounts used to identify and report cost data if the data source is other than the official accounting systems and/or any adjustments made to data originating from the official accounting records. These actions essentially meet the intent of the recommendation.

    Recommendation: To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, take steps to ensure compliance with guidance on variance analysis and affirmation statements.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: According to DOD in June 2008, DOD has implemented a compliance scorecard to track compliance with submitting costs, variance analysis explanations, and affirmation statements and the Under Secretary of Defense (Comptroller) issued a memorandum with revised guidance regarding Cost-of-War footnotes.

    Recommendation: To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, revise the cost-of-war report format to disclose when component management has not affirmed to the accuracy and fair representation of reported obligations or provided all variance explanations, as required.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: According to DOD in 2008, the Defense Finance and Accounting Service uses a spreadsheet to monitor late and missing explanations and monitors missing explanations until they are received and identifies missing explanations or affirmations when the draft is submitted to the Under Secretary of Defense (Comptroller). If late explanations or affirmations are received before the release of the report, they are immediately provided so they can be included in the final report. These actions meet the intent of the recommendation.

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