oversight

Military Operations: Some Funds for Fiscal Year 1999 Contingency Operations Will Be Available for Future Needs

Published by the Government Accountability Office on 1999-09-21.

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

                     United States General Accounting Office

GAO                  Briefing Report to the Chairman,
                     Subcommittee on Defense, Committee on
                     Appropriations, House of
                     Representatives

September 1999
                     MILITARY
                     OPERATIONS

                     Some Funds for Fiscal
                     Year 1999 Contingency
                     Operations Will Be
                     Available for Future
                     Needs




GAO/NSIAD-99-244BR
United States General Accounting Office                                                          National Security and
Washington, D.C. 20548                                                                    International Affairs Division



                                    B-283395                                                                                     Leter




                                    September 21, 1999

                                    The Honorable Jerry Lewis
                                    Chairman, Subcommittee on Defense
                                    Committee on Appropriations
                                    House of Representatives

                                    Dear Mr. Chairman:

                                    In fiscal year 1999, U.S. military forces are participating in a number of
                                    contingency operations, most notably in the Balkans and Southwest Asia.
                                    Through June 1999, the Department of Defense (DOD) has reported about
                                    $4 billion in incremental costs1 for contingency operations in fiscal year
                                    1999 and is estimating that there will be several billion dollars in additional
                                    costs through the end of the fiscal year. In response to your request, this
                                    report examines (1) the costs of and funding for fiscal year 1999
                                    contingency operations and (2) whether any funds remaining at the end of
                                    fiscal year 1999 can be applied to fiscal year 2000 funding requirements.



Background                          Since the end of the Persian Gulf War in 1991, the two largest contingency
                                    operations involving U.S. military forces are in the Balkans and Southwest
                                    Asia. These two operations account for 98 percent of DOD’s reported fiscal
                                    year 1999 incremental costs for contingency operations through June 1999,
                                    the latest available data. In the Balkans, the United States was first engaged
                                    in Bosnia and, beginning this year, in Kosovo. U.S. involvement in Bosnia
                                    began in July 1992 as part of humanitarian relief efforts and then, in April
                                    1993, the United States began to participate in the North Atlantic Treaty
                                    Organization (NATO) enforcement of a no-fly zone over Bosnia and
                                    Herzegovina in support of United Nations peacekeeping. From December
                                    1995 through the present date, the United States has deployed military
                                    personnel in and around Bosnia to assist in implementing the General


                                    1
                                     As used in this report, “incremental costs” means those costs that would not have been
                                    incurred if it were not for the operation. It should be recognized that DOD’s financial
                                    systems cannot reliably determine costs and only the total obligations are captured by the
                                    accounting systems. 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 1                                           GAO/NSIAD-99-244BR Military Operations
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Framework Agreement (also known as the Dayton Agreement). U.S. forces,
currently numbering about 6,200, are part of a multilateral coalition under
NATO command. On March 24, 1999, the United States provided military
forces in support of NATO combat operations against Yugoslavia following
the failure of peace talks and escalating violence against ethnic Albanians
in Kosovo. By late May 1999, more than 39,000 U.S. military personnel were
involved in the operation. Combat operations officially ended on June 20,
1999. With the Yugoslav acceptance of a peace plan and United Nations’
endorsement of the plan, the United States began providing troops to the
NATO-led Kosovo Force, whose mission is peace enforcement in Kosovo.
In fiscal year 1999, DOD has reported almost $3.1 billion in incremental
costs for Balkans operations through June 1999.

U.S. forces have been involved in no-fly zone enforcement over parts of
Iraq since the end of the Persian Gulf War. The size of the U.S. force
involved has on average comprised 15,000 to 20,000 personnel, many of
them Navy and Marine Corps personnel embarked on ships. Beginning in
December 1998 and continuing to this day, the United States has conducted
a low level of air strikes against Iraq, first in support of United Nations
weapons of mass destruction inspection efforts and then in response to
Iraqi attempts to target allied aircraft enforcing the no-fly zones. In fiscal
year 1999, DOD has reported $887 million in incremental costs through
June 1999.

DOD budgets for the cost of ongoing contingency operations and Congress
includes funds for ongoing operations in the annual defense appropriations
acts.2 In the case of new or expanded operations, such as the operations
involving Kosovo and the late 1998 military action involving Iraq, costs
have not been budgeted in advance and the services generally borrow
funds from other activities that they planned to conduct later in the fiscal
year. If these funds are not replenished through supplemental
appropriations or reprogramming of previously appropriated funds, then
the services have to cancel planned activities.

Congress appropriates funds both directly to the services’ appropriations
accounts and to the Overseas Contingency Operations Transfer Fund. DOD
can transfer funds in the Overseas Contingency Operations Transfer Fund
to the services’ appropriations accounts as operations unfold during the
year. Any funds remaining in the fund at the end of a fiscal year can be


2
    See for example, Pub. L. 105-262, Oct. 17, 1998, 112 Stat. 2279 at 2284.




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                   carried over to the next fiscal year. The bulk of fiscal year 1999 contingency
                   operation funding was placed in the Overseas Contingency Operations
                   Transfer Fund for subsequent transfer to the services. Congress also
                   established a considerably smaller Operational Rapid Response Transfer
                   Fund in fiscal year 1999 to fund the accelerated acquisition and deployment
                   of selected technologies and systems for the military action involving
                   Yugoslavia. Section I of this briefing report contains additional background
                   information.



Results in Brief   Based on our analysis of available funding and costs through June 1999, we
                   believe that there is sufficient funding for all fiscal year 1999 contingency
                   operations costs and project that between $138 million and $475 million of
                   the funds originally appropriated to fund fiscal year 1999 contingency
                   operations could be applied to fiscal year 2000 funding requirements. The
                   availability of funds originally intended to fund fiscal year 1999 contingency
                   operations is due primarily to the fact that combat operations in Kosovo
                   ended in June 1999 rather than continuing to the end of the fiscal year as
                   anticipated. DOD agrees that there are sufficient funds to meet fiscal year
                   1999 costs, but believes that only $138 million will be available to apply to
                   fiscal year 2000 funding requirements.

                   Table 1 summarizes our analysis of the changes in funding requirements as
                   a result of operational changes in Kosovo and Southwest Asia. In
                   examining these changes, it is important to recognize that cost estimates
                   are being revised and fiscal year 1999 cost reports are only available
                   through June 1999. While it is not possible to precisely detail the net change
                   in costs precipitated by the early end of military action and U.S.
                   participation in the Kosovo Force and the resulting implications for
                   funding, it is possible to provide a rough estimate of the possible net
                   change based on the currently available data.




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                               Table 1: GAO Estimate of Change in Funding Requirements for Fiscal Year 1999
                               Contingency Operations
                               (Dollars in millions)
                               Contingency                              Potential     Potential
                               operation        Cost category           decrease      increase      Net change
                               Kosovo           Air operations            $1,745
                                                Kosovo Force                             $1,157
                                                Redeployment and
                                                reconstitution                              351
                                                Humanitarian relief          162
                                                Munitions                     —              —
                                                Contingency reserve           —              —
                                                Rapid Response
                                                Transfer Fund                 —              —
                                                Subtotal                  $1,907         $1,508            $399
                               Southwest
                               Asia                                           76                             76
                               Total                                      $1,983         $1,508            $475




Funding Is Available to Meet   The early end of combat operations against Yugoslavia has had the greatest
All Fiscal Year 1999           impact on fiscal year 1999 contingency operations funding. The costs
                               associated with the air campaign as well as humanitarian assistance have
Requirements
                               declined substantially. This has, in turn, substantially reduced the funding
                               requirement for these activities and made funds available for other
                               operational costs. At the same time, the costs of participation in the Kosovo
                               Force and the redeployment and reconstitution of equipment used in the
                               combat operations against Yugoslavia were unbudgeted. However, on
                               balance, decreased funding requirements exceed increased requirements;
                               therefore, there is sufficient funding for all Kosovo operations’ fiscal year
                               1999 costs. DOD also estimates that sufficient funds initially budgeted to
                               finance combat operations will be left to fund participation in the Kosovo
                               Force and redeployment and reconstitution costs. Section II of this briefing
                               report contains the details of our analysis.

                               Estimated Southwest Asia fiscal year 1999 cost estimates and funding
                               status present a mixed picture. Military personnel costs have risen by about
                               $120 million, primarily due to an expected increase in Air Force costs. At
                               the same time, estimated operation and maintenance costs have declined



                               Page 4                                     GAO/NSIAD-99-244BR Military Operations
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                              $76 million. Office of the Secretary of Defense (Comptroller) officials
                              assume that the services can absorb the increased military personnel costs
                              within their existing military personnel funding because, as of August 30,
                              1999, the services had not requested any additional funds. Consequently,
                              the Comptroller’s office plans to use the $76 million excess in funds related
                              to reduced operation and maintenance costs to help fund other
                              contingency operations. Section III contains details on Southwest Asia
                              costs and funding.


Between $138 Million and      We estimate that there could be between $138 million and $475 million
$475 Million in Funds Could   remaining at the end of fiscal year 1999 that could be used to reduce fiscal
                              year 2000 funding requirements for contingency operations, which are
Be Available to Help Fund
                              expected to exceed $5 billion. The primary differences between DOD’s
Fiscal Year 2000 Costs        $138 million estimate and our $475 million estimate relate to (1) the
                              $162 million in unexpended funds for humanitarian needs and whether
                              DOD will be tasked to resource additional humanitarian needs and
                              (2) $175 million in estimated reconstitution costs that DOD expects will
                              occur in fiscal year 2000. In discussing the $175 million in estimated fiscal
                              year 2000 reconstitution costs with DOD officials, they agreed that the
                              $175 million will not have been distributed to the services by the end of
                              fiscal year 1999. These officials also noted that they do not intend to
                              include that amount in their fiscal year 2000 budget request for Kosovo
                              operations, which is still being developed because they view fiscal year
                              2000 reconstitution costs associated with the air campaign as covered in
                              their current air campaign cost estimates and planned funds use. Section IV
                              of this briefing report contains additional detail.



Agency Comments and           In written comments on a draft of this report DOD stated that our original
                              estimate of the amount of funds that can be applied to fiscal year 2000 costs
Our Evaluation                was too high. In our draft report, we had identified up to $1.9 billion as
                              available to be applied to fiscal year 2000 requirements. DOD estimates that
                              $138 million will be available to apply to fiscal year 2000 requirements.
                              DOD arrived at this estimate through a comparison of appropriated funds
                              and revised cost estimates for Kosovo-related and Southwest Asia
                              operations. DOD identified four reasons for the differences between our
                              estimate and theirs. Based on DOD’s comments and additional information
                              we obtained, we have reduced our estimate of the amount of funds that
                              could be available to apply to fiscal year 2000 requirements. However, we
                              still feel that up to $475 million in additional funds could be available to




                              Page 5                                   GAO/NSIAD-99-244BR Military Operations
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apply to fiscal year 2000 requirements. Appendix I contains the full text of
DOD’s comments.

DOD identified the following reasons for the differences in estimated costs.
One reason our estimate is higher than DOD’s is because we assumed
DOD’s cost report through the end of June represented the total cost of the
Kosovo air campaign. DOD disagrees with this assumption because it
states that there is a time lag between recording obligations and their
inclusion in the cost report. DOD states that the most accurate estimates of
the air campaign costs are the budget estimates for the balance of fiscal
year 1999 submitted by the services and defense agencies. We recognize
that some additional costs are likely to be reported beyond June.
Preliminary July 1999 air campaign cost data for the military services show
an additional $196 million in costs, which probably includes a mix of
further air campaign and redeployment costs. Consequently, we have
reduced our air campaign cost calculation. We had already excluded from
our calculation of potential carry-over funds DOD’s estimate of
$351 million in fiscal year 1999 redeployment and reconstitution costs.
However, we have included in our calculation of the amount of funds that
would be available to apply to fiscal year 2000 requirements $175 million in
estimated reconstitution costs that DOD expects will occur in fiscal year
2000. In discussing this matter with DOD officials, they agreed that this
$175 million will not have been distributed to the services by the end of
fiscal year 1999.

A second reason our estimate is higher is that while our report includes
$162 million in uncommitted funds set aside for refugee relief as available
for fiscal year 2000 requirements, DOD believes that it is premature to
declare such uncommitted funds as excess and available for fiscal year
2000 requirements. We exclude from our calculation the funds DOD has
identified as needed for planned activities and question whether additional
DOD funds need to be used for further relief activities given the efforts of
other organizations. For example, on August 31, 1999, the United Nations
reported that measures to repair structures in Kosovo and to place people
in temporary housing should ensure winter shelter for all of the nearly
700,000 people whose homes have been damaged or destroyed.

In a draft of this report, we stated that $1.1 billion for readiness and
munitions would be available and could be applied to fiscal year 2000
requirements. DOD, in commenting on the draft report, stated that (1) it
has validated requirements in excess of the $1.1 billion for readiness and
munitions, (2) expects the President will soon transmit an official budget



Page 6                                   GAO/NSIAD-99-244BR Military Operations
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              request that designates a significant portion of these funds as emergency,
              and (3) consequently, these funds should not be considered as available for
              fiscal year 2000 requirements. We agree that DOD can use these funds for
              specific items that the President identifies as meeting a critical readiness or
              sustainability need, to include replacement of expended munitions, and
              designates as an emergency requirement. Given that the President is
              expected to soon transmit a budget request, we have excluded the
              $1.1 billion from our calculations and have revised our report accordingly.
              If the President’s submission involves less than the full $1.1 billion, the
              difference may become available to help fund other requirements.

              Finally, DOD states that the $300 million appropriated to the Operational
              Rapid Response Transfer Fund has been apportioned and allocated to the
              military departments for execution and that these funds will be obligated
              shortly. In our draft report we had considered the $300 million in the
              transfer fund to be available. We have adjusted our calculations to reflect
              the fact that these funds have been distributed and are no longer available
              to apply toward fiscal year 2000 requirements.



Scope and     To assess the costs of fiscal year 1999 contingency operations and the
              adequacy of funding to finance them, we undertook a number of activities.
Methodology   To understand how DOD derived its cost estimates, we determined DOD’s
              assumptions in developing estimates for the Balkans and Southwest Asia
              operations through discussions with the Office of the Secretary of Defense
              (Comptroller) and the military services and a review of various budget
              documents. To obtain information on reported costs, we reviewed DOD’s
              contingency operations cost reports and fund distributions to the military
              services and other DOD agencies. We also held discussions and reviewed
              data at the Office of the Secretary of Defense (Comptroller), all service
              headquarters, and major commands within each service that were heavily
              involved in contingency operations in the Balkans and/or Southwest Asia,
              including the U.S. Army Forces Command, U.S. Army Europe, the Air
              Force’s Air Combat Command, the Air Mobility Command, and the Navy
              Commanders in Chief, U.S. Atlantic and Pacific Fleet. We did not perform a
              data reliability assessment of reported costs. We have previously reported
              that when considering the cost of operations, it should be recognized that
              DOD’s financial systems cannot reliably determine costs.3 Only the total

              3
               Contingency Operations: DOD’s Reported Costs Contain Significant Inaccuracies
              (GAO/NSIAD-96-115, May 17, 1996).




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obligations are captured by the accounting systems. The services use
various management information systems to identify incremental
obligations and to estimate costs.

To determine how operational changes have affected costs and the
implications for fiscal year 1999 and fiscal year 2000 funding requirements,
we undertook several steps. These included (1) identifying the assumptions
made in developing DOD’s budget requests, (2) ascertaining the pace of
actual operations and comparing them with the assumptions made to
develop budget requests, (3) reviewing the latest available cost reports, and
(4) comparing them to available funding. To undertake these steps, we met
with officials in the military services, including selected major commands
and unified commands such as the U.S. European Command, U.S. Central
Command, U.S. Pacific Command, and U.S. Transportation Command;
reviewed service documents, including detailed budget estimates and cost
reports; reviewed the legislation containing contingency operations
funding; and discussed these matters with officials from the Office of the
Secretary of Defense (Comptroller) and the Joint Staff.

We performed our work between January and July 1999 in accordance with
generally accepted government auditing standards.


We are sending copies of this report to the Honorable William Cohen,
Secretary of Defense; the Honorable William J. Lynn, Under Secretary of
Defense (Comptroller); and the Honorable Jacob Lew, Director, Office of
Management and Budget. We are also sending copies to Congressman John
Murtha, Ranking Minority Member, Subcommittee on Defense, House
Committee on Appropriations; Senator Ted Stevens, Chairman,
Subcommittee on Defense and Senator Daniel Inouye, Ranking Minority
Member, Senate Committee on Appropriations; Senator John Warner,
Chairman, and Senator Carl Levin, Ranking Minority Member, Senate
Committee on Armed Services; and Congressman Floyd Spence, Chairman,
and Congressman Ike Skelton, Ranking Minority Member, House
Committee on Armed Services. Copies will also be made available to




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other interested parties on request. Principal contributors to this report are
listed in appendix II. If you or your staff have any further questions
concerning this report, please contact me at (202) 512-3504.

Sincerely yours,




Norman J. Rabkin
Director, National Security Preparedness Issues




Page 9                                    GAO/NSIAD-99-244BR Military Operations
Contents



Letter                                                                                           1


Briefing Section I                                                                              12
Background

Briefing Section II                                                                             24
Fiscal Year 1999 Cost
and Funding for
Balkans Operations

Briefing Section III                                                                            46
Fiscal Year 1999 Cost
and Funding for
Southwest Asia
Operations

Briefing Section IV                                                                             48
Funding Status for
Fiscal Years 1999 and
2000

Appendixes              Appendix I:    Comments From the Department of Defense                  52
                        Appendix II:   GAO Contacts and Staff Acknowledgments                   54




                        Page 10                              GAO/NSIAD-99-244BR Military Operations
Contents




Abbreviations

DOD        Department of Defense
KFOR       Kosovo Force
NATO       North Atlantic Treaty Organization
OCOTF      Overseas Contingency Operations Transfer Fund
OSD        Office of the Secretary of Defense
SWA        Southwest Asia




Page 11                               GAO/NSIAD-99-244BR Military Operations
Briefing Section I

Background                                                                                                           Ben
                                                                                                                       rifg
                                                                                                                          Seo
                                                                                                                            ctinI




                        DOD’s Fiscal Year 1999 Major
                        Contingency Operations




                                    Bosnia




                                   Kosovo




      Hurricane Mitch
                                                               Southwest Asia




                                The Department of Defense (DOD) describes contingency operations as
                                military operations that go beyond the routine deployment or stationing of
                                U.S. forces abroad but fall short of large-scale theater warfare. In a March
                                1999 report to Congress, DOD reported that since the end of the Persian
                                Gulf War in February 1991, U.S. military forces have conducted or
                                participated in approximately 50 overseas smaller-scale contingency
                                operations involving the deployment of 500 or more military personnel at
                                any one time. These operations included noncombatant evacuation



                                Page 12                                         GAO/NSIAD-99-244BR Military Operations
Briefing Section I
Background




operations, no-fly zone enforcement, humanitarian assistance, and peace
enforcement operations.

In fiscal year 1999, U.S. military forces participated in a number of
contingency operations, most notably in the Balkans and in Southwest Asia
(SWA). In the Balkans, the United States continues to participate in the
peace enforcement operation in Bosnia and U.S. forces became engaged
first in military operations against the Federal Republic of Yugoslavia and
its province of Kosovo and then in a peace enforcement operation in
Kosovo. For purposes of this report, we refer to operations involving the
Federal Republic of Yugoslavia, including Kosovo, as Kosovo operations. In
SWA, U.S. forces enforced the no-fly zones over the northern and southern
portions of Iraq in support of United Nations Security Council resolutions.
Beginning in December 1998 and continuing to this day, the United States
has also conducted a low level of air strikes against Iraq, first in support of
United Nations weapons of mass destruction inspection efforts and then in
response to Iraqi attempts to target allied aircraft enforcing the no-fly
zones. U.S. forces were also engaged in several smaller operations,
particularly the provision of humanitarian assistance in response to
Hurricane Mitch in Central America. In March 1999, we reported to you on
the scope of DOD’s efforts in response to Hurricane Mitch and its cost.1




1
 Military Operations: DOD’s Disaster Relief Assistance in Response to Hurricane Mitch
(GAO/NSIAD-99-122R, Mar. 29, 1999).




Page 13                                         GAO/NSIAD-99-244BR Military Operations
          Briefing Section I
          Background




Balkans and SWA Largest and Most
Expensive Contingency Operations
• Balkans involve over 16,000 U.S. military
  personnel
   • In Bosnia 6,200 plus 1,700 support troops
     in nearby countries; in Kosovo 7,005 plus
     1,500 support troops across the border in
     Macedonia
   • Costs total $10.6 billion from 1992 through
     June 1999
• SWA averages 15,000 - 20,000 personnel
  depending on level of tension with Iraq
   • Costs total $6.2 billion from 1991 through
     June 1999

          Since the end of the Persian Gulf War in 1991, two of the largest
          contingency operations involving U.S. military forces are in the Balkans
          and SWA. In the Balkans, the United States was first engaged in Bosnia and,
          beginning this year, in Kosovo. U.S. involvement in Bosnia began in July
          1992 as part of humanitarian relief efforts in Bosnia and Herzegovina and
          Croatia. In April 1993, the United States began to participate in the North
          Atlantic Treaty Organization (NATO) enforcement of a no-fly zone over
          Bosnia and Herzegovina in support of United Nations peacekeeping. From



          Page 14                                 GAO/NSIAD-99-244BR Military Operations
Briefing Section I
Background




December 1995 through the present date, the United States has deployed
military personnel in and around Bosnia to assist in implementing the
General Framework Agreement (also known as the Dayton Agreement).
U.S. forces are part of a multilateral coalition under NATO command. The
number of U.S. military personnel in Bosnia has steadily declined, from
about 18,000 in February 1996, to about 6,900 in October 1998, to about
6,200 troops in July 1999, and Americans held key leadership positions,
including command of the operation. In addition to U.S. military personnel
in Bosnia, there have been as many as several thousand U.S. military
personnel stationed in the nearby countries of Hungary, Croatia, and Italy
in support of Bosnia operations.

On March 24, 1999, the United States provided military forces in support of
NATO military action against Yugoslavia following the failure of peace talks
and escalating violence against ethnic Albanians in Kosovo. NATO called
this action Operation Allied Force. It began on March 24, 1999, was
suspended 78 days later on June 10, 1999, and officially ended on June 20,
1999. By late May 1999, about 39,000 U.S. military personnel drawn from all
the military services were involved in the operation stationed at various
locations throughout Europe. Following the signing of an agreement
permitting the deployment of multinational forces, the withdrawal of
Yugoslav troops, and United Nations endorsement of the plan, the United
States began providing troops to the NATO-led Kosovo Force (KFOR),
whose mission is peace enforcement in Kosovo. The United States is
providing 7,005 troops. In addition, the United States will have 1,500 troops
in Macedonia to operate a staging base for U.S. troops entering and
departing Kosovo, which are not included in the KFOR troop total.

From the beginning of U.S. military involvement in the Balkans in 1992
through June 1999, DOD has reported $10.6 billion in incremental costs.
The bulk of these costs, about 83 percent, have been for operations in
Bosnia, given their longer duration vis-à-vis the newer Kosovo operation.

U.S. forces have been involved in no-fly zone enforcement over parts of
Iraq since the end of the Persian Gulf War. The size of the U.S. force
involved varies substantially depending on the level of tension with Iraq.
The Congressional Research Office reports that during the mid-1990s, U.S.
forces in the Persian Gulf region on average comprised 15,000 to 20,000
personnel, many of them Navy and Marine Corps personnel embarked on
ships. In May 1999, force levels were at about 18,500. From the end of the
Persian Gulf War in 1991 through June 1999, DOD has reported $6.2 billion
in incremental costs for SWA operations.



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                      Briefing Section I
                      Background




    Relative Contribution of U.S. Aircraft and
    Forces to NATO’s Kosovo Operations
  Air Campaign                                         KFOR
                                                     France
U.S. Aircraft - 720                                  7, 000              United States
                                                                         7,005
                                           Italy
                                           5,000
                                                                              United Kingdom
                                                                              10,000
  Other NATO                               Germany
  Aircraft - 325                           8,500
                                                         Other Countries
                                                         14,500




                      The United States has been a major force provider in the Balkans. In
                      Bosnia, U.S. military personnel comprise about 20 percent of the NATO-led
                      force as of July 1999 (6,200 of 30,000). In the air campaign involving
                      Kosovo, the United States provided the lion’s share of aircraft, about
                      two-thirds of the aircraft used at the end of the campaign. On June 2, 1999,
                      DOD reported that in addition to the United States, 13 nations were
                      providing aircraft for the campaign, with the United States contributing
                      720 aircraft and other nations contributing a total of 325 aircraft. Unlike the



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Briefing Section I
Background




air campaign, the United States is providing a much smaller portion of
forces for KFOR, about one-seventh, or 7,005 of an estimated force of
50,000, when deployment is complete. The United Kingdom will be the
largest troop-contributing nation, with about 10,000 troops. One of its
generals is the KFOR commander.

Within NATO, each nation participating in military operations assumes the
cost of its own operations. NATO refers to this practice as “letting costs lie
where they fall.” NATO does not provide estimates of the overall cost of the
operation or of the cost of each member’s contribution. All NATO members
contribute to NATO common costs, which are paid through NATO’s military
budget and its infrastructure budget. In the Balkans, the military budget
pays for headquarters costs, including facility rental and maintenance,
office supplies and furniture, vehicles, and travel; the infrastructure budget
pays for new construction, theater-wide communications, initial
procurement of automated data processing equipment, and theater-wide
infrastructure. At the current NATO membership level of 19 nations, the
United States’ assigned contribution is 23.15 percent of the military budget
and 22.333 percent of the infrastructure budget. NATO’s Bosnia military
budget for calendar year 1999 is an estimated $36.7 million; its
infrastructure budget an estimated $48 million. NATO budgets on a
calendar year basis rather than the fiscal year basis used for U.S. budgets.
The U.S. share of the military budget is about $8.6 million; its share of the
infrastructure budget is about $10.8 million. For Kosovo-related operations,
NATO’s military budget is estimated at $68.9 million, of which the U.S.
share is about $16 million. Estimates are not available yet for the
infrastructure budget. The U.S. share is paid out of DOD’s budget and is
part of DOD’s incremental cost of Balkans operations.




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               Briefing Section I
               Background




DOD Fiscal Year 1999 Contingency Cost
Overview
Dollars in Millions


                            Reported Cost             Estimated Cost for
                            Through June              Fiscal Year 1999
Air Force                   $1,552                    $ 2,345

Army                          1,923                     3,192

Navy/Marine Corps                   428                    457

  Service Subtotal          $3,903                    $5,994

DOD Agencies                        117                    N/A

DOD Total                   $4,020                         N/A




               DOD tracks the “incremental costs” of participation in contingency
               operations. As used in this report, “incremental costs” means those costs
               that would not have been incurred if it were not for the operation.
               Examples of incremental costs include (1) special payments to
               participating military personnel, such as imminent danger pay;
               (2) transportation costs to deploy personnel and equipment to the area of
               operations; (3) contractor support for deployed forces; and




               Page 18                                 GAO/NSIAD-99-244BR Military Operations
Briefing Section I
Background




(4) redeployment and reconstitution, including repair of equipment used in
the operation.

Through June 1999, DOD reported $4 billion in incremental costs for all
contingency operations in which U.S. military forces have been involved in
fiscal year 1999. The large majority of these costs—98 percent—were
incurred in the Balkans and SWA. DOD prepares monthly contingency
operations cost reports, the most recent of which is the report of costs
incurred through June 1999. The cost reports include costs associated with
the deployment of forces; their sustainment, including contractor support;
operating tempo; special pays and allowances for which deployed military
personnel are eligible; the pay of mobilized reservists; and redeployment of
U.S. forces and reconstitution of equipment used in the operations.

DOD’s latest year-end estimate for fiscal year 1999 contingency operations
is about $6 billion for the military services, compared with the $3.9 billion
the services reported through June 1999. Reported costs through June
represent 65 percent of the services’ full year estimate. As costs associated
with the conclusion of the Kosovo air campaign and U.S. participation in
peace enforcement in Kosovo are incurred, reported costs will increase.
However, as will be discussed later, costs are likely to be lower than
estimated.

Among the services and DOD agencies, the Army, which has had soldiers in
Bosnia since the beginning of the fiscal year and has now deployed soldiers
to Kosovo, reported the largest costs for fiscal year 1999 contingency
operations through June−49 percent of the services’ total. Air Force costs
represented 40 percent of the services’ total and Navy and Marine Corps
costs were 11 percent of the total. The remaining costs are for DOD
agencies involved in contingency operations, which are spread over a
number of defense-wide agencies, such as the U.S. Special Operations
Command and the Defense Information Systems Agency. Costs reported by
these agencies through June 1999 represent a much smaller portion of
overall DOD costs−only 3 percent of the DOD total. Year-end estimates for
these DOD agencies were not available at the time of our review.




Page 19                                  GAO/NSIAD-99-244BR Military Operations
                   Briefing Section I
                   Background




 Fiscal Year 1999 Funding for Contingency
 Operations
  Dollars in Millions

            Military    O&M Munitions           Readiness/    Rapid            Total
         Personnel                               Munitions Response
                                               Contingency     Fund

Bosnia        $342 $1,416                  0             0             0     $1,758



SWA             134     1,152           $177             0             0       1,463



Kosovo          441     3,196           521        $1,100         $300         5,558



Total         $917 $5,764               $698       $1,100         $300       $8,779




                   DOD budgets for the cost of ongoing contingency operations and Congress
                   includes funds for ongoing operations in the annual defense appropriations
                   acts. In the case of new or expanded operations, such as the operations
                   involving Kosovo and the late 1998 attacks against Iraq, costs have not been
                   budgeted in advance and the services generally borrow funds that they
                   planned to spend later in the fiscal year. If these funds are not replenished
                   through supplemental appropriations or reprogramming of previously
                   appropriated funds, then the services have to cancel planned activities.



                   Page 20                                   GAO/NSIAD-99-244BR Military Operations
Briefing Section I
Background




DOD has received about $8.8 billion for contingency operations during
fiscal year 1999. Funding came from several sources: (1) a carry forward of
$343 million remaining in the Overseas Contingency Operations Transfer
Fund (OCOTF) from prior year appropriations; (2) $439 million for the
OCOTF from the fiscal year 1999 DOD Appropriations Act;2
(3) $1,859 million in supplemental appropriations contained in the
Omnibus Consolidated and Emergency Supplemental Appropriations Act
for Fiscal Year 1999,3 enacted in October 1998; and (4) $6 billion in
supplemental appropriations enacted in May 1999.4 In addition, according
to Office of the Secretary of Defense (OSD) (Comptroller) officials,
$119.8 million from the fiscal year 1999 DOD Appropriations Act was
allocated by DOD for military personnel in SWA. The Secretary of Defense
transfers funds from the OCOTF to the services for expenses related to
overseas contingency operations as operations unfold during the year. The
bulk of fiscal year 1999 contingency operation funding, $7.3 billion, was
placed in the OCOTF, with most of the remainder appropriated directly to
the services’ appropriation accounts. Funds remaining in the OCOTF at the
end of a fiscal year can be carried forward to the next fiscal year.

Part of the above funding was provided following an April 1999 request by
the President for $5.5 billion in additional supplemental funding for DOD
operations involving Kosovo and SWA. The President’s request included
funding for air operations, military personnel costs, munitions, and
humanitarian assistance. After receiving this request, Congress
appropriated not only the $5.5 billion requested, but also an additional
$550 million for critical readiness or sustainability needs, including
replacement of expended munitions, and for a special Operational Rapid
Response Transfer Fund, 5 which will be discussed later in this report.
While the President requested that almost all the funds be placed in the
OCOTF for subsequent transfer to the services and Congress appropriated
a large portion of the funds accordingly, Congress also appropriated some
funds directly to the services’ appropriations accounts and to the new
Operational Rapid Response Transfer Fund.



2
    Pub. L. 105-262, Oct. 17, 1998, 112 Stat. 2279 at 2284.
3
    Pub. L. 105-277, Oct. 21, 1998, 112 Stat. 2681 at 2681-556.
4
    Pub. L. 106-31, May 21, 1999, 113 Stat. 57 at 76-78.
5
    Pub. L. 106-31, May 21, 1999, 113 Stat. 57 at 78.




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Background




Almost two-thirds of the $8.8 billion in contingency operations funding was
for operation and maintenance, normally the largest cost category.
Operation and maintenance funds are used for a wide variety of purposes,
including transportation of personnel, goods, and equipment; unit
operational tempo (fuel and repair parts); and intelligence,
communications, and logistics support. About 20 percent of the funding
was for munitions replenishment, reflecting the air campaign involving
Kosovo and the air strikes in SWA, and for other critical readiness or
sustainability needs. These funds were split between direct appropriations
to the services’ procurement accounts and a contingent appropriation for
readiness and munitions that was included in the OCOTF. Just over
10 percent of the available funding was for military personnel accounts,
which fund the pay and allowances of mobilized reservists and special
payments or allowances for all qualifying military personnel, such as
Imminent Danger Pay ($150 per month) and Family Separation Allowance
($75 per month).




Page 22                                 GAO/NSIAD-99-244BR Military Operations
Page 23   GAO/NSIAD-99-244BR Military Operations
Briefing Section II

Fiscal Year 1999 Cost and Funding for Balkans
Operations                                                                                                          Be
                                                                                                                     rn
                                                                                                                      ifg
                                                                                                                        Seo
                                                                                                                          ctin
                                                                                                                             I




                      GAO Projection of Funding Adequacy for
                      Kosovo Operations by Cost Category
                                                                   Potential Cost Potential Cost
                      Cost Category                   Funded         Increase       Decrease
                      Air Operations                    X                               X

                      Peace Enforcement                                    X
                      Redeployment/
                      Reconstitution                                       X
                      Humanitarian                        X                                     X

                      Munitions                           X                    No change
                      Readiness/Munitions
                      Contingency                        X                     No change

                      Rapid Response
                      Transfer Fund                      X                     No change




                                     As discussed earlier, Congress provided supplemental funding in May 1999
                                     for U.S. military operations involving Kosovo as well as heightened military
                                     operations in SWA. In developing its budget for Kosovo operations, which
                                     served as the principal basis for the President’s supplemental funding
                                     request, DOD included estimates for air operations, military personnel
                                     costs, munitions replenishment, and humanitarian assistance. The budget
                                     was designed to ensure that military forces had sufficient resources to
                                     sustain the high operating tempo of the air campaign through the end of the



                                     Page 24                                   GAO/NSIAD-99-244BR Military Operations
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Fiscal Year 1999 Cost and Funding for
Balkans Operations




fiscal year. DOD estimated that military operations, including air
operations and military personnel costs, would be $3,301 million. It further
estimated that $1,548 million would be needed to replenish munitions
already expended and create a readiness/munitions contingency reserve
for additional munitions that would be expended as the air campaign
continued. Humanitarian assistance was estimated at another $335 million.

Accurately estimating the cost of contingency operations, particularly
those involving uncertain situations such as the one in Kosovo, is difficult.
DOD has to make assumptions about a variety of factors, such as the
duration of operations. Events, however, may differ from the assumptions.
In developing the Kosovo estimate, DOD assumed that air operations
would continue through the end of the fiscal year, and there was no peace
agreement at the time the estimate was being prepared. DOD, therefore,
did not include funding for peace enforcement and redeployment and
reconstitution of forces engaged in the air campaign in its fiscal year
1999 estimate.

The approved supplemental funding contained resources within the
OCOTF for the Presidential call up of a large number of reservists and the
special payments and allowances for which deployed personnel were
eligible, air operations in and around the Federal Republic of Yugoslavia,
humanitarian relief efforts for Kosovo refugees, and a contingent
appropriation for readiness and munitions to prevent any degradation in
readiness of U.S. forces in the Balkans and around the world as operations
continued through the fiscal year. The supplemental also placed funds in
procurement accounts for the restoration of inventory levels of munitions
and in an Operational Rapid Response Transfer Fund to support specific
requests from U.S. regional commanders for the accelerated acquisition
and deployment of military technologies and systems needed for the
conduct of Operation Allied Force, or to provide substitute or replacement
systems for other theaters to replace assets diverted as a result of
Operation Allied Force, NATO’s name of the operation.1

With the termination of Operation Allied Force in mid-June 1999 and the
subsequent redeployment of assets, DOD costs for some of the funded
categories should be lower than anticipated because estimates were
premised on air operations continuing through the end of the fiscal year at
a high operating tempo. Consequently, remaining balances from funded


1
    Pub. L. 106-31, May 21, 1999, 113 Stat. 57 at 78.




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categories that have costs lower than their budgeted level should be more
than sufficient to offset the costs associated with peace enforcement and
the redeployment and reconstitution of forces involved in Operation Allied
Force, which were not included in the appropriation. As a result, a portion
of these funds are likely to remain at the end of the fiscal year to apply
toward fiscal year 2000 funding requirements.




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Page 27                                 GAO/NSIAD-99-244BR Military Operations
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         Fiscal Year 1999 Cost and Funding for
         Balkans Operations




Air Operations Costs


• Budget request assumed air operations
  would continue through end of fiscal year at
  high operating tempo
• Air campaign ended June 20,1999, and most
  deployed aircraft returned to home station
• Air support will be needed for peace
  enforcement; details yet to be determined
• Net air operations cost should be much lower
  than estimated




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DOD’s cost estimate included $3.3 billion for air operations involving
Kosovo as well as for the Kosovo Diplomatic Observer Mission and the air
verification mission, two smaller operations involving monitoring events in
Kosovo from late 1998 through early 1999, both of which ended shortly
before the air campaign began. In support of NATO’s air campaign, DOD
committed approximately 600 aircraft at the time the supplemental funding
request was submitted and planned to deploy up to an additional 300
aircraft. Near the end of the air campaign, about 720 aircraft had deployed.
These aircraft initially came from units forward stationed in Europe, with
most of the additional aircraft coming from the continental United States.
In developing the cost estimate, a high operating tempo was anticipated
through the remainder of the fiscal year. Deployed aircraft included Air
Force aircraft at air bases throughout Europe, Navy aircraft operating from
the aircraft carrier stationed in the region, land-based Navy and Marine
Corps aircraft, and Army Apache attack helicopters.

The NATO air campaign was officially terminated on June 20, 1999, and the
next day the Secretary of Defense authorized the Allied Force commander
to begin redeploying more than 300 aircraft to their home stations in the
United States and Europe. On June 25, 1999, the Secretary of Defense
authorized the redeployment of a second increment of 315 U.S. aircraft.
Through June 1999, DOD reported $1.3 billion in operations costs for
Kosovo air operations or about 38 percent of the initial $3.3 billion
estimate. Consequently, the early termination of the air campaign will
result in estimated air operations costs being much lower than anticipated.
In discussing our analysis with the Office of the Secretary of Defense
(OSD) (Comptroller), a senior OSD (Comptroller) official agreed that
enough funds are available from the supplemental funding initially
budgeted for air operations to fund fiscal year 1999 KFOR operations as
well as redeployment and reconstitution costs and fiscal year 2000
reconstitution costs and that a small amount of funds, $62 million, would
remain at the end of the fiscal year.

Some aircraft are being retained in theater to provide continued air support
for KFOR. Also, according to U.S. European Command officials involved
with Operation Allied Force, air support was being restructured to support
Balkan operations in Bosnia and Kosovo. At the time of our visit, the details
had not yet been finalized.




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           Briefing Section II
           Fiscal Year 1999 Cost and Funding for
           Balkans Operations




Peace Enforcement Costs


• Budget did not include KFOR costs,
  estimated at $1.2 billion for fiscal year 1999
• Army predominant U.S. force provider; cost
  estimated at $924 million
• $273 million estimated for Navy/Marine
  Corps, Air Force, and other DOD agencies
• Funding need critical, since now in fourth
  quarter of fiscal year and funding flexibility is
  limited
   • OSD provided an interim distribution of
     $500 million in July to Army for KFOR


           As Yugoslav forces withdrew from Kosovo, NATO forces began peace
           enforcement operations. KFOR was established to create the secure
           conditions for the rebuilding of Kosovo, the re-establishment of law and
           order, the safe return of refugees to their homes, social and economic
           reconstruction, and the full investigation of all war crimes and atrocities.
           The United States committed 7,005 personnel as part of the estimated
           50,000 troops that will comprise KFOR. Another 1,500 U.S. military
           personnel will be in Macedonia in support of the U.S. forces serving as part



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of KFOR. The United States is responsible for one of five sectors
established in Kosovo, with the United Kingdom, Germany, France, and
Italy operating the others. Forces from many other countries are also
involved with this peace enforcement effort.

Initially, about 4,800 soldiers and Marines provided the first U.S. presence.
These initial forces have been replaced by U.S. Army troops from the 1st
Infantry Division, based in Germany. Estimates for KFOR operations during
fiscal year 1999 total $1.2 billion. The Army, which is providing the large
majority of KFOR forces, estimates its costs in support of Kosovo peace
enforcement through September 1999 at $924 million. The remainder of the
estimated costs includes $88 million for the Navy/Marine Corps, $86 million
for the Air Force, and $99 million for other Defense agencies. The
corresponding DOD funding requirement is $41 million less than the cost
estimate because DOD estimates that the services will not incur some
normal home station costs as a result of their participation in KFOR. For
June 1999, the first month of the KFOR operation, DOD reported
$350 million in costs. DOD did not include any cost estimates for providing
forces to KFOR in its April 1999 supplemental request because it did not
know when the conflict would end at the time it developed the
supplemental request.

Considering the magnitude of the estimated KFOR costs coupled with the
fact that the operation is now in the last quarter of the fiscal year, the
Army’s funding need for this force is critical. According to officials at U.S.
Army Europe, which will incur the bulk of the costs, funding flexibility is
very limited because the fiscal year is drawing to a close. This makes it
difficult if not impossible to borrow funds planned to be spent later in the
fiscal year. OSD (Comptroller) is aware of the situation and in July
provided an interim distribution of $500 million from the OCOTF to finance
KFOR.




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          Briefing Section II
          Fiscal Year 1999 Cost and Funding for
          Balkans Operations




Redeployment/Reconstitution Costs


• Supplemental did not include funds for
  redeployment and reconstitution
• Services estimating $351 million
   • Air Force $275 million
   • Army $61 million
   • Navy $15 million
• Given short duration of operation estimates
  appear high
• An additional $175 million in reconstitution
  costs estimated for fiscal year 2000



          DOD’s supplemental request for Kosovo and SWA operations did not
          include any redeployment and reconstitution costs. Redeployment costs
          include the transportation costs associated with returning personnel and
          equipment to their home station. Reconstitution costs include the cost to
          clean, inspect, maintain, replace, and restore equipment to the required
          condition at the conclusion of the contingency operation. Kosovo
          operations were assumed to continue at a high rate through the end of the
          fiscal year. Since the air campaign terminated in June, many of the aircraft



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and associated personnel have returned to their home stations. As such,
redeployment and reconstitution costs are being incurred during fiscal year
1999.

The services are estimating reconstitution and redeployment costs of
$351 million for fiscal year 1999. The Air Force’s redeployment and
reconstitution cost estimate is the highest, $275 million. It consists of
temporary duty pay, spare parts, flying hours for redeployment, and
reconstitution costs. Of this amount, the Air Force estimated $46 million in
redeployment costs and over 600 of the aircraft involved in the air
campaign have already returned to home station. The Army has the second
largest cost estimate for redeployment and reconstitution, $61 million. The
Army estimated $20 million for redeploying the 5,500 personnel and
support equipment associated with the Apache helicopters and multiple-
launch rocket systems and $41 million for reconstitution. Redeployment is
ongoing and its planned completion was mid-August 1999. The Navy has
the smallest cost, $15 million, for the redeployment of EA-6B, F/A-18, and
P-3 aircraft. For the most part, naval ships and aircraft used in the Kosovo
operation were the naval forces normally forward deployed as part of
normal peacetime presence. The Navy did not estimate any reconstitution
costs for fiscal year 1999 and estimates $4 million for fiscal year 2000. OSD
(Comptroller) cost estimates also include $175 million in additional Air
Force reconstitution costs in fiscal year 2000.

We believe reconstitution estimates may be high for several reasons: (1) the
air campaign lasted only 78 days, (2) the buildup occurred over more than a
month so not all aircraft were used for the full duration of the air campaign,
and (3) the Army’s Apache helicopters only engaged in training for combat
operations and trained for a shorter period of time than the 78 days of the
air campaign.




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          Briefing Section II
          Fiscal Year 1999 Cost and Funding for
          Balkans Operations




Humanitarian Costs


• DOD planned to build three refugee camps
  in Albania
   • Only one was completed before refugees
     began returning to Kosovo
• Through June 1999, DOD reported $97
  million of $335 million that was budgeted had
  been spent
• DOD estimates up to $76 million in additional
  humanitarian costs
• DOD may have up to $162 million to finance
  other operational needs


          DOD requested and Congress included $335 million in the 1999 emergency
          supplemental appropriation to provide refugee relief to displaced Kosovars
          as part of the funds placed in the OCOTF.2 Through June 1999, DOD has
          reported that it spent $97 million in humanitarian assistance. Funds


          2
              Pub. L. 106-31, May 21, 1999, 113 Stat. 57 at 76-77.




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distributed through the OCOTF were used for camp construction, refugee
relief, and other humanitarian purposes. Considerably less money has been
spent on refugee relief because the conflict in Kosovo ended much sooner
than anticipated and refugees began returning to their homes in June 1999.
DOD plans called for construction of three tent camps to be built in Albania
as temporary housing for the Kosovar refugees. However, only one camp
was completed, although additional costs were incurred for the second and
third camps even though they were not built. These costs consisted of site
preparation at the second camp and tents for both the second and third
camps.

According to an OSD (Comptroller) official, up to an additional $76 million
may be needed in humanitarian assistance costs. Of this amount,
$36 million is for the redeployment of Air Force personnel providing
humanitarian support, $10 million is the U.S. share of NATO common costs
for humanitarian assistance, and from $10 to $30 million is the amount
estimated to clean up unexploded ordinance in Kosovo. This official said
that DOD will continue to consider humanitarian requirements identified
by the interagency community, including the State Department, and will
fund those requirements if sufficient legal authority and funding exist. OSD
(Comptroller) continues to view all the humanitarian funds as dedicated to
additional humanitarian requirements. However, if no such requirements
arise, DOD may have up to $162 million to finance other contingency
operations costs. In fact, a July 1999 United Nations High Commissioner for
Refugees initial survey concluded that 40,000 to 50,000 homes in Kosovo
were uninhabitable and that organization is providing assistance to start
emergency repairs and has plans for assistance to make homes winter-
proof. On August 31, 1999, the United Nations reported that measures to
repair structures in Kosovo and to place people in temporary housing
should ensure winter shelter for all of the nearly 700,000 people whose
homes have been damaged or destroyed. This suggests that there may be
few additional humanitarian requirements to which DOD will be asked to
respond.




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         Fiscal Year 1999 Cost and Funding for
         Balkans Operations




Munitions Costs


• DOD requested and Congress appropriated
  funds to restore munitions levels and in
  some instances increase overall production
  levels
• All funds have been distributed to services




         Munitions usage in air attacks involving Kosovo and SWA resulted in the
         depletion of the Navy’s and the Air Force’s inventories of several types of
         preferred munitions and a need to immediately replenish them rather than
         wait until the fiscal year 2001 budget process. The munitions involved were
         the Navy’s Tomahawk Land-Attack Missile and the Air Force’s Conventional
         Air Launched Cruise Missile, Joint Direct Attack Munition, which adds
         more precision capability, and towed decoys, which are used against radar
         guided missiles. To replenish and in the case of the Joint Direct Attack



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Munition and towed decoys to increase production levels, DOD requested
and Congress appropriated $698 million.3 Of this amount, $521 million was
requested for munitions expended in Kosovo operations and $177 million
for munitions expended in SWA operations. Congress also appropriated an
additional $1.1 billion as a readiness and munitions contingency amount to
ensure that the inventory of critical munitions remains adequate for future
operations and that U.S. force readiness remains high, which is discussed
later in this report.

As of June 1999, all of the $698 million appropriated for munitions
replenishment had been distributed by OSD (Comptroller) to the services.
The Navy received $444.7 million for its Tomahawk Land-Attack Missiles
and the Air Force received $253.2 million to replenish Conventional Air
Launched Cruise Missiles and increase production of the Joint Direct
Attack Munition and Air Force towed decoys.




3
 Of the $698 million, $684 million was directly appropriated to the services’ procurement
accounts. According to OSD (Comptroller) records, the remaining $14 million was placed in
the OCOTF for the purpose of Tomahawk Land-Attack Missile recertifications. See Pub.
L. 106-31, May 21, 1999, 113 Stat. 57 at 76-78.




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          Fiscal Year 1999 Cost and Funding for
          Balkans Operations




Contingent Readiness and Munitions Costs


• Congress provided an additional $1.1 billion
  for critical readiness or sustainability needs,
  including maintaining adequate munitions
  inventories
• Use of the fund requires Presidential
  notification and designation as an
  emergency requirement
• President expected to transmit a budget
  request soon




          In addition to the $698 million directly appropriated to the services for
          munitions replenishment, Congress appropriated an additional $1.1 billion
          as part of the May 1999 supplemental appropriation in what it termed a
          contingent emergency appropriation for readiness and munitions. This
          amount, included in the OCOTF, was to be available to meet critical
          readiness and sustainability needs, including to replace other munitions
          that were expected to be expended in the course of combat operation so
          that adequate inventories would be maintained for future operations. Use



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of this amount requires Presidential notification to Congress that specifies
specific items which meet a critical readiness and sustainability need and
designates the amount as an emergency requirement.

In written comments on a draft of this report DOD stated that the
Commanders in Chief of the Unified Commands and the Military
Departments have identified requirements for critical readiness or
sustainability items that greatly exceed the funding available in the OCOTF.
DOD further stated that the Joint Requirements Oversight Council had
evaluated the requests and validated requirements in excess of the
$1.1 billion. DOD described these requirements as consistent with
Congress’ intended use of the funds and that it expects the President will
soon transmit an official budget request that designates a significant
portion of these funds as emergency. Consequently, DOD concluded that
these funds will not be available for fiscal year 2000 requirements. Given
that the President is expected to soon transmit a budget request, we have
excluded the $1.1 billion from our calculations. If the President’s
submission involves less than the full $1.1 billion, the difference may
become available to help fund other requirements.




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         Balkans Operations




Operational Rapid Response Transfer
Fund
• $300 million appropriated for accelerated
  acquisition and deployment of military
  technologies and systems needed for air
  campaign or to provide substitute or
  replacement systems for those diverted from
  other regional commands
• DOD has distributed the $300 million; $40
  million to replace destroyed equipment; $260
  million for equipment enhancements that
  would improve capability to participate in
  Kosovo and other operations


         In addition to other amounts appropriated in the 1999 emergency
         supplemental appropriations for military operations involving Kosovo,
         Congress appropriated $300 million to a new appropriations account, the
         Operational Rapid Response Transfer Fund. The funds are available for
         obligation until September 30, 2000, but can only be obligated after
         recommendations by the Joint Requirements Oversight Council to the
         Secretary of Defense for his approval and the President’s designation as
         emergency. The appropriations legislation states that the funding in this



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account is available only for the accelerated acquisition and deployment of
military technologies and systems needed for the conduct of Operation
Allied Force, or to provide accelerated acquisition and deployment of
military technologies and systems as substitute or replacement systems for
other regional commands that had assets diverted as a result of Operation
Allied Force.4

Many U.S. military assets were deployed to Europe to meet the demands of
Operation Allied Force. In many instances this diverted capabilities and
forces from other regional commands, which have their own operational
requirements, such as those of the U.S. Central Command involving Iraq.
Because of these deployments and the uncertain duration of the operation
involving Kosovo, the House Committee on Appropriations recommended,
and Congress included, this additional funding because there were several
broad, high-leverage operational categories in which assets are in short
supply or deficient, but which could be used to great effect if such assets
were made available in sufficient numbers for Operation Allied Force. 5
These included tactical airborne electronic warfare and surveillance;
tactical imagery and signals intelligence reconnaissance (particularly
systems that can loiter over engagement areas such as unmanned aerial
vehicles) and related communications data links that can rapidly
disseminate information; and tactical communications systems in general.
Some of these unmanned aerial vehicles were lost during Operation Allied
Force.

According to an OSD (Comptroller) official, the early termination of the air
campaign will not affect their ability to use money from this transfer fund.
The services and defense agencies submitted their priority needs to the
Joint Requirements Oversight Council, which in turn on July 7, 1999,
forwarded its approved list of needs to the Secretary of Defense for
approval. On July 29, 1999, the President requested the funds and
designated the request as an emergency requirement. The President stated
that the funds will be used to acquire and replace equipment needed for
operations in Kosovo. In written comments on a draft of this report, DOD
stated that the $300 million appropriated to the Operational Rapid
Response Transfer Fund has been apportioned and allocated to the military
departments for execution and that these funds will be obligated shortly.


4
    Pub. L. 106-31, May 21, 1999, 113 Stat. 57, pp. 78-79.
5
    See H.R. Report 106-125, May 4, 1999, pp. 8-9.




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Our analysis indicates that about $40 million of the distribution appears to
be intended to replace equipment destroyed during combat operations and
for related costs, specifically some unmanned aerial vehicles, and about
$260 million appears to be enhancements to existing equipment that would
improve U.S. military capability to participate in contingency operations,
including in Kosovo. However, no mention has been made of replacing
other lost equipment, specifically the one F-117 combat aircraft that was
shot down during the air campaign and is no longer in production and the
two Apache attack helicopters lost in training accidents while preparing to
undertake combat operations.




Page 42                                  GAO/NSIAD-99-244BR Military Operations
Briefing Section II
Fiscal Year 1999 Cost and Funding for
Balkans Operations




Page 43                                 GAO/NSIAD-99-244BR Military Operations
          Briefing Section II
          Fiscal Year 1999 Cost and Funding for
          Balkans Operations




Status of Bosnia Cost and Funding


• $1,758 million in funding provided to the
  services and defense agencies for fiscal year
  1999 costs
• Current cost estimate is $1,593 million
• Based on current estimates, $165 million
  may be left after covering costs
• Most of the $165 million was placed in the
  services military personnel appropriations
  accounts; authority to obligate these funds
  expires at the end of fiscal year 1999



          During fiscal year 1999, DOD allotted $1,758 million from its appropriations
          to conduct operations in Bosnia. As discussed earlier, Congress provided
          funds for the OCOTF for ongoing contingency operations, including
          Bosnia, in an emergency supplemental appropriation since no funds were
          appropriated in DOD’s fiscal year 1999 annual appropriations legislation. Of
          the total, DOD programmed $1,416 million from the OCOTF for Bosnia and
          the remaining $342 million was transferred to the services’ military
          personnel accounts, as directed by Congress. OSD transferred all of the



          Page 44                                  GAO/NSIAD-99-244BR Military Operations
Briefing Section II
Fiscal Year 1999 Cost and Funding for
Balkans Operations




funds that were placed in the OCOTF primarily to the services operation
and maintenance and military personnel appropriation accounts.

In late July 1999, OSD (Comptroller) developed a revised estimate for the
cost of Bosnia operations for the fiscal year, which reflected a decline in
expected costs to about $1,593 million. The reduced estimate reflects
changes in the operation that have resulted in an expectation of lower
overall costs. Our analysis of the revised cost estimate indicated that the
key change in the estimate was a reduction in the Army’s military personnel
costs. Within the services’ operations costs, the Army’s costs rose slightly
and an increase in Air Force costs was more than offset by a decline in
Navy costs. If actual costs for the balance of the fiscal year closely track
DOD’s revised cost estimate, the services would have received $165 million
in funds that were in excess of their costs.

Most of this funding, $161 million of the $165 million, was in military
personnel costs, which, as noted above, was transferred to the services
military personnel appropriations accounts. Funds appropriated to the
military personnel accounts are only available for use in the year for which
they are appropriated and any funds remaining at the end of that year can
no longer be obligated. Therefore, if any funds remain unused at the end of
the fiscal year they would no longer be available for obligation and so
would not be available to apply toward a subsequent year’s funding
requirements. The remaining $4 million reflects operation and maintenance
funds above current estimates and according to an OSD (Comptroller)
official is factored into DOD’s calculation of funds that will be available to
apply to fiscal year 2000 funding requirements.




Page 45                                   GAO/NSIAD-99-244BR Military Operations
Briefing Section III

Fiscal Year 1999 Cost and Funding for
Southwest Asia Operations                                                                                      Bn
                                                                                                                rifg
                                                                                                                e  Seo
                                                                                                                     ctin
                                                                                                                        I




                       Status of Southwest Asia Cost and Funding

                       • $1,287 million in funding transferred to the
                         services and defense agencies for fiscal year
                         1999 exclusive of munitions replenishment
                       • Based on current estimates, military
                         personnel cost have increased by $120
                         million while operation and maintenance
                         costs have declined by $76 million
                       • Services absorbing increased military
                         personnel costs, making the $76 million in
                         operations costs available for other
                         operations


                                 During fiscal year 1999, SWA funding has totaled almost $1,287 million,
                                 excluding munitions replenishment funding, which, as discussed earlier,
                                 was provided separately. The bulk of this funding, $1,152 million, was in the
                                 OCOTF and most of it was subsequently transferred to the services and
                                 defense agencies based on their cost experience. The remaining




                                 Page 46                                  GAO/NSIAD-99-244BR Military Operations
Briefing Section III
Fiscal Year 1999 Cost and Funding for
Southwest Asia Operations




$134 million1 was directly appropriated or transferred to the services’
military personnel accounts. Currently, SWA estimated costs and funding
status present a mixed picture. There has been a $120 million increase in
military personnel costs, primarily involving the Air Force, and a
$76 million excess in funds originally intended to cover operation and
maintenance costs. OSD (Comptroller) officials assume that the services
can absorb the increased military personnel costs within their existing
military personnel funding because as of August 30, 1999, the services had
not requested any additional funds. Consequently, OSD (Comptroller) plans
to use the $76 million excess in funds related to operation and maintenance
costs to help fund other contingency operations.




1
    Totals do not add due to rounding.




Page 47                                  GAO/NSIAD-99-244BR Military Operations
Briefing Section IV

Funding Status for Fiscal Years 1999 and 2000                                                                                     Bn
                                                                                                                                   rifS
                                                                                                                                   e  gection
                                                                                                                                            IV




                      Net Change in Contingency Operations
                      Costs
                      Dollars in Millions

                      Contingency   Cost Category             Potential Decrease   Potential Increase   Net Change
                      Operation
                      Kosovo        Air Operations            $1,745

                                    KFOR                                           $1,157

                                    Redeployment/                                     351
                                    Reconstitution
                                    Humanitarian relief         162

                                    Munitions                    ---                  ---
                                    Contingency reserve          ---                  ---

                                    Rapid Response Transfer      ---                  ---
                                    Fund
                                              Subtotal        $1,907               $1,508               ($399)

                      Bosnia        Bosnia                       ---                  ---

                      Southwest     Southwest Asia               76                                       (76)
                      Asia
                          Total                               $1,983               $1,508               ($475)




                                             As discussed throughout this report, as the operations in the Balkans and
                                             SWA have changed, the costs associated with those operations have also
                                             changed. In some instances, such as in the case of Kosovo air operations,
                                             costs have declined substantially with the earlier than expected conclusion
                                             of the air campaign. Bosnia costs have declined from earlier estimates used
                                             in developing funding levels as operational changes have occurred. In other
                                             instances, such as U.S. participation in KFOR, funds were not included in
                                             the budget and therefore all U.S. KFOR costs were unfunded.



                                             Page 48                                         GAO/NSIAD-99-244BR Military Operations
Briefing Section IV
Funding Status for Fiscal Years 1999 and
2000




Cost estimates are being revised and cost reports are only available
through June 1999. As a result, it is not possible to detail the net change in
costs and the resulting implications for funding with precision. It is,
however, possible to provide a broad estimate of the possible net change
based on the currently available data. We project that costs for budgeted
contingency operations activities have decreased by $1,983 million and that
there are $1,508 million in unbudgeted costs. This leads us to conclude that
DOD can cover the fiscal year 1999 unbudgeted costs of KFOR and
redeployment and reconstitution costs within previously appropriated
contingency operations funds. We have also concluded that as much as
$475 million in funding provided for fiscal year 1999 contingency
operations would be available to be applied to fiscal year 2000 funding
requirements.

Cost decreases involve Kosovo combat operations, humanitarian
assistance, and SWA operations costs. Cost increases involve KFOR costs
and the redeployment and reconstitution costs associated with returning
aircraft, other equipment, and personnel involved in the Kosovo air
campaign to their home stations. DOD agrees that there are sufficient funds
for fiscal year 1999 costs, but in written comments on a draft of this report
stated that only $138 million will be available to apply to fiscal year 2000
requirements. The difference between DOD’s and our estimate is
$337 million. It consists of (1) $162 million in remaining humanitarian funds
that are dedicated to future humanitarian needs and (2) $175 million in
estimated reconstitution costs that DOD expects will occur in fiscal year
2000. In discussing the $175 million in estimated fiscal year 2000
reconstitution costs with DOD officials, they agreed that the $175 million
will not have been distributed to the services by the end of fiscal year 1999.
These officials also noted that they do not intend to include that amount in
their fiscal year 2000 budget request for Kosovo operations, which is still
being developed because they view fiscal year 2000 reconstitution costs
associated with the air campaign as covered in their current air campaign
cost estimates and planned funds use.




Page 49                                    GAO/NSIAD-99-244BR Military Operations
                   Briefing Section IV
                   Funding Status for Fiscal Years 1999 and
                   2000




Fiscal Year 2000 Cost Outlook

Dollars in Billions
 $6.0
            $5.4
 $5.0

                                     $2.5
 $4.0
                                                                              K oso vo
 $3.0                                                                         B osn ia
                                                                              SWA
                                     $1.8
 $2.0


 $1.0


 $0.0
                                     $1.1
           F Y 20 00




                   Fiscal year 2000 contingency operations costs are likely to exceed
                   $5 billion. The President’s budget for DOD in fiscal year 2000, submitted to
                   Congress in February 1999, includes $1.8 billion for ongoing Bosnia-related
                   operations and $1.1 billion for SWA operations at the force level and
                   operating tempo in place the previous September. Since there was no
                   KFOR at the time the budget was submitted, no funds were included for it.
                   OSD has not finalized its KFOR estimate yet, but its initial estimate is that
                   the cost will be at least $2.5 billion. It also expects SWA costs to rise due to



                   Page 50                                    GAO/NSIAD-99-244BR Military Operations
Briefing Section IV
Funding Status for Fiscal Years 1999 and
2000




the increased level of assets and personnel deployed since late last year,
while Bosnia costs may decline due to the reduction in the number of U.S.
forces below 6,200 and an overestimation of Army Reserve personnel
needs. As just discussed, there may be funds remaining in the OCOTF at the
end of fiscal year 1999 that would be carried over and could help fund fiscal
year 2000 requirements. Both the House1 and Senate2 DOD appropriations
bills for fiscal year 2000 contain reductions in appropriations to the
OCOTF, $575 million in the House bill and $300 million in the Senate bill.
The House Appropriations Committee report3 described the reduction as
related to the termination of air operations over Kosovo and reduced air
operations tempo over SWA. The Senate Appropriations Committee report4
described the reduction as related to concerns about how money
appropriated to the OCOTF is being spent and the reduction in personnel
supporting operations in Bosnia.




1
    H.R. 2561, July 20, 1999.
2
    S. 1122, May 25, 1999.
3
    H.R. Report 106-244, July 20, 1999, p. 111.
4
    S. Report 106-53, May 25, 1999, p. 38.




Page 51                                           GAO/NSIAD-99-244BR Military Operations
Appendix I

Comments From the Department of Defense                          AA
                                                                  ppepn
                                                                      en
                                                                       dxd
                                                                         ix
                                                                          eiIs




             Page 52        GAO/NSIAD-99-244BR Military Operations
Appendix I
Comments From the Department of Defense




Page 53                                   GAO/NSIAD-99-244BR Military Operations
Appendix II

GAO Contacts and Staff Acknowledgments                                                            Appendx
                                                                                                        Ii




GAO Contacts          Carol Schuster (202) 512-3958
                      Steve Sternlieb (202) 512-4534



Acknowledgments       In addition to those named above, Joe Rutecki, Bonita Anderson, and Herb
                      Dunn made key contributions to this report.




(701158)      Leter   Page 54                                GAO/NSIAD-99-244BR Military Operations
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