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July 26, 2007: 

Congressional Committees: 

Subject: Global War on Terrorism: Reported Obligations for the 
Department of Defense: 

Since 2001, Congress has provided the Department of Defense (DOD) with 
hundreds of billions of dollars in supplemental and annual 
appropriations for military operations in support of the Global War on 
Terrorism (GWOT).[Footnote 1] DOD's reported annual costs for GWOT have 
shown a steady increase from about $0.2 billion in fiscal year 2001 to 
about $98.4 billion in fiscal year 2006. In fiscal year 2007, Congress 
provided DOD with about $161.8 billion in annual and supplemental 
appropriations[Footnote 2] for GWOT. To continue its GWOT operations, 
DOD has requested $141.7 billion in appropriations for fiscal year 
2008. The United States' commitments to GWOT will likely involve the 
continued investment of significant resources, requiring decision 
makers to consider difficult trade-offs as the nation faces an 
increasing long-range fiscal challenge. The magnitude of future costs 
will depend on several direct and indirect cost variables and, in some 
cases, decisions that have not yet been made. DOD's future costs will 
likely be affected by the pace and duration of operations, the types of 
facilities needed to support troops overseas, redeployment plans, and 
the amount of equipment to be repaired or replaced. [Footnote 3] Future 
cost variables for other U.S. government agencies include the efforts 
to help form national and provincial governments and build management 
capacity as well as capable and loyal security forces in both 
Afghanistan and Iraq. Reconstruction activities to restore, sustain, 
and protect critical infrastructure will also impose costs. Also, 
healthcare costs will likely increase as more servicemembers require 
treatment from injuries and mental health conditions such as post- 
traumatic stress disorder. 

DOD compiles and reports monthly and cumulative incremental 
obligations[Footnote 4] incurred to support GWOT in a monthly 
Supplemental and Cost of War Execution Report. DOD leadership uses this 
report, along with other information, to advise Congress on the costs 
of the war and to formulate future GWOT budget requests. DOD reports 
these obligations by appropriation, contingency operation,[Footnote 5] 
and military service or defense agency. The monthly cost reports are 
typically compiled in the 45 days after the end of the reporting month 
in which the obligations are incurred.[Footnote 6] DOD has prepared 
monthly reports on the obligations incurred for its involvement in GWOT 
since fiscal year 2001. 

Section 1221 of the National Defense Authorization Act for Fiscal Year 
2006[Footnote 7] requires us to submit quarterly updates to Congress on 
the costs of Operation Iraqi Freedom and Operation Enduring Freedom 
based on DOD's monthly Supplemental and Cost of War Execution Reports. 
This report, which responds to this requirement, contains our analysis 
of DOD's reported obligations for military operations in support of 
GWOT through April 2007. Specifically, we assessed (1) DOD's 
appropriations and reported obligations for military operations in 
support of GWOT to date and (2) DOD's fiscal year 2007 reported 
obligations for GWOT by military service and appropriation account. 

Scope and Methodology: 

To conduct our work, we analyzed applicable annual and supplemental 
appropriations from fiscal year 2001 through April 2007 and DOD's 
monthly Supplemental and Cost of War Execution Reports from September 
2001 to April 2007. Specifically, we identified appropriated amounts 
intended for GWOT and reported GWOT obligations for each operation, 
military service, and appropriation account. Our prior work[Footnote 8] 
has found the data in DOD's monthly Supplemental and Cost of War 
Execution Report to be of questionable reliability. Consequently, we 
are unable to ensure that DOD's reported obligations for GWOT are 
complete, reliable, and accurate, and they therefore should be 
considered approximations. 

DOD is taking steps to improve GWOT cost reporting. Specifically, over 
the years, we have made a series of recommendations to the Secretary of 
Defense intended to improve the transparency and reliability of DOD's 
GWOT obligations and DOD has implemented many of these recommendations. 
For example we have recommended that DOD (1) revise the cost reporting 
guidance so that large amounts of reported obligations are not shown in 
"other" miscellaneous categories and (2) take steps to ensure that 
reported GWOT obligations are reliable. In response, DOD has modified 
the guidance to more clearly define some of the cost categories and is 
taking additional steps, which we have not yet fully evaluated, to 
strengthen the oversight and program management of the cost reporting. 
Until all DOD's efforts are more fully implemented, it is too soon to 
know the extent to which these changes will improve DOD's cost 
reporting. While establishing sound cost reporting procedures and 
oversight is clearly important, the reliability of the cost-of-war 
reports is also dependent on the quality of DOD's accounting data. 
Factors contributing to DOD's challenges in reporting reliable cost 
data include long standing deficiencies in DOD's financial management 
systems. We are aware that DOD has efforts underway to improve these 
systems as well. 

We are continuing to review the fiscal year 2007 funding requirements 
and reported obligations, the reliability of the obligations, and DOD's 
ongoing efforts to improve its cost reporting, which include procedures 
for attesting to the accuracy of data and analyzing variances. We will 
report on this review later this year. We are also beginning a review 
of the process, including models and other tools, used to estimate GWOT 
funding requirements. 

We conducted our work from June 2007 through July 2007 in accordance 
with generally accepted government auditing standards. 

Summary: 

From fiscal year 2001 through July 2007, Congress has provided DOD with 
about $542.9 billion[Footnote 9] for its efforts in support of GWOT. 
DOD has reported obligations of about $429.1 billion for military 
operations in support of the war from fiscal years 2001 through 2006 
and from the beginning of fiscal year 2007 through April 2007, the 
latest available data. The $113.8 billion difference between DOD's GWOT 
appropriations and reported obligations can generally be attributed to 
certain fiscal year 2007 appropriations and multiyear funding for 
procurement; military construction; and research, development, test, 
and evaluation from previous GWOT-related appropriations that have yet 
to be obligated, and obligations for classified activities, which are 
not included in DOD's reported obligations.[Footnote 10] DOD's total 
reported obligations related to GWOT have demonstrated a steady annual 
increase each fiscal year through 2006. Figure 1 shows DOD's reported 
GWOT obligations by fiscal year, from fiscal year 2001 through fiscal 
year 2006 and from the beginning of fiscal year 2007 through April 
2007. 

Figure 1: DOD's Reported GWOT Obligations for Fiscal Years 2001 through 
2006 and from the Beginning of Fiscal Year 2007 through April 2007: 

[See PDF for Image] 

Source: GAO analysis of DOD data. 

Notes: The fiscal year 2007 figure reflects DOD's reported obligations 
from October 2006 through April 2007. Reported GWOT obligations include 
Operation Noble Eagle, Operation Enduring Freedom, and Operation Iraqi 
Freedom, and generally reflect costs reported in DOD's cost-of-war 
reports. However, the fiscal year 2002 and 2003 figures include about 
$20.1 billion which, according to DOD officials, was not reported in 
DOD's cost-of-war reports. GAO has assessed the reliability of DOD's 
obligation data and found significant problems, such that these data 
may not accurately reflect the true dollar value of GWOT obligations. 

[End of figure] 

Through April 2007, DOD's total reported obligations are already more 
than three quarters of the total amount of obligations it reported for 
all of fiscal year 2006. In addition, DOD's reported investment 
obligations--which include procurement; research, development, test, 
and evaluation; and military construction, through April 2007--are 
approximately one and a half times higher than its reported obligations 
for investments during all of fiscal year 2006. As a result, total 
reported obligations for fiscal year 2007 may well exceed the amount 
reported for fiscal year 2006. 

DOD's reported obligations to date include about $324.9 billion for 
operations in and around Iraq as part of Operation Iraqi Freedom, and 
about $76.5 billion for operations in Afghanistan, the Horn of Africa, 
the Philippines, and elsewhere as part of Operation Enduring Freedom. 
It also includes about $27.7 billion for operations in defense of the 
homeland as part of Operation Noble Eagle. Figure 2 shows DOD's 
reported GWOT obligations for Operation Iraqi Freedom, Operation 
Enduring Freedom, and Operation Noble Eagle from fiscal year 2001 
through April 2007. 

Figure 2: DOD's Reported GWOT Obligations by Operation for Fiscal Years 
2001 through 2006 and from the Beginning of Fiscal Year 2007 through 
April 2007: 

[See PDF for Image] 

Source: GAO analysis of DOD data. 

Notes: The fiscal year 2007 figure reflects DOD's reported obligations 
from October 2006 through April 2007. Operation Iraqi Freedom began in 
fiscal year 2003; therefore no obligations were reported in fiscal 
years 2001 and 2002 for this operation. Reported GWOT obligations 
generally reflect costs reported in DOD's cost-of-war reports. However, 
the fiscal year 2002 and 2003 figures include about $20.1 billion 
which, according to DOD officials, was not reported in DOD's cost-of- 
war reports. GAO has assessed the reliability of DOD's obligation data 
and found significant problems, such that these data may not accurately 
reflect the true dollar value of GWOT obligations. 

[End of figure] 

As figure 2 shows, from fiscal years 2003 through 2006 DOD's reported 
obligations for Operation Iraqi Freedom consistently increased both in 
dollar amount and as a proportion of total reported GWOT obligations. 
In contrast, DOD's reported obligations for Operation Noble Eagle have 
consistently decreased since fiscal year 2003, while those for 
Operation Enduring Freedom have remained within a range of $10.3 
billion to $15.9 billion each fiscal year. 

DOD's reported fiscal year 2007 obligations as of April 2007 total 
$76.6 billion. The Army accounts for the largest proportion of reported 
obligations--about $55.0 billion, nearly eight times higher than the 
almost $6.9 billion in obligations reported for the Marine Corps, the 
service with the next greatest reported amount. Among appropriation 
accounts, operation and maintenance, which include items such as 
support for housing, food, and services; the repair of equipment; and 
transportation to move people, supplies, and equipment, accounts for 
the largest reported obligations--about $38.9 billion. Obligations for 
investment, which include procurement; research, development, test, and 
evaluation; and military construction, account for more than a quarter 
of reported obligations or about $21.6 billion. Figure 3 shows DOD's 
reported obligations through April of fiscal year 2007, by military 
service and appropriation account. 

Figure 3: DOD's Reported GWOT Obligations for Fiscal Year 2007, by 
Military Service and Appropriation Category, as of April 2007: 

[See PDF for Image] 

Source: GAO analysis of DOD data. 

Notes: GAO has assessed the reliability of DOD's obligation data and 
found significant problems, such that these data may not accurately 
reflect the true dollar value of GWOT obligations. Obligation figures 
may not add to $76.6 billion because of rounding. 

[End of figure] 

In previous work,[Footnote 11] we reported that significant amounts of 
multiyear procurement funding provided in the fiscal year 2006 
supplemental appropriation would likely not be obligated by DOD in 
fiscal year 2006 and would remain available for use in fiscal year 
2007. A large amount of these multiyear funds has since been obligated. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, DOD did not take 
exception to any of the updated cost information presented in this 
report. DOD did express concern, as it did in responding to our prior 
update in May 2007, about our observations on the reliability of its 
reported cost information. Specifically DOD stated that it has already 
taken action to address concerns we have raised regarding the 
reliability of the data presented in DOD's Supplemental and Cost of War 
Execution Reports, including requiring component organizations to 
attest to the accuracy of the data submitted, report data variances and 
the methodology for computing the data, and increased management 
oversight of the cost reporting process. DOD also expressed concern 
that we continue to represent the data in these cost-of-war reports as 
being of questionable reliability. We agree that DOD has taken steps to 
improve cost reporting, which we acknowledge in our report. We also 
note DOD is just beginning to implement many of these efforts. As we 
state in our scope and methodology section, we are currently evaluating 
the reliability of GWOT cost data, as well as the attestation and 
variance analysis processes, to gain insights into their effect on data 
reliability and will be reporting on the results of our review later 
this year. Until all DOD's efforts are more fully implemented, it is 
too soon to know the extent to which these changes will improve DOD's 
cost reporting. Therefore, users of DOD's reported cost information 
need to continue to exercise caution. While establishing sound cost 
reporting procedures and oversight is clearly important, the 
reliability of the cost-of-war reports is also dependent on the quality 
of DOD's accounting data. As stated in our report, factors contributing 
to DOD's challenges in reporting reliable cost data include long 
standing deficiencies in DOD's financial management systems. We are 
aware that DOD has efforts underway to improve these systems as well. 
DOD also provided technical comments and we have incorporated them in 
the report as appropriate. DOD's comments are included in appendix I in 
this report. 

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. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-9619 or pickups@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Key contributors to this report are 
listed in appendix II. 

Signed by: 

Sharon Pickup: 
Director, Defense Capabilities and Management: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

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

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

The Honorable John P. Murtha: 
Chairman: 
The Honorable C. W. Bill Young: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Comments from the Department of Defense: 

Office of The Under Secretary Of Defense: 
1100 Defense Pentagon: 
Washington, D.C. 20301-1100: 
Comptroller: 

Ms. Sharon Pickup: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Ms. Pickup: 

This is the Department of Defense (DoD) response to the Government 
Accountability Office (GAO) Draft Report GAO-07-1056R, "Global War On 
Terrorism: Reported Obligations for the Department of Defense dated 
July 3, 2007 (GAO Code 350990). 

The Department has already taken prudent and appropriate action to 
address GAO's concerns. Based on GAO recommendations, each of the 
Department's component organizations attests in writing to the accuracy 
of the data submitted for the Department's Cost of War reports. In 
addition, the Department requires and analyzes footnotes in the Cost of 
War reports. These footnotes report data variances and describe the 
methodology for computing data. The Department has also increased 
management oversight of the cost of war reporting process by 
establishing a senior level steering group and program management 
office. I am concerned, however, that, despite our actions, the GAO 
report continues to represent the data in the Department's Cost of War 
report as being of questionable reliability. 

We are constantly striving to improve the Cost of War report. We value 
the GAO's important contribution to our process of continual 
improvement. We look forward to working with your staff on our plans to 
further improve the Department's Cost of War reports. 

Sincerely, 

Signed by: 

J David Patterson: 
Principal Deputy: 

[End of section 

Appendix II: GAO Contact and Staff Acknowledgements: 

GAO Contact: Sharon Pickup (202) 512-9619: 

Acknowledgements: In addition to the contact listed above, Ann Borseth, 
Assistant Director, Susan Ditto, George Duncan, Richard Geiger, Ron La 
Due Lake, Brian Mateja, Lonnie McAllister, Christopher Miller, and 
Thomas Twambly made key contributions to this report. 

(350990): 

FOOTNOTES 

[1] After the terrorist attacks of September 11, 2001, the President 
announced a Global War on Terrorism, requiring the collective 
instruments of the entire federal government to counter the threat of 
terrorism. Ongoing military and diplomatic operations overseas, 
especially in Iraq and Afghanistan, constitute a key part of GWOT. 
These operations involve a wide variety of activities, such as 
combating insurgents, civil affairs, capacity building, infrastructure 
reconstruction, and training military forces of other nations. 

[2] Of the $161.8 billion, Congress provided $67.4 billion in Title IX 
of the Department of Defense Appropriation Act, 2007 as bridge funding 
to support ongoing operations early in the fiscal year. Congress 
provided the remaining $94.4 billion in the U.S. Troop Readiness, 
Veterans' Care, Katrina Recovery, and Iraq Accountability Act, 2007. 

[3] For more information see GAO, Securing, Stabilizing, and Rebuilding 
Iraq: Key Issues for Congressional Oversight, GAO-07-308SP (Washington, 
D.C.: Jan. 9, 2007), and Global War on Terrorism: Observations on 
Funding, Costs, and Future Commitments, GAO-06-885T (Washington, D.C.: 
July 18, 2006). 

[4] According to Department of Defense Financial Management Regulation, 
7000.14-R, Volume 1, Definitions, p. xvii (December 2001), obligations 
are incurred through actions such as orders placed, contracts awarded, 
services received, or similar transactions made by federal agencies 
during a given period that will require payments during the same or a 
future period. 

[5] DOD defines contingency operations to include small, medium, and 
large-scale campaign-level military operations, including support for 
peacekeeping operations, major humanitarian assistance efforts, 
noncombatant evacuation operations, and international disaster relief 
efforts. 

[6] Volume 12, Chapter 23, of DOD's Financial Management Regulation, 
7000.14-R. This regulation generally establishes financial policy and 
procedures related to DOD contingency operations. Volume 6A, Chapter 2, 
and Volume 3, Chapter 8, of the DOD Financial Management Regulation 
also include provisions to ensure the accuracy of cost reporting. 

[7] Pub. L. No. 109-163,  1221(c) (2006). 

[8] For more information see GAO, Global War on Terrorism: DOD Needs to 
Improve the Reliability of Cost Data and Provide Additional Guidance to 
Control Costs, GAO-05-882 (Washington, D.C.: Sept. 21, 2005), and 
Global War on Terrorism: Fiscal Year 2006 Obligation Rates Are Within 
Funding Levels and Significant Multiyear Procurement Funds Will Likely 
Remain Available for Use in Fiscal Year 2007, GAO-07-76 (Washington, 
D.C.: Nov. 13, 2006). 

[9] From fiscal year 2001 through fiscal year 2004, military operations 
in defense of the homeland (Operation Noble Eagle) were funded through 
supplemental appropriations. Since fiscal year 2005, DOD has funded 
these operations through its regular budget, and these amounts cannot 
be separately identified. Therefore, the $542.9 billion includes 
funding for Operation Noble Eagle only from fiscal years 2001 through 
2004. 

[10] Appropriations for military personnel and operation and 
maintenance are usually available for 1 year, while appropriations for 
research and development funds are usually available for 2 years; 
procurement funds (with the exception of shipbuilding funds, which are 
sometimes longer) for 3 years; and military construction funds for 5 
years. 

[11] GAO-07-76.

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