oversight

Military Operations: Fiscal Year 2003 Obligations Are Substantial, but May Result in Less Obligations Than Expected

Published by the Government Accountability Office on 2003-09-17.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to Congressional Committees




September 2003
                 MILITARY
                 OPERATIONS
                 Fiscal Year 2003
                 Obligations Are
                 Substantial, but May
                 Result in Less
                 Obligations Than
                 Expected




GAO-03-1088
                                                September 2003


                                                MILITARY OPERATIONS

                                                Fiscal Year 2003 Obligations Are
Highlights of GAO-03-1088, a report to          Substantial, but May Result in Less
congressional committees
                                                Obligations Than Expected



The Global War on Terrorism                     While funds obligated by DOD for GWOT, including the war with Iraq, in
(GWOT)—principally involving                    fiscal year 2003 are substantial—about $39 billion through June 2003—the
operations in Afghanistan and                   funds appropriated by Congress appear to be sufficient for fiscal year 2003,
Iraq—is being funded in fiscal year             and some of the services may not obligate all of the funds they were
2003 by Congress’s appropriation                appropriated for fiscal year 2003. For example, at the end of June 2003, with
of almost $69 billion, including
almost $16 billion in a transfer fund
                                                75 percent of the fiscal year completed, the services’ percentage of GWOT
called the Iraqi Freedom Fund. To               operation and maintenance funds that had been obligated ranged from a low
assist Congress in its oversight of             of 65 percent for the Army to a high of 78 percent for the Marine Corps (see
funding for GWOT, GAO examined                  chart below). In contrast, the percentage of military personnel funds
the obligation of GWOT funds and                obligated by the three-fourths of-the-fiscal-year mark by the services ranged
the implications for additional                 from 72 to 75 percent of GWOT appropriations.
funding in fiscal year 2003 and the
President’s request for fiscal year             Obligations of GWOT Operation and Maintenance Funds, through June 2003
2004 funds for several operations in
Southwest Asia that were canceled
after the budget was submitted.



GAO recommends that the
Department of Defense (DOD) take
several actions to ensure that the
fiscal year 2003 funds appropriated
for GWOT are fully utilized,
including that the Secretary of
Defense review the services’
spending plans before transferring
additional funds from the Iraqi
Freedom Fund to ensure the funds
will be obligated as planned. GAO
also suggests that, given the results
of this review, Congress not
provide the $1.4 billion requested
by the President for DOD in fiscal
year 2004 for continued support of
Operations Desert Spring and
Northern and Southern Watch
                                                The military services believe they will obligate all the fiscal year 2003 funds
since DOD canceled them. GAO
made changes to its                             appropriated to them. In addition, the services have received billions of
recommendations based on DOD’s                  dollars more in transfers from the Iraqi Freedom Fund. But GAO’s analysis
comments on a draft of this report              suggests that they may not need all the funds transferred as well as further
and DOD now agrees with the                     transfers in fiscal year 2003 for operation and maintenance, since
revised recommendations.                        considerable unobligated fiscal year 2003 funds remain in their direct
                                                appropriations.
www.gao.gov/cgi-bin/getrpt?GAO-03-1088.
                                                Since DOD terminated Operations Desert Spring and Northern and Southern
To view the full product, including the scope   Watch in Southwest Asia in March 2003, the funds ($1.4 billion) that were
and methodology, click on the link above.       included in the President’s fiscal year 2004 budget to support those
For more information, contact Neal Curtin at
(757) 552-8100 or curtinn@gao.gov.              operations next year may no longer be necessary.
Contents


Letter                                                                                   1
             Results in Brief                                                            2
             Background                                                                  3
             Unobligated Balances Late in the Fiscal Year Raise Doubts about
               Services’ Ability to Fully Obligate Their Fiscal Year 2003 GWOT
               Funds and Justification for Iraqi Freedom Fund Transfers                  5
             The Termination of Operations Northern Watch, Southern Watch,
               and Desert Spring Obviates the Need for Requested Fiscal Year
               2004 Funds for These Operations                                         14
             Conclusions                                                               14
             Recommendations for Executive Action                                      15
             Matter for Congressional Consideration                                    15
             Agency Comments and Our Evaluation                                        15

Appendix I   Scope and Methodology                                                     19



Tables
             Table 1: Operation and Maintenance Funds Provided to the
                      Services for the Global War on Terrorism                           6
             Table 2: Military Personnel Funds Provided to the Services for the
                      Global War on Terrorism                                            7


Figures
             Figure 1: Location of DOD’s Fiscal Year 2003 Contingency
                      Operations                                                         4
             Figure 2: Obligations of GWOT Operation and Maintenance Funds
                      through June 2003                                                  9
             Figure 3: Obligations of GWOT Military Personnel Funds through
                      June 2003                                                        12




             Page i                                        GAO-03-1088 Military Operations
Abbreviations

DOD               Department of Defense
GWOT              Global War on Terrorism



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Page ii                                                 GAO-03-1088 Military Operations
United States General Accounting Office
Washington, DC 20548




                                   September 17, 2003

                                   Congressional Committees

                                   Following the terrorist attacks of September 11, 2001, the United
                                   States began military operations to combat terrorism both in the United
                                   States and overseas. Military operations to defend the United States from
                                   terrorist attacks are known as Operation Noble Eagle. Overseas operations
                                   to combat terrorism are known as Operation Enduring Freedom and have
                                   taken place principally in Afghanistan. In March 2003, the United States
                                   began Operation Iraqi Freedom to change the government in Iraq.
                                   Together, these three operations are known as the Global War on
                                   Terrorism (GWOT). To support GWOT in fiscal year 2003, Congress
                                   appropriated $68.7 billion to the Department of Defense (DOD) in the
                                   Consolidated Appropriations Resolution, 2003, and Emergency Wartime
                                   Supplemental Appropriations Act, 2003.1 Of the $68.7 billion appropriated,
                                   almost $16 billion was appropriated in the Wartime Supplemental for a
                                   transfer account called the Iraqi Freedom Fund.2

                                   To assist Congress in its oversight role, we reviewed the fiscal year 2003
                                   funding for the GWOT. Specifically, we reviewed the services’ obligation
                                   rates for GWOT-related activities and what those obligation rates suggest
                                   about the services’ needs to draw from the Iraqi Freedom Fund during
                                   fiscal year 2003. We also reviewed the President’s request for fiscal year
                                   2004 funds for Operations Northern Watch, Southern Watch, and Desert
                                   Spring,3 which DOD subsequently terminated in March 2003. We provided
                                   briefings to the House and Senate Appropriations Committee staff and
                                   House and Senate Armed Services Committee staff as well as the House
                                   and Senate Budget Committee staff in June and July 2003. This report
                                   updates the information we provided during the briefings.



                                   1
                                       P.L. 108-7 (Feb. 20, 2003) and P.L. 108-11 (Apr.16, 2003).
                                   2
                                    The Iraqi Freedom Fund is a special account providing funds for additional expenses for
                                   ongoing military operations in Iraq, and those operations authorized by P.L. 107-40
                                   (Sept. 13, 2001), Authorization for Use of Military Force, and other operations and related
                                   activities in support of the global war on terrorism.
                                   3
                                    Operations Northern and Southern Watch enforced the no-fly zones over Iraq. Operation
                                   Desert Spring, an Army operation, rotated forces in and out of Kuwait to train with the
                                   Kuwaiti military.



                                   Page 1                                                       GAO-03-1088 Military Operations
                   To accomplish this review, we obtained the most recently available
                   DOD data on the services’ obligation of fiscal year 2003 GWOT funds. We
                   interviewed DOD and service officials responsible for preparing budgets
                   and estimating costs and force levels. We also interviewed resource
                   management officials from most of the major commands involved in
                   Operation Iraqi Freedom. We focused our work on the obligation of funds
                   appropriated for operation and maintenance and military personnel
                   because they represented the large majority of funds obligated in fiscal
                   year 2003 through June 2003. A detailed discussion of our scope and
                   methodology is contained in appendix I.


                   While funds obligated for the Global War on Terrorism (GWOT) in
Results in Brief   fiscal year 2003 are substantial—about $39 billion through June 2003,
                   our analysis of the services’ obligation rates suggests that the funds
                   appropriated by Congress for fiscal year 2003 GWOT operation and
                   maintenance and military personnel, excluding transfers from the Iraqi
                   Freedom Fund, are sufficient because some of the services may not be
                   able to obligate, before the end of fiscal year 2003, the funds they were
                   appropriated. For example, at the end of June 2003, with three-fourths of
                   the fiscal year complete, the percentage of the services’ GWOT operation
                   and maintenance appropriations that had been obligated ranged from a
                   low of 65 percent for the Army to a high of about 78 percent for the Marine
                   Corps. While some costs are higher than expected, other costs are lower,
                   and on balance considerable operation and maintenance funds remain
                   unobligated relatively late in the fiscal year for each of the services except
                   the Marine Corps. Costs are higher, for example, because force levels in
                   Iraq have not decreased as quickly as expected; one of the reasons for
                   lower costs, on the other hand, is that not all forces deployed as planned.
                   The percentage of the GWOT military personnel funds that had been
                   obligated by the three-fourths of the fiscal-year mark by the services
                   ranged from 72 percent for the Air Force to 75 percent for the Army and
                   the Marine Corps.

                   The military services believe that they will be able to obligate their entire
                   fiscal year 2003 GWOT-appropriated funds, including an additional
                   $2.4 billion in transfers to their operation and maintenance accounts
                   received in August 2003 from the Iraqi Freedom Fund. Based on our
                   analysis of the services’ obligation data, we identified considerable
                   unobligated balances in the services’ fiscal year 2003 operation and
                   maintenance appropriations that can be used for GWOT. Therefore, we
                   believe the services may have sufficient funds in these accounts for fiscal
                   year 2003, that not all of the transferred funds may be obligated, and that


                   Page 2                                          GAO-03-1088 Military Operations
             the services should not require any further transfers from the Iraqi
             Freedom Fund this fiscal year.

             In March 2003, DOD terminated Operations Northern Watch, Southern
             Watch, and Desert Spring. Therefore, the funds requested for these
             operations in the President’s fiscal year 2004 budget request for DOD may
             no longer be necessary as requested.

             We are making recommendations to ensure that (1) funds provided to the
             services for GWOT are fully utilized and (2) any funds transferred from the
             Iraqi Freedom Fund that are not obligated by the end of fiscal year 2003
             are identified and returned to the Fund. We also identified a matter for
             congressional consideration regarding the President’s fiscal year 2004
             budget request for certain Southwest Asia operations that DOD canceled
             in March 2003 following the President’s budget submission.

             In official oral comments on a draft of this report, DOD agreed with one of
             our recommendations and had concerns with two others. We revised our
             recommendations to reflect DOD’s concerns, and DOD now concurs with
             the revised recommendations.


             From the end of the Persian Gulf War in February 1991 through June 2003,
Background   the DOD reported that it had obligated over $86.203 billion for incremental
             costs4 it had incurred for its overseas contingency operations. These
             operations included the enforcement of no-fly zones, humanitarian
             assistance, and peace enforcement operations, as well as operations to
             combat terrorism. In fiscal year 2003, these costs were incurred preparing
             for and undertaking GWOT, including the 2003 war against Iraq. In
             addition, U.S. military forces are continuing to participate in contingency
             operations in the Balkans. Figure 1 shows the location of DOD’s
             contingency operations for fiscal year 2003.




             4
              The term “incremental costs” means those directly attributable costs that would not have
             been incurred if it were not for the operation. Sections 230406 and 230902 of Department
             of Defense Financial Management Regulation 7000.14R, Volume 12, Chapter 23,
             Contingency Operations (Feb. 2001) provide additional information on incremental costs.
             We further note that DOD’s financial systems only capture total obligations and the
             services use various management information systems to identify incremental obligations
             and to estimate costs. Although we use the term costs throughout this report as a
             convenience, we are actually referring to DOD’s obligation of funds.




             Page 3                                                 GAO-03-1088 Military Operations
Figure 1: Location of DOD’s Fiscal Year 2003 Contingency Operations




                                        Most of the costs associated with GWOT fall into two accounts—operation
                                        and maintenance and military personnel. Operation and maintenance
                                        account funds obligated in support of 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. Military personnel funds obligated in support of
                                        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.




                                        Page 4                                      GAO-03-1088 Military Operations
                           The services were appropriated about $34 billion to their operation and
Unobligated Balances       maintenance accounts and about $15 billion to their military personnel
Late in the Fiscal Year    accounts for fiscal year 20035 to support the war in Iraq and Operations
                           Enduring Freedom and Noble Eagle. It appears that while the funds
Raise Doubts about         obligated for these operations—about $39 billion as of the end of
Services’ Ability to       June 2003—are substantial,6 the proportion of appropriated funds that
                           have been obligated as of that date is lower than the proportion of the
Fully Obligate Their       fiscal year elapsed as of that same date except for the Marine Corps. In
Fiscal Year 2003           this regard, through June 2003, which represents three-fourths of the fiscal
GWOT Funds and             year, three of the four services had not obligated more than 68 percent of
                           the operation and maintenance funds appropriated for GWOT, while the
Justification for          Marine Corps had obligated 78 percent.
Iraqi Freedom
Fund Transfers

Fiscal Year 2003 Funding   To support GWOT in fiscal year 2003, Congress appropriated $68.7 billion
for the Global War on      to DOD in the Consolidated Appropriations Resolution, 2003, and
Terrorism                  Emergency Wartime Supplemental Appropriations Act, 2003. According to
                           the conference report that accompanied the legislation, Congress included
                           $6.1 billion for Operations Noble Eagle and Enduring Freedom in the
                           Consolidated Appropriations Resolution of February 2003.7 In March 2003,
                           the President requested that Congress appropriate $74.8 billion for GWOT,
                           including the conduct of military operations in Iraq and reconstruction and
                           relief there. Of this amount, $62.6 billion was identified in the President’s
                           budget for DOD’s GWOT military operations. In developing the President’s
                           request, DOD assumed, among other things, that the war with Iraq would
                           be a short conflict, would involve a two-front war using Turkey as a
                           staging area, and there would be a rapid redeployment and demobilization
                           of Reserve and National Guard troops following the cessation of combat
                           operations. In April 2003, Congress appropriated $79.2 billion, including
                           $62.6 billion for DOD to cover all GWOT, including the war with Iraq, in



                           5
                            This amount excludes almost $16 billion provided in the Iraqi Freedom Fund, which is
                           available until the end of fiscal year 2004.
                           6
                             Of this amount, we estimate that almost $28 billion was for the war with Iraq based on the
                           Office of the Secretary of Defense (Comptroller)’s estimate through May 2003 and our
                           analysis of the June 2003 obligations data.
                           7
                            Conference Report (H.R. Conf. Rep. No. 108-10), Feb. 13, 2003, accompanying H.J. Res. 2,
                           Consolidated Appropriations Resolution, 2003 (P.L. 108-7) Feb. 20, 2003.




                           Page 5                                                   GAO-03-1088 Military Operations
                                                                the Emergency Wartime Supplemental Appropriations Act of April 2003.8
                                                                Although the services received their Consolidated Appropriations
                                                                Resolution, 2003, funds for fiscal year 2003 in February 2003, they did not
                                                                receive their first allocation of funds from the Emergency Supplemental
                                                                until May 2003 and their second allocation until July 2003. Before
                                                                receiving these monies, the services used funds from the Consolidated
                                                                Appropriations and their base programs, obligating $25.9 billion for
                                                                GWOT. DOD’s statement of its requirements for the supplemental
                                                                appropriation included reimbursing the services’ accounts for costs
                                                                incurred and financing the costs associated with military operations
                                                                against Iraq.

                                                                Neither the President’s request for funds nor the appropriations act
                                                                allocated the funds to specific operations. Of the funds appropriated
                                                                to DOD by the Emergency Wartime Supplemental, $46.699 billion was
                                                                appropriated directly to the services’ and other defense agencies’
                                                                appropriations accounts and $15.679 billion to a transfer fund called the
                                                                Iraqi Freedom Fund. Tables 1 and 2 show the operation and maintenance
                                                                and the military personnel appropriations provided to the services
                                                                for GWOT.

Table 1: Operation and Maintenance Funds Provided to the Services for the Global War on Terrorism

 Dollars in millions
 Operation and maintenance                                                            Army             Navy          Air Force Marine Corps            All services
 Consolidated Appropriations Resolution                                             $1.340           $0.436             $1.767             $0.202             $3.745
 Emergency Wartime Supplemental Appropriations                                     $16.078           $5.107             $7.120             $1.670           $29.975
 Total                                                                            $17. 418           $5.543             $8.887             $1.872           $33.720
Source: Department of Defense Fiscal Year 2003 Appropriations Report.

                                                                Note: The dollar figures cited above include appropriations received by both the active and the
                                                                reserve components for each service.




                                                                8
                                                                    P.L. 108-11 (Apr. 16, 2003).




                                                                Page 6                                                         GAO-03-1088 Military Operations
Table 2: Military Personnel Funds Provided to the Services for the Global War on Terrorism

 Dollars in millions
 Military personnel                                                                 Army               Navy          Air Force Marine Corps            All services
 Consolidated Appropriations Resolution                                            $0.771            $0.214             $0.563             $0.069             $1.617
 Emergency Wartime Supplemental Appropriations                                     $7.803            $1.600             $2.800             $1.200           $13.403
 Total                                                                             $8.574            $1.814            $ 3.363             $1.269           $15.020
Source: Department of Defense Fiscal Year 2003 Appropriations Report.

                                                                Note: The dollar figures cited above include appropriations received by both the active and the
                                                                reserve components for each service.


                                                                To assess the extent to which funds appropriated for GWOT have been
                                                                obligated, we compared the latest available obligation reports for
                                                                GWOT with the funds appropriated to each of the services’ operation and
                                                                maintenance and military personnel accounts. We then compared the
                                                                proportion of the funds obligated to the proportion of the fiscal year that
                                                                had elapsed to ascertain if funds were obligated at a level commensurate
                                                                with that point in the fiscal year. We recognize that funds are not obligated
                                                                equally each month throughout the fiscal year but 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. The
                                                                results of this analysis are discussed in the following sections of this
                                                                report. We discussed our analysis with DOD representatives at the Office
                                                                of the Secretary of Defense (Comptroller) and each of the services’ budget
                                                                offices, who disagreed with our methodology. These representatives
                                                                believed that the analysis should take into account the fact that the
                                                                supplemental appropriation was not available until mid-April 2003 and that
                                                                funds were not provided to the services until the beginning of May 2003.

                                                                We recognize that the supplemental funding was not provided to the
                                                                services until May 2003. At the same time, DOD had to conduct Operations
                                                                Noble Eagle and Enduring Freedom from the first day of fiscal year 2003
                                                                and subsequently prepare for war in Iraq, deploy over 100,000 military
                                                                personnel to the Persian Gulf, and conduct major combat operations, all
                                                                before receiving supplemental funding. As discussed earlier, to fund these
                                                                operations in advance of receiving supplemental funding, the services
                                                                used funds from the Consolidated Appropriations and their base
                                                                programs. In doing so, DOD reported that it had obligated $25.9 billion for
                                                                GWOT in fiscal year 2003 through April 2003. Therefore, we believe that
                                                                assessing how much of the services’ direct GWOT appropriations have
                                                                been obligated relatively late in the fiscal year provides a reasonable
                                                                measure of how quickly the services are obligating their GWOT



                                                                Page 7                                                         GAO-03-1088 Military Operations
                            appropriations and the likelihood that they will obligate all the funds
                            appropriated to them. Our analysis suggests that the services have no need
                            for further transfers from the Iraqi Freedom Fund in fiscal year 2003, that
                            all the funds transferred to their operation and maintenance accounts may
                            not be obligated, and that any transferred funds unobligated at the end of
                            the fiscal year should be transferred back to the Iraqi Freedom Fund.


Proportion of Operation     Our analysis of the percentage of fiscal year 2003 GWOT operation
and Maintenance Funds       and maintenance funds obligated by the services compared with the
Obligated Is Lower Than     proportion of the fiscal year elapsed (i.e., October 1, 2002, through
                            June 2003, the latest month for which obligation data are available for all
Proportion of Fiscal Year   the services) shows that the proportion of available appropriations that
Elapsed Except for the      have been obligated as of a particular date is lower than the proportion of
Marines Corps               the fiscal year elapsed as of that same date for three of the four military
                            services, notwithstanding that funds obligated to date include those
                            required to cover the preparation of military forces for the war with Iraq
                            and the expense of transporting them and their equipment from the United
                            States and elsewhere to the Persian Gulf. Therefore, we believe the actual
                            operation and maintenance obligations made in fiscal year 2003 could be
                            less than the funds available for obligation in fiscal year 2003. By the end
                            of June 2003, only one of the services, the Marine Corps, had obligated
                            more than 75 percent of the funds appropriated for operation and
                            maintenance, while the other three services had obligated between 65 and
                            68 percent, although three-fourths of the fiscal year had already elapsed,
                            raising doubts about whether all the services will be able to obligate their
                            entire fiscal year 2003 GWOT operation and maintenance funds in the
                            remaining 3 months of fiscal year 2003. For example, the Army, by the end
                            of June 2003, had obligated 65 percent of its directly appropriated funds
                            for GWOT. Figure 2 displays the obligations through June 2003 for each of
                            the military services.

                            As can be seen in figure 2, the percentage of directly appropriated
                            operation and maintenance funds that were obligated as of June 30, 2003,
                            ranged from a low of 65 percent for the Army to a high of 78 percent for
                            the Marine Corps.




                            Page 8                                         GAO-03-1088 Military Operations
Figure 2: Obligations of GWOT Operation and Maintenance Funds through
June 2003




Note: Total obligations include obligations from both the active and the reserve components.


Based on our analysis, we believe that in fiscal year 2003 the services, with
the possible exception of the Marine Corps, may not obligate all operation
and maintenance funds appropriated to them for GWOT. The services,
however, believe that they will obligate all or almost all of these funds.
This may in fact be the case, but except for the Marine Corps, if the
services do obligate all these funds it will require a faster rate of obligation
of funds—greater than the rate at which they have been obligating funds in
recent months. We recognize that estimating the costs of ongoing military
operations is difficult because operational requirements can differ
substantially from what was assumed in developing budget estimates.
This has been the case in Iraq, where actual operations have differed from
some of the assumptions. For example, a second front using Turkey as a
staging area never materialized, there has not been a rapid redeployment
and demobilization of Reserve and National Guard troops, one major Army



Page 9                                                         GAO-03-1088 Military Operations
    division expected to deploy did not, and transportation costs were lower
    than predicted. Some of these differences, such as the lack of a rapid
    redeployment and demobilization, are resulting in higher than expected
    costs, while other differences, for example, the decision to not deploy one
    of the Army’s divisions, are resulting in lower than expected costs.
    However, in light of the rate of obligations made through June and the
    information presented below, we continue to believe that actual
    obligations of GWOT operation and maintenance funds for fiscal year 2003
    may be less than the total GWOT operation and maintenance
    appropriations available for obligation in fiscal year 2003.

•   According to the Army’s obligation plan, the Army expects to obligate
    $6 billion during the last 3 months of fiscal year 2003. Through June 2003,
    the Army had obligated $11.315 billion. Combining the funds obligated
    through June and the Army’s estimate for the balance of fiscal year 2003
    indicates that the Army will obligate a total of $17.315 billion—$98 million
    less than the $17.413 billion it received in direct operation and
    maintenance appropriations for GWOT. It should be noted, however, that
    the Army’s actual June obligations of $2.38 billion are higher than the
    $2.2 billion it planned to obligate in June. Whether the Army will obligate
    all its fiscal year 2003 GWOT operation and maintenance funds depends on
    whether its obligations for the last 3 months of the fiscal year continue at
    or near the June 2003 rate or fall to the levels expected in its obligation
    plan. In discussing the results of our analysis with the Army, Army officials
    told us that preliminary reports indicate that their July obligations will be
    about $3 billion. However, their preliminary June obligation estimate was
    higher than their actual June obligations, which underscores the difficulty
    in projecting costs and the need to closely monitor the obligation of
    GWOT funds.
•   The Marine Corps expects to obligate approximately $591 million for force
    reconstitution (the repair of damaged equipment and the replacement of
    munitions, spare parts or equipment lost in war) during the last 3 months
    of the fiscal year. However, in discussing our analysis with the Marine
    Corps, Marine Corps officials involved with budgeting for ongoing military
    operations told us that constraints in depot and contractor capacity could
    lead the Marine Corps to obligate fewer funds in fiscal year 2003 than
    planned for depot maintenance, which accounts for $50 million to
    $70 million of its $591 million reconstitution estimate.
•   Through June 2003, which is the first 9 months of fiscal year 2003, the
    Air Force had obligated $6.0 billion, or 68 percent, of its direct GWOT
    operation and maintenance appropriation. Most of the Air Force’s aircraft
    have redeployed from Operation Iraqi Freedom, and the Air Force’s role in
    that operation has been reduced. According to Air Force officials, in
    March 2003, the Air Force had 1,000 aircraft deployed in support of the



    Page 10                                        GAO-03-1088 Military Operations
                               war in Iraq and by late June the number had been reduced to 276. The
                               Air Force’s June 2003 obligation of its GWOT operation and maintenance
                               appropriation was $76 million less than its May 2003 obligation of
                               that appropriation.
                           •   The Navy had obligated $3.7 billion, or 67 percent, of its direct GWOT
                               appropriation through June 2003. According to Navy officials, all Navy
                               ships that deployed to support Operation Iraqi Freedom have been
                               redeployed, and Navy activity is back to pre-Operation Iraqi Freedom
                               levels. Furthermore, Navy officials with the Pacific Fleet (the Navy’s major
                               force provider for Operation Iraqi Freedom) told us that their GWOT
                               obligations were lower than they had estimated, due in part to lower fuel
                               and airlift costs. In discussing our analysis with Navy headquarters
                               officials, they said that while a shorter duration of combat operations
                               resulted in certain costs not accruing or accruing at the estimated levels,
                               other operational factors and costs occurred that were substituted and
                               more than offset estimated fuel and airlift savings. Based on obligations
                               through June 2003, we believe the Navy may not be able to obligate its
                               entire fiscal year 2003 GWOT operation and maintenance appropriation by
                               the end of fiscal year 2003.


Military Personnel Funds       The services have been obligating their funds for military personnel at a
Are Being Obligated at         faster rate than that for their operation and maintenance funds. As figure 3
a Faster Rate Than             shows, with three-fourths of the fiscal year gone, the Army and the
                               Marine Corps had each obligated about three-fourths of their GWOT
Operation and                  appropriations for military personnel costs while the Navy and Air Force
Maintenance Funds              had each obligated slightly less than three-fourths of their respective
                               GWOT appropriation.




                               Page 11                                        GAO-03-1088 Military Operations
Figure 3: Obligations of GWOT Military Personnel Funds through June 2003




Note: Total obligations include obligations from both the active and the reserve components.


According to DOD’s July 2, 2003, report on fiscal year 2003 appropriations,
the services will obligate their entire fiscal year 2003 GWOT military
personnel appropriations. Service officials told us that they believe they
will use their entire GWOT military personnel appropriation because the
planned demobilization of reserve component personnel has not occurred.
In addition, the Army has not been able to redeploy its troops from Iraq as
originally planned, which increased the Army’s costs for the special pays
and allowances, such as imminent danger pay and family separation
allowance, which some deployed military personnel are entitled to receive.




Page 12                                                        GAO-03-1088 Military Operations
DOD is Transferring           In addition to the direct appropriations included in the Emergency
Additional Funds to the       Wartime Supplemental Appropriations Act, Congress also established the
Military Services             Iraqi Freedom Fund, which provides the services with additional funds to
                              cover their GWOT costs. Congress appropriated almost $15.7 billion9 to
                              this Fund and made it available to DOD through September 30, 2004. DOD
                              must notify Congress at least 5 days in advance of such transfers, but
                              congressional approval to make the transfers is not required. Once DOD
                              transfers funds to the services’ operation and maintenance or military
                              personnel accounts during fiscal year 2003, the funds must be obligated by
                              September 30, 2003, or they should be transferred back to the Iraqi
                              Freedom Fund.10

                              On August 11, 2003, DOD notified the Congressional Defense Committees
                              of its intention to make an initial transfer of $4.8 billion from the Iraqi
                              Freedom Fund to various service and DOD agency accounts. Of the
                              $4.8 billion, about half ($2.4 billion) would be transferred to the services’
                              operation and maintenance accounts; the balance would be transferred
                              to defensewide operation and maintenance and to a variety of
                              procurement and research, development, test, and evaluation accounts.
                              The August 11, 2003, notification did not include any transfers to the
                              services’ military personnel accounts. Of the amount to be transferred to
                              the services’ operation and maintenance accounts,

                          •   $1,097.3 million would be transferred to the Army,
                          •   $683.7 million would be transferred to the Navy,
                          •   $285.9 million would be transferred to the Marine Corps, and
                          •   $377.5 million would be transferred to the Air Force.

                              These transfers will increase the amount of funds in the services’ fiscal
                              year 2003 operation and maintenance accounts available for GWOT.




                              9
                                Of the $15.7 billion, as much as $5.2 billion was earmarked for particular programs or
                              activities such as the Coast Guard, fighting oil well fires, and repairing Iraq’s oil fields, as
                              well as payments to reimburse cooperating nations. The remaining $10.4 billion is available
                              to meet the requirements of the services and defensewide programs.
                              10
                                 Although Iraqi Freedom Fund budget authority remains available for transfer until
                              September 30, 2004, funds transferred under this Fund shall be merged with and shall be
                              available for the same purposes and for the same time period, as the appropriation to
                              which transferred, but can be transferred back to the Fund if unobligated by the end of the
                              fiscal year.




                              Page 13                                                    GAO-03-1088 Military Operations
                      Since the 1991 war with Iraq, the United States has been conducting
The Termination of    operations in Southwest Asia to monitor Iraq’s compliance with various
Operations Northern   United Nations resolutions. Operations Northern and Southern Watch
                      enforced the no-fly zones over Iraq. Operation Desert Spring, an Army
Watch, Southern       operation, rotated forces in and out of Kuwait to train with the Kuwaiti
Watch, and Desert     military. From the inception of operations through June 2003,11 costs for
                      these operations have totaled $11.4 billion. Since fiscal year 2002, funds
Spring Obviates the   for these operations have been included in the services’ base programs.
Need for Requested
Fiscal Year 2004      In March 2003, DOD terminated Operations Northern and Southern Watch
                      and Operation Desert Spring. The President’s fiscal year 2004 budget
Funds for             request, which was submitted in February 2003, before the termination of
These Operations      these operations, included approximately $1.4 billion for these operations.
                      We briefed the Senate and House Committees on Appropriations on the
                      termination of these operations in early June 2003 and suggested that
                      since the operations have ended there was no need to provide funds for
                      them in fiscal year 2004, although there could be further costs associated
                      with shutting them down in fiscal year 2003 between the time they were
                      terminated in March 2003 and September 2003.

                      The Army agreed that it would not require any funding in fiscal year 2004
                      for Operation Desert Spring, and the Air Force agreed that it would not
                      require funding for Northern Watch, but it disagreed with congressional
                      action to eliminate funding for Operation Southern Watch. The Air Force
                      asked that the funds for Operation Southern Watch be restored because
                      it believed it needed these funds to maintain the bases that were
                      previously used for Operation Southern Watch and that now support the
                      ongoing operations.


                      Our analysis of the obligation of funds to support GWOT in fiscal year 2003
Conclusions           suggests that the funds appropriated to the services for that purpose,
                      particularly for operation and maintenance, could be sufficient to cover
                      their fiscal year 2003 costs. On August 11, 2003, DOD notified Congress of
                      its intent to initially transfer $2.4 billion from the Iraqi Freedom Fund to
                      the services’ operation and maintenance accounts. Collectively, with the
                      funds DOD has transferred from the Iraqi Freedom Fund to the military



                      11
                        While the programs were terminated in March 2003, after the President’s fiscal year 2004
                      budget request submission, some costs continue to be obligated as the services complete
                      the process of shutting down the operations.




                      Page 14                                                 GAO-03-1088 Military Operations
                      services and the large amount of unobligated funds remaining in the
                      services’ fiscal year 2003 GWOT operation and maintenance
                      appropriations except for the Marine Corps as of the end of June 2003,
                      obligating these funds between July and September 30, 2003, could
                      be challenging.

                      In March 2003, DOD terminated Operations Northern Watch, Southern
                      Watch, and Desert Spring. Therefore, the funds requested for these
                      Operations in the President’s fiscal year 2004 budget request for DOD may
                      no longer be necessary as requested.


                      To ensure that funds already appropriated, including funds transferred
Recommendations for   from the Iraqi Freedom Fund, to the military services for GWOT are fully
Executive Action      utilized and that additional funds are not transferred to the military
                      services’ operation and maintenance and military personnel accounts from
                      the Iraqi Freedom Fund until they are needed, we recommend that the
                      Secretary of Defense (1) monitor the obligation of funds in the services’
                      operation and maintenance accounts, including the GWOT funds,
                      (2) ensure that all funds transferred to the services’ operation and
                      maintenance accounts that are not likely to be obligated by the end of
                      fiscal year 2003 are transferred back to the Fund as allowed by the
                      Wartime Supplemental Appropriation, and (3) closely review the
                      executability of further funding transfers from the Iraqi Freedom Fund to
                      ensure the funds will be obligated as planned.

                      Because Operations Northern Watch, Southern Watch, and Desert Spring
Matter for            were canceled in March 2003, after the President’s fiscal year 2004 budget
Congressional         submission, Congress may wish to delete the funds requested for this
                      purpose from the fiscal year 2004 DOD appropriations.
Consideration

                      In official oral comments on a draft of this report, DOD agreed with our
Agency Comments       recommendation to ensure that all funds transferred to the services’
and Our Evaluation    operation and maintenance accounts that are not likely to be obligated by
                      the end of fiscal year 2003 are transferred back to the Iraqi Freedom Fund.
                      DOD had concerns with our other two recommendations dealing with (1)
                      monitoring the obligation of GWOT funds and (2) prohibiting the transfer
                      of funds from the Iraqi Freedom Fund until the services provide obligation
                      reports showing that a large percentage of their current GWOT
                      appropriations, such as 90 percent, have been obligated and suggested
                      some revisions. Based on DOD’s comments we have revised our


                      Page 15                                       GAO-03-1088 Military Operations
recommendations as discussed below. DOD agrees with our revised
recommendations.

With respect to our recommendation that the Secretary of Defense
monitor the obligation of GWOT funds in the services’ operation and
maintenance accounts, including those transferred from the Iraqi Freedom
Fund, DOD noted that when the supplemental funds are released to the
components those funds become part of the appropriation and are not
separately identified as GWOT funds. DOD further noted that it could not
separately monitor GWOT funds because they are not identified separately
in the accounting systems. As a result, we revised our recommendation to
state that the Secretary of Defense monitor the obligation of funds in the
services’ operation and maintenance accounts, including the GWOT funds.

DOD did not agree with our recommendation that the Secretary of
Defense prohibit further transfers until the services provide obligation
reports showing that a large percentage of their current GWOT
appropriations, such as 90 percent, have been obligated. DOD noted that
our recommendation ignores the funding pipeline issues; specifically that
it takes time for the funds to be released, received by the services, and
obligated. DOD said that to arbitrarily suggest that 90 percent of an
account must be obligated before additional funds could be transferred
into the account would create an unnecessary burden on the services, lead
to "stop-go" funding decisions, and have a negative impact on normal
operating procedures. We did not cite a specific figure in our draft
recommendation; rather we suggested that a large percentage of the
services’ current GWOT appropriations, such as 90 percent, be obligated
before making further transfers. However, in light of DOD's concerns we
revised our recommendation to state that the Secretary of Defense closely
review the executability of further funding transfers from the Iraqi
Freedom Fund to ensure the funds will be obligated as planned.


We are sending copies of this report to 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
http://www.gao.gov.




Page 16                                       GAO-03-1088 Military Operations
If you have any questions regarding this report, please call me on
(757) 552-8100. Principal contributors to this report were Steve Sternlieb,
Carole Coffey, George Duncan, Matt Ullengren, and James Reynolds.




Neal P. Curtin
Director, Defense Capabilities
 and Management




Page 17                                        GAO-03-1088 Military Operations
List of Congressional Committees

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

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

The Honorable Jerry Lewis
Chairman
The Honorable John Murtha
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
House of Representatives

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




Page 18                            GAO-03-1088 Military Operations
                Appendix I: Scope and Methodology
Appendix I: Scope and Methodology


                To examine the adequacy of funding for the Global War on Terrorism
                (GWOT), we reviewed (1) the President’s fiscal year 2003 budget request
                for supplemental appropriations, (2) applicable laws and accompanying
                reports appropriating funds for GWOT, and (3) DOD reports on the
                obligation of funds. We also obtained budget estimates from the services
                and their key elements involved in GWOT operations. We also met with
                service officials to discuss world events that may have had an impact on
                their budget estimates and their obligation patterns. We compared the
                latest available obligation reports against total available appropriated
                funds. We then compared the proportion of appropriated funds obligated
                with the proportion of the fiscal year that had elapsed to ascertain how
                rapidly funds were being obligated. We recognized that funds are not
                obligated equally each month throughout the fiscal year but 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. We focused our work on the obligation of funds appropriated
                for operation and maintenance and military personnel because they
                represented the large majority of funds obligated in fiscal year 2003
                through June 2003. During that period $866 million of the $38.9 billion in
                reported obligations was obligated for what the Department of Defense
                categorized as investment.

                To determine if there is a continued need for fiscal year 2004 funds for
                Operations Southern Watch, Northern Watch, and Desert Spring, we met
                with service officials and reviewed documents to determine the status of
                the three operations. We reviewed the President’s fiscal year 2004 budget
                request for the Department of Defense to determine the total requested for
                the three operations.

                We visited the following locations during our review:

            •   Office of the Secretary of Defense (Comptroller), Washington, D.C.
            •   Office of the Secretary of Defense (Reserve Affairs), Washington, D.C.
            •   Department of the Army, Headquarters, Washington, D.C.
            •   U.S. Army Reserve Command, Fort McPherson, Ga.
            •   U.S. Army Forces Command, Fort McPherson, Ga.
            •   U.S. Army National Guard, Arlington, Va.
            •   U.S. Army Europe, Heidelberg, Germany.
            •   U.S. Army Pacific Command, Fort Shafter, Hawaii
            •   Department of the Air Force, Headquarters, Washington, D.C.
            •   U.S. Air National Guard, Arlington, Va.
            •   U. S. Air Force Europe, Ramstein Air Base, Germany.
            •   Pacific Air Force, Hickham Air Base, Hawaii



                Page 19                                        GAO-03-1088 Military Operations
                      Appendix I: Scope and Methodology




                  •   Department of the Navy, Headquarters, Washington, D.C.
                  •   United States Marine Corps, Headquarters, Washington, D.C.
                  •   Naval Reserve Forces Command, New Orleans, La.
                  •   United States Marine Corps Reserve Forces, New Orleans, La.
                  •   Marine Forces, Pacific, Camp Smith, Hawaii
                  •   Pacific Fleet, Pearl Harbor, Hawaii

                      We also obtained information from the Army Material Command,
                      Alexandria, Virginia.

                      We performed our work from February through September 2003 in
                      accordance with generally accepted government auditing standards.




(350308/350359)
                      Page 20                                     GAO-03-1088 Military Operations
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