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Encourage Fiscal Discipline and Optimize the Use of Tools Intended to 
Improve GWOT Cost Reporting' which was released on November 6, 2007. 

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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

November 2007: 

Global War On Terrorism: 

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

GAO-08-68: 

GAO Highlights: 

Highlights of GAO-08-68, a report to congressional committees. 

Why GAO Did This Study: 

Since the September 2001 terrorist attacks, Congress has provided about 
$542.9 billion, as of May 2007, to the Department of Defense (DOD) for 
the Global War on Terrorism (GWOT). Prior GAO reports have found DODís 
reported GWOT obligation data unreliable and problems with transparency 
over certain costs. DOD made changes to its reporting procedures, 
requiring components to perform a monthly variance analysis on 
obligation data and to include affirmation statements attesting to the 
accuracy of cost data. 

Under the Comptroller Generalís authority to conduct evaluations on his 
own initiative, GAO assessed (1) the outlook of DODís reported GWOT 
obligations for fiscal year 2007 and funding requests for fiscal year 
2008, (2) the effect of changes in DODís GWOT funding guidance, and (3) 
DODís progress in implementing variance analysis and affirmation 
statements. 

For this engagement, GAO analyzed fiscal year 2007 GWOT-related 
appropriations and reported obligations, as well as DODís corrective 
actions. 

What GAO Found: 

Through June 2007, DODís reported obligations for fiscal year 2007 of 
$95.4 billion were almost equal to its total reported GWOT obligations 
for fiscal year 2006. After GWOT obligations are reported for the 
remaining 3 months of fiscal year 2007, which are now averaging $10.6 
billion a month, total obligations will significantly exceed those for 
fiscal year 2006. Further, changes to the Presidentís fiscal year 2008 
GWOT request for DOD have been submitted to fund operational 
requirements that were not included in the original request. These 
include decisions in January 2007 to increase or ďsurgeĒ troop levels 
in Iraq, and in September 2007 to begin to withdraw these troops during 
fiscal year 2008. These amendments, totaling nearly $47.6 billion, 
bring the total fiscal year 2008 GWOT funding request for DOD to about 
$189.3 billion. 

Changes in DODís GWOT funding guidance have resulted in billions of 
dollars being added to GWOT funding requests for what DOD calls the 
ďlonger war against terror,Ē making it difficult to distinguish between 
incremental costs to support specific contingency operations and base 
costs. Although emergency funding has historically been used to support 
unexpected costs of contingency operations, in October 2006, DOD 
revised guidance to allow for additional costs. As a result, the fiscal 
year 2007 and 2008 requests included funding for items generally 
requested in DODís base budget, such as future weapon systems, 
transformation, and increases to military end strength. GAO believes 
similarities, in some cases, between DODís GWOT and base funding 
requests, along with the duration of GWOT operations, indicate DOD has 
reached the point where it should build more funding into its base 
budget. Without clearly defining the ďlonger war against terrorĒ and 
increasing the transparency between incremental and base costs, 
decision makers cannot assess priorities and potential trade-offs. If 
the administration believes the nation is engaged in a long-term 
conflict, the implications should be considered during annual budget 
deliberations. Continuing to fund GWOT through emergency requests 
reduces transparency and avoids the necessary reexamination of 
commitments, investment priorities, and trade-offs. 

DOD has achieved some positive results and GWOT cost reporting 
continues to evolve. More action is needed to optimize the tools 
intended to improve GWOT cost reporting. DOD has begun to improve 
transparency by requiring components to analyze variances in reported 
obligations and to disclose reasons for significant changes. GAO found 
that required explanations, in some instances, were not disclosed due 
to inadequate management oversight, and other types of analysis could 
help identify obligations omitted from reports, such as about $1.5 
billion in Marine Corps obligations. Also, in some cases, components 
did not provide required affirmation statements to attest to accuracy 
nor were they required to disclose the basis for statements or note the 
outcome of variance analyses. Without more complete information and a 
more robust methodology, DOD does not yet have the data needed to 
assess reliability or to be confident adequate steps are taken to 
validate cost data. 

What GAO Recommends: 

GAO makes 11 recommendations on GWOT funding requests and the 
reliability of cost reports, including better defining incremental and 
base costs, building more funding into DODís base budget, and 
performing additional analyses on variances. DOD generally agreed with 
the recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink http://www.GAO-08-68]. For more information, contact Sharon 
Pickup at (202) 512-9619 or pickups@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

DOD's Fiscal Year 2007 Reported GWOT Obligations Will Significantly 
Exceed Those of Fiscal Year 2006, and Changes to DOD's Fiscal Year 2008 
GWOT Funding Request Have Been Submitted: 

Changes in DOD's GWOT Funding Guidance Has Made It Difficult to 
Distinguish between Incremental Costs and Base Costs: 

DOD Has Achieved Some Positive Results; Further Action Is Needed to 
Optimize Use of Tools Intended to Improve Cost Reporting: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: DOD's Fiscal Year 2007 GWOT Appropriations and 
Obligations: 

Appendix III: Process for Calculating Variance Analyses: 

Appendix IV: Comments from the Department of Defense: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Fiscal Year 2007 Appropriations Identified for GWOT for the 
Military Services: 

Table 2: DOD's Formula for Calculating the Burn Rate for the Variance 
Analysis of Reported GWOT Obligation Amounts: 

Table 3: Thresholds for Determining If an Explanation Is Required for a 
Variance: 

Figures: 

Figure 1: DOD's Cumulative Reported GWOT Obligations for Fiscal Years 
2001 through 2006: 

Figure 2: DOD's Reported GWOT Obligations for Fiscal Years 2001 through 
2006 by Operation: 

Figure 3: DOD's Reported GWOT Obligations for Fiscal Year 2007, by DOD 
Component and Appropriation Account, as of June 2007: 

Figure 4: Number of Missing Variance Explanations and Related Dollar 
Amount of Obligations by DOD Component: 

Figure 5: Military Services' Fiscal Year 2007 Reported GWOT Military 
Personnel Obligations of Appropriations Identified for GWOT through 
June 2007: 

Figure 6: Military Services' Fiscal Year 2007 Reported GWOT Operation 
and Maintenance Obligations of Appropriations Identified for GWOT 
through June 2007: 

Figure 7: Military Services' Fiscal Year 2007 Reported GWOT Procurement 
Obligations of Appropriations Identified for GWOT through June 2007: 

Abbreviations: 

DFAS: Defense Finance and Accounting Service: 

DOD: Department of Defense: 

GWOT: Global War on Terrorism: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

November 6, 2007: 

Congressional Committees: 

Since the September 11, 2001 terrorist attacks, Congress has provided 
about $542.9 billion, as of May 2007, to the Department of Defense 
(DOD) in annual and supplemental appropriations for domestic and 
overseas military operations in support of the Global War on Terrorism 
(GWOT).[Footnote 1] This amount includes about $161.8 billion in annual 
and supplemental emergency appropriations for fiscal year 
2007.[Footnote 2] In the President's fiscal year 2008 budget proposal 
submitted in February 2007, DOD requested about $481.4 billion for its 
base budget needs and about $141.7 billion to fund "urgent needs" 
associated with ongoing operations in Iraq and Afghanistan and other 
costs of GWOT.[Footnote 3] Subsequently, on July 31, 2007, the 
President amended DOD's fiscal year 2008 GWOT funding request, 
increasing the request by $5.3 billion to maximize the production and 
fielding of new armored vehicles for service members in Iraq and 
Afghanistan. On October 22, 2007, the President submitted an additional 
amendment to DOD's fiscal year 2008 GWOT request for about $42.3 
billion to cover requirements related to operational changes, 
particularly in Iraq, that were not included in the initial request. 
DOD's total fiscal year 2008 GWOT budget request now stands at $189.3 
billion. As of June 2007, DOD reported total obligations of about 
$447.8 billion for GWOT, including about $340.3 billion for Operation 
Iraqi Freedom in Iraq and $79.9 billion for Operation Enduring Freedom 
in Afghanistan.[Footnote 4] 

Past administrations generally used emergency funding requests to fund 
the initial or unexpected costs of most contingency 
operations.[Footnote 5] DOD's previous guidance in building requests 
directed components to request funding for the incremental costs above 
base budget funding needed to support specific forces and capabilities 
required to execute these contingency operations during the fiscal 
year. Incremental costs are defined as additional costs to DOD 
components that would not have been incurred if a contingency 
operation, like Operation Enduring Freedom or Operation Iraqi Freedom, 
had not been supported. However, this guidance was revised for fiscal 
year 2007. Beginning with its fiscal year 2007 supplemental funding 
request for GWOT, DOD directed its components to include in their GWOT 
requests funding for what it characterized as the "longer war against 
terror" as well as for the specific contingency operations in Iraq and 
Afghanistan. According to DOD officials, the components were also 
expected to apply this guidance in developing fiscal year 2008 
requests. 

DOD reports its GWOT-related costs in terms of obligations, which it 
incurs through actions such as orders placed, contracts awarded, 
services received, or similar transactions. Obligations incurred during 
a given period may require payments during the same or a future period. 
DOD compiles and reports obligations incurred to support GWOT in a 
monthly Supplemental and Cost of War Execution Report (cost-of-war 
report). DOD leadership uses this report, along with other information, 
to evaluate the costs of the war and to formulate future GWOT funding 
requests. The report identifies monthly and cumulative incremental GWOT 
obligations for the current fiscal year. DOD reports these obligations 
by appropriation, contingency operation, 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. DOD has prepared monthly reports on the obligations 
incurred for its involvement in GWOT since fiscal year 2001. 

Over the years, we have conducted a series of reviews under the 
Comptroller General's authority examining the funding and reported 
obligations for military operations in support of GWOT. Based on this 
work, we have made a series of recommendations to the Secretary of 
Defense intended to improve the transparency and reliability of DOD's 
cost information on GWOT obligations and to adjust GWOT funding 
requests, and DOD has implemented many of these. For example, in 
September 2005 and in November 2006, we reported that continued 
problems with transparency over DOD's costs and inaccuracies in 
reported obligations make it difficult for DOD and Congress to reliably 
know how much the war is costing, examine details on how appropriated 
funding is being spent, or have historical data useful in considering 
future funding needs.[Footnote 6] In response, DOD has taken a number 
of steps, including modifying its guidance to more clearly define some 
of its cost categories and issuing guidance to the secretaries of the 
military services and the directors of the defense agencies intended to 
help DOD components more accurately and consistently report obligations 
for contingency operations conducted in support of GWOT. This guidance 
directed DOD components to perform a monthly variance analysis, which 
is a tool to determine the factors that cause differences, if any, 
between reported obligations for certain cost categories and the 
average amount of obligations for the same categories during the fiscal 
year. DOD components submit their explanations for these differences to 
the Defense Finance and Accounting Service (DFAS) along with their 
reported obligation information for inclusion in the monthly 
Supplemental and Cost of War Execution Report. To further establish 
accountability, the DOD Comptroller required each DOD component to 
attest to the accuracy of the monthly Supplemental and Cost of War 
Execution Report submissions and affirm that this information provides 
a fair representation of ongoing activities related to those 
operations. Furthermore, in July 2006, we testified that the President 
should consider funding additional GWOT costs through DOD's base 
budget, as has been done with Operation Noble Eagle, instead of through 
emergency supplemental funding requests.[Footnote 7] 

We prepared this report under the Comptroller General's authority to 
conduct evaluations on his own initiative. To assist Congress in its 
oversight role and to help it consider future GWOT funding needs, we 
assessed (1) DOD's fiscal year 2007 reported obligations for GWOT by 
operation, military service, and appropriation account based on data 
through June 2007 to determine the outlook of obligations in fiscal 
year 2007 and funding requests for fiscal year 2008, (2) changes in 
DOD's GWOT funding guidance to determine the effect on the department's 
base budget and GWOT funding requests, and (3) DOD's progress in 
implementing variance analysis and affirmation statements as tools to 
improve GWOT cost reporting. 

To assess DOD's reported obligations for GWOT in fiscal year 2007, the 
outlook of obligations for the remainder of the fiscal year, and its 
funding requirements for GWOT in fiscal year 2008, we analyzed DOD's 
October 2006 through June 2007 Supplemental and Cost of War Execution 
Reports and reviewed applicable supplemental and annual appropriations 
and DOD reports on the transfer of funds between various appropriation 
accounts. We then reviewed the same documents for past fiscal years to 
determine if fiscal year 2007 obligations were greater than, equal to, 
or less than the previous fiscal years. We also interviewed key 
officials from the Office of the Under Secretary of Defense 
(Comptroller)[Footnote 8] and the Army, Navy, Marine Corps, and Air 
Force to obtain their projections of GWOT obligations through the end 
of the fiscal year and potential requirements for fiscal year 2008. As 
previously reported, we 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 should 
therefore be considered approximations. To examine the impact of 
changes in DOD's GWOT funding guidance on DOD's base budget and GWOT 
funding requests, we reviewed guidance issued by DOD regarding the 
submission of requirements for GWOT funding. We analyzed DOD's base 
budget and GWOT funding requests, to determine what changes had 
occurred in these submissions as a result of the guidance. We also 
interviewed key officials from the DOD Comptroller, Army, Navy, Marine 
Corps, and Air Force to determine how they interpreted and implemented 
this guidance. To examine DOD's progress in implementing variance 
analysis and affirmation statements as tools to improve GWOT cost 
reporting, we reviewed guidance issued by DOD for the analysis and 
reporting of GWOT obligations and the information reported in DOD's 
cost-of-war reports. We also interviewed key officials from the DOD 
Comptroller, DFAS, Army, Navy, Marine Corps, and Air Force about their 
reporting and analysis processes. For the 5-month period from November 
2006 through March 2007, we determined whether required variance 
explanations were included in the cost-of-war reports in accordance 
with DOD's guidance. Finally, for the same 5-month period, we reviewed 
affirmations associated with DOD cost-of-war reports to determine 
whether all required affirmations were submitted before the reports 
were issued. Further details about our scope and methodology can be 
found in appendix I. 

We performed our work from November 2006 through August 2007 in 
accordance with generally accepted government auditing standards. 

Results in Brief: 

Our analysis of DOD's fiscal year 2007 reported obligations through 
June 2007 shows that, at that time, DOD's reported GWOT obligations 
were almost equal to all GWOT obligations for fiscal year 2006. After 
GWOT obligations are reported for the remaining 3 months of fiscal year 
2007, total obligations will significantly exceed those for fiscal year 
2006. Further, changes to the President's fiscal year 2008 GWOT request 
for DOD have been submitted to the Congress to fund operational 
requirements that were not funded in the original request. As of June 
2007, which represents 9 months (75 percent) of fiscal year 2007, DOD's 
reported obligations of about $95.4 billion were already roughly equal 
to reported obligations of about $98.4 billion for all of fiscal year 
2006. In the three months of fiscal year 2007 remaining to be reported, 
DOD will continue to incur and report obligations, which are averaging 
about $10.6 billion a month. This increase in fiscal year 2007 reported 
obligations is due in part to the cost of deploying an additional 
30,000 troops to support operations in Iraq as part of the surge 
strategy and the deployment of additional personnel to Afghanistan to 
provide increased security against an anticipated insurgent offensive. 
Since these additional forces were not fully in place until the end of 
June, it is likely that the full financial effect of these and other 
ongoing operations in theater will not be seen until obligations have 
been reported for the last 3 months of fiscal year 2007, beginning with 
the July cost-of-war report. Also adding to the increased fiscal year 
2007 obligations is DOD's need to repair or replace billions of dollars 
worth of equipment after nearly 6 years of ongoing operations. 
Consequently, obligations for procurement, which include aircraft, 
munitions, vehicles, communications and electronics equipment account 
for nearly a quarter of reported obligations in fiscal year 2007 
through June 2007--about $21.5 billion. This amount is approximately 
one and a half times reported obligations for procurement during all of 
fiscal year 2006. Since 60 percent, or about $24.7 billion, of the 
military services procurement funding was provided in the fiscal year 
2007 GWOT supplemental appropriation, which was not signed into law 
until May 2007, it is likely that DOD's reported obligations for 
procurement will continue to increase as these additional funds are 
obligated. Because these procurement funds are available for obligation 
over multiple years, some fiscal year 2007 procurement funding will 
likely be obligated in fiscal year 2008 and beyond. In October 2007, 
the President submitted an amendment to the fiscal year 2008 GWOT 
request for DOD to cover funding needs related to operational changes, 
particularly in Iraq, such as the administration's decisions in January 
2007 to increase or "surge" troop levels in Iraq, and in September 2007 
to begin to withdraw these troops during fiscal year 2008. This 
amendment totals about $42.3 billion, which will help fund, among other 
things, an additional five combat brigades and other forces deployed as 
part of the President's surge strategy in Iraq, additional Mine 
Resistant Ambush Protected vehicles, and reconstitution of military 
equipment. The President's revised fiscal year 2008 GWOT funding 
request for DOD will total about $189.3 billion. 

Changes in DOD's GWOT funding guidance have resulted in billions of 
dollars being added to GWOT funding requests for what DOD calls the 
"longer war against terror," making it difficult to distinguish between 
incremental costs to support specific contingency operations and longer 
term costs typically associated with DOD's baseline budget. In the 
past, emergency funding requests have generally been used to support 
the initial or unexpected costs of contingency operations. Once a 
limited and partial projection of costs could be made, past 
administrations have generally requested further funding in DOD's base 
budget requests. We have previously encouraged the administration to 
include known or likely projected costs of ongoing operations related 
to GWOT within DOD's base budget requests. However, current 
administration policy dictates that the costs of ongoing military 
operations in support of GWOT, such as Operation Enduring Freedom and 
Operation Iraqi Freedom, should be requested as emergency funding. In 
October 2006, the Deputy Secretary of Defense issued a memo expanding 
the ground rules for DOD's GWOT requests by allowing the inclusion of 
funding needs related to what DOD called the "longer war against 
terror," rather than limiting the request to contingency operations 
such as Operation Enduring Freedom or Operation Iraqi Freedom, without 
clearly defining the "longer war." As a result of DOD's new GWOT 
funding guidance, the line between what has historically been requested 
as emergency funding and what has historically been requested as part 
of DOD's base budget has been blurred. For example, DOD's fiscal year 
2008 GWOT request includes funding for a Joint Strike Fighter that will 
not be operationally capable for several years, five CV-22 Vertical 
Lift Aircraft that will not be available until 2009, and about $1.6 
billion to accelerate transformation and increases to end strength of 
the Army and Marine Corps. DOD's position is that it is appropriate to 
request emergency funding for longer term items because of the ongoing 
nature of GWOT and the need to repair and replace equipment that is 
being depleted at a greater than normal or peacetime rate. However, we 
believe it is precisely because the administration defines GWOT as long 
term that the costs implicit in any strategy should be transparent and 
subject to discussion and debate. Furthermore, we believe, in some 
cases, the similarities between DOD's GWOT and base funding requests, 
coupled with the duration of GWOT operations, indicate that DOD has 
reached the point where it needs to build more funding into its base 
budget. Without a clear definition of the "longer war against terror" 
and clearer distinctions between what constitutes incremental versus 
base costs, decision makers lack an integrated picture and the ability 
to set priorities and make trade-offs between the costs of ongoing 
operations and DOD's long-term funding needs. If the administration 
believes that the nature of the security challenges facing the United 
States has changed such that we are engaged in a long-term conflict, 
the implications--for example, in terms of force structure, investment 
priorities, and long-term versus short-term costs--should be the focus 
of discussion with Congress. Continuing to fund the GWOT through 
emergency funding requests reduces transparency and avoids the 
necessary reexamination and discussion of defense commitments and the 
trade-offs among funding needs that may be required. 

DOD has achieved some positive results and GWOT cost reporting 
continues to evolve. At the same time, more action is needed to 
optimize the use of tools intended to improve GWOT cost reporting. For 
example, for the 5-month period we reviewed, DOD made some progress in 
improving the transparency of monthly cost-of-war information by 
requiring components to analyze variances in reported obligations and 
to disclose underlying reasons for significant changes. In addition, 
according to DOD officials, studying the causes of significant 
obligation variances has helped DOD components identify and correct 
inaccurately reported obligations. However, we identified instances 
where required explanations for significant variances in obligations 
were not disclosed due to inadequate management oversight. Further, 
other techniques beyond variance analysis may be needed to identify 
GWOT obligations that were omitted from the cost-of-war reports. For 
example, by comparing available funding with obligations data we 
identified approximately $1.5 billion in obligations that were omitted 
from the October 2006 through February 2007 cost-of-war reports for the 
Marine Corps. In addition, in some cases, components did not provide 
required affirmation statements to attest to the accuracy of their 
reports. We also determined that affirmation requirements do not 
require components to disclose the basis for affirmation statements or 
note the overall outcome of variance analyses. Without more complete 
information and a more robust methodology, including standardized 
quality assurance processes, DOD does not yet have sufficient 
information to assess the reliability of cost data submitted by the 
components nor can it be confident that adequate steps have been taken 
to validate the cost data. 

To improve transparency related to funding the war on terrorism, and 
permit reexamination and analysis of our defense commitments, we 
recommend that the Secretary of Defense direct the Under Secretary of 
Defense (Comptroller) to (1) issue guidance defining what constitutes 
the "longer war against terror," identify what costs are related to 
that longer war, and build these costs into the base defense budget; 
(2) identify incremental costs of the ongoing GWOT operations that can 
be moved into the base budget; and (3) in consultation with the Office 
of Management and Budget, consider limiting emergency funding requests 
to truly unforeseen or sudden events. Also, to further improve the 
reliability of DOD's reported obligation information, we recommend that 
the Secretary of Defense direct the Under Secretary of Defense 
(Comptroller) to develop and implement additional guidance with regard 
to the implementation of the variance analysis and affirmation 
statements included in DOD's monthly cost-of-war reports. 

In written comments on a draft of this report, DOD generally agreed 
with 10 of our recommendations and did not agree or disagree with an 
11th recommendation. 

DOD did not agree or disagree with our recommendation that the use of 
emergency funding requests be limited to truly unforeseen or sudden 
events. Instead, DOD noted that the Office of Management and Budget, 
not the Secretary of Defense, makes the determination concerning the 
use of emergency funding requests. Therefore, to recognize the role of 
the Office of Management and Budget, we have changed the recommendation 
to read: "We recommend that the Secretary of Defense, in consultation 
with the Office of Management and Budget, consider limiting emergency 
funding requests to truly unforeseen or sudden events." 

DOD's comments and our evaluation of them are discussed in detail in a 
later section of this report and the department's comments are 
reprinted in appendix IV. 

Background: 

Since the terrorist attacks of September 11, 2001, the United States 
has undertaken military operations worldwide to fight terrorism as part 
of GWOT. Military operations to combat terrorism began with Operation 
Noble Eagle, aimed at defending the U.S. homeland against terrorist 
attacks, and Operation Enduring Freedom, which takes place principally 
in and around Afghanistan, but also covers additional operations in the 
Horn of Africa, the Philippines, and elsewhere. In 2003, the United 
States began Operation Iraqi Freedom, which takes place principally in 
Iraq. These operations involve a wide variety of activities such as 
combating insurgents, training the military forces of other nations, 
and conducting small-scale reconstruction and humanitarian relief 
projects. DOD is responsible for carrying out these activities. 

Since September 2001, funding for military operations in support of 
GWOT has generally been provided through annual appropriations or 
supplemental appropriations as emergency funding[Footnote 9] 
essentially outside of the annual budget process. A majority of this 
funding has come as supplemental appropriations, which are requested by 
the department and approved by Congress separately from DOD's annual 
appropriation. The portion of annual appropriations for GWOT, also 
known as "Title IX" or "bridge funding" was provided by Congress to pay 
for ongoing military operations during the first part of the fiscal 
year in 2005,[Footnote 10] 2006, and 2007. For fiscal year 2007, 
Congress provided DOD with about $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. In February 2007, 
the President submitted a request for supplemental appropriations and 
Congress provided DOD with an additional about $94.4 billion in the 
U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq 
Accountability Act, 2007. 

In his fiscal year 2008 budget, the President included a request for 
GWOT funding in the budget submission for the first time since 
September 2001. This action was consistent with a requirement in 
section 1008 of the John Warner National Defense Authorization Act for 
Fiscal Year 2007[Footnote 11] which required the President's future 
budget submissions after fiscal year 2007 to include a request for the 
appropriation of funds for ongoing military operations in Afghanistan 
and Iraq for that fiscal year, an estimate of all funds expected to be 
required in that fiscal year for such operations, and a detailed 
justification of the funds requested. This fiscal year 2008 GWOT 
funding request, totaling $141.7 billion, was submitted along with 
DOD's annual budget request, but was requested as emergency funding. 
The GWOT funding request contained the caveat that it was based upon 
the department's best estimate of war funding needs as of February 2007 
and, if circumstances warranted, the department would seek to amend the 
request as appropriate. 

DOD's total reported obligations related to GWOT have increased 
steadily each fiscal year through 2006 for a cumulative total of $352.5 
billion, as shown in figure 1. As discussed later, the trend in growing 
costs is expected to continue through fiscal year 2007. As of June 
2007, DOD reported obligations of about $95.4 billion for fiscal year 
2007. 

Figure 1: DOD's Cumulative Reported GWOT Obligations for Fiscal Years 
2001 through 2006: 

[See PDF for image] 

This figure is a line graph representing DOD's Cumulative Reported GWOT 
Obligations for Fiscal Years 2001 through 2006. The vertical axis of 
the graph represents obligations in billions from 0 to 400. The 
horizontal axis of the graph represents fiscal years 2001 through 2006. 

The following data is depicted: 

Fiscal year 2001: 
GWOT Obligations: $0.2. 

Fiscal year 2002: 
GWOT Obligations: $29.4. 

Fiscal year 2003: 
GWOT Obligations: $98.0. 

Fiscal year 2004: 
GWOT Obligations: $169.2. 

Fiscal year 2005: 
GWOT Obligations: $254.0. 

Fiscal year 2006: 
GWOT Obligations: $352.5. 

Source: GAO analysis of DOD data. 

Note: Cumulative reported GWOT obligations by fiscal year generally 
reflect costs reported in DOD's cost-of-war reports. However, the 
fiscal year 2002 and 2003 figures include about $20.1 billion that, 
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 shown in figure 2, DOD's reported obligations for GWOT at the end of 
each fiscal year have increased from about $0.2 billion in fiscal year 
2001 to about $98.4 billion in fiscal year 2006. A majority of this 
increase is due to reported obligations for Operation Iraqi Freedom, 
which have consistently increased in both 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 since 2002. 

Figure 3: DOD's Reported GWOT Obligations for Fiscal Years 2001 through 
2006 by Operation: 

[See PDF for image] 

This figure is a line graph consisting of three lines representing 
DOD's Cumulative Reported GWOT Obligations for Fiscal Years 2001 
through 2006 by Operation. The vertical axis of the graph represents 
obligations in billions from 0 to 100. The horizontal axis of the graph 
represents fiscal years 2001 through 2006. 

Fiscal year 2001: 
GWOT Obligations: $0.2. 

Fiscal year 2002: 
GWOT Obligations: $29.1. 

Fiscal year 2003: 
GWOT Obligations: $68.6. 

Fiscal year 2004: 
GWOT Obligations: $71.3 

Fiscal year 2005: 
GWOT Obligations: $84.8. 

Fiscal year 2006: 
GWOT Obligations: $98.4. 

Operation Iraqi Freedom reported obligations through fiscal year 2006: 
$259.0; 
Operation Enduring Freedom reported obligations through fiscal year 
2006: $66.1; 
Operation Noble Eagle reported obligations through fiscal year 2006: 
$27.4. 

Source: GAO analysis of DOD data. 

Note: Operation Iraqi Freedom began in fiscal year 2003; therefore no 
obligations were reported in fiscal years 2001 and 2002 for this 
operation. Fiscal year 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 that, 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] 

In previous reports,[Footnote 12] we identified numerous problems in 
DOD's processes for recording and reporting obligations, raising 
significant concerns about the overall reliability of DOD's reported 
obligations. On its own initiative and in response to our 
recommendations, DOD has placed greater management focus on weaknesses 
in GWOT cost reporting and taken a number of steps intended to improve 
the reliability and accuracy of reported obligations. Factors affecting 
the reliability of DOD's reported costs include long-standing 
deficiencies in hundreds of nonintegrated financial management systems 
requiring manual entry of some data in multiple systems, and the lack 
of a systematic process to ensure that data are correctly entered into 
those systems. DOD's efforts to improve weaknesses include establishing 
additional procedures for analyzing and validating GWOT cost data, and 
establishing a new steering group. 

Specifically, in August 2005, the DOD Comptroller issued guidance to 
the secretaries of the military services and the directors of the 
defense agencies to help DOD components more accurately and 
consistently report obligations for contingencies such as 
GWOT.[Footnote 13] This guidance directed DOD components to perform a 
monthly variance analysis to identify changes in obligation amounts 
from prior months for selected obligation cost categories.[Footnote 14] 
This guidance also required written explanations, in the form of 
footnotes to the cost-of-war report, for each month that reported 
obligations exceeded previously reported obligations by certain 
percentages and if any obligations were reported as negative amounts. 

In June 2006, DOD issued revised guidance[Footnote 15] that required 
DOD components to compute variance percentages for all obligation cost 
categories, except for investments and the Iraqi and Afghanistan 
security forces funds,[Footnote 16] based on the average amount of 
fiscal year obligations, called the burn rate, instead of only the 
obligations in the prior month as previously required. According to DOD 
officials, the revised guidance was issued in an effort to improve the 
usefulness of the variance analysis and reduce workload based on 
feedback from the DOD components. The revised guidance also requires 
footnotes to explain various adjustments to reported obligations. 
Further, all negative dollar amounts of reported obligations continue 
to require an explanation. A more detailed explanation of the variance 
analysis calculation can be found in appendix III. 

In addition, in March 2006, the DOD Comptroller issued guidance that 
required that each DOD component attest to the accuracy of its 
respective monthly obligation information (used to compile the 
department's monthly cost-of-war report) and affirm that its reported 
obligations provide a fair representation of ongoing activities related 
to contingency operations. The DOD Comptroller emphasized to DOD 
components that accurate financial data is essential to the effective 
management of funds entrusted to DOD and that it is the responsibility 
of all engaged in the contingency operations reporting process to 
ensure that costs reported are accurate. 

Furthermore, DOD established a Senior Steering Group including 
representatives from DOD, the DFAS, and the military services in 
February 2007 in an effort to standardize and improve the GWOT cost- 
reporting process and to increase management attention to the 
process.[Footnote 17] DOD also established a GWOT Cost-of-War Project 
Management Office to monitor work performed by auditing agencies and to 
report possible solutions and improvements to the Senior Steering 
Group. Also, a contractor was hired to analyze and document the current 
cost-of-war reporting process used by the DOD components. This "as-is 
process" will be used as a baseline to identify additional areas for 
improvement in a future "to-be process". At the time of our report, 
this effort was not yet complete, but the "to-be process" is expected 
to be in place and operational during fiscal year 2008. 

DOD's Fiscal Year 2007 Reported GWOT Obligations Will Significantly 
Exceed Those of Fiscal Year 2006, and Changes to DOD's Fiscal Year 2008 
GWOT Funding Request Have Been Submitted: 

Our analysis of DOD's fiscal year 2007 reported obligations through 
June 2007 shows that, at that time, DOD's reported GWOT obligations of 
about $95.4 billion were almost equal to reported GWOT obligations of 
about $98.4 billion for all of fiscal year 2006. After GWOT obligations 
are reported for the remaining 3 months of fiscal year 2007, total 
obligations will significantly exceed those for fiscal year 2006. The 
higher reported obligations in fiscal year 2007 are largely due to 
costs associated with the surge strategy in support of Operation Iraqi 
Freedom and the need to repair and replace equipment after about 6 
years of ongoing operations. Also, changes to the President's fiscal 
year 2008 GWOT request for DOD have been submitted to Congress to fund 
operational requirements, such as the surge strategy in Iraq, that were 
not funded in the original request. 

DOD's Fiscal Year 2007 Reported Obligations through June 2007 Are 
Roughly Equal to Reported Obligations for All of Fiscal Year 2006 and 
Will Significantly Exceed Fiscal Year 2006's by the End of Fiscal Year 
2007: 

DOD's fiscal year 2007 reported obligations through June 2007 of about 
$95.4 billion were roughly equal to reported obligations of about $98.4 
billion for all of fiscal year 2006. When the remaining 3 months of 
fiscal year 2007 are reported, total obligations, which are being 
incurred at an average rate of about $10.6 billion a month, will 
significantly exceed those of fiscal year 2006. As of June 2007, which 
represents 9 months (75 percent) of fiscal year 2007, DOD has reported 
obligations of about 97 percent of the total amount of obligations it 
reported for all of fiscal year 2006. Reported obligations associated 
with Operation Iraqi Freedom continue to be far higher than those for 
other GWOT operations in fiscal year 2007. Of the total in obligations 
reported by DOD for GWOT through June 2007, nearly $81.3 billion, or 
about 85 percent, has been reported for Operation Iraqi Freedom. In 
contrast, DOD has reported obligations of approximately $13.8 billion, 
or about 14 percent, for Operation Enduring Freedom and about $0.33 
billion, or less than 1 percent, for Operation Noble Eagle. The Army 
accounts for the largest proportion of reported obligations--about 
$66.0 billion seven times higher than the almost $9.4 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 housing, food, and services; 
the repair of equipment; and transportation to move people, supplies, 
and equipment, accounts for the largest reported obligations--about 
$51.2 billion. Figure 3 shows DOD's reported obligations through June 
of fiscal year 2007, by military service and appropriation account. 

Figure 3: DOD's Reported GWOT Obligations for Fiscal Year 2007, by DOD 
Component and Appropriation Account, as of June 2007: 

[See PDF for image] 

This figure contains two pie charts that depict the following data: 

DOD's Reported GWOT Obligations for Fiscal Year 2007, by DOD Component 
and Appropriation Account, as of June 2007, By DOD component (dollars 
in billions): 

Army: $66.0; 
Marine Corps: $9.4; 
Air Force: $7.7; 
Navy: $6.4; 
Other DOD components: $5.8. 

DOD's Reported GWOT Obligations for Fiscal Year 2007, by DOD Component 
and Appropriation Account, as of June 2007, by appropriation account 
(dollars in billions): 

Operation and Maintenance: $51.2; 
Procurement: $21.5; 
Military personnel: $14.4; 
Other: $7.2; 
Working Capital fund: $0.6; 
Research, development, test and evaluation: $0.4; 
Military construction: $0.1. 

DOD's Reported GWOT Obligations for Fiscal Year 2007, by DOD Component 
and Appropriation Account, as of June 2007, total: $94.5 billion. 

Source: GAO analysis of DOD data. 

Note: 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 $95.4 billion because of rounding. 

[End of figure] 

Further information regarding funding and obligations by military 
services and appropriations accounts can be found in appendix II. 

DOD's reported obligations in fiscal year 2007 through June 2007 are 
higher than fiscal year 2006's largely due to costs associated with the 
surge strategy in support of Operation Iraqi Freedom. In late January 
of 2007, the President announced a "surge" strategy in Iraq, providing 
for the deployment of an additional 30,000 troops to support stability 
operations. He also announced the deployment of additional personnel to 
Afghanistan to provide increased security against an anticipated 
insurgent offensive. This brings the total number of troops in Iraq and 
Afghanistan to about 193,000. Since these additional forces were not 
fully in place until the end of June, it is likely that the full 
financial effect of the surge and other ongoing operations in-theater 
will not be seen until the last quarter of fiscal year 2007, beginning 
with the July cost-of-war report. 

Also adding to the increased fiscal year 2007 obligations is DOD's need 
to repair or replace billions of dollars worth of equipment after 
nearly 6 years of ongoing operations. Continuing military operations in 
Iraq and Afghanistan are taking a toll on the condition and readiness 
of military equipment. Harsh combat and environmental conditions in 
theater over sustained periods of time exacerbates equipment repair, 
replacement, and modernization problems that existed before the onset 
of combat operations in Iraq and Afghanistan. Consequently, obligations 
for procurement which include aircraft, munitions, vehicles, 
communications, and electronics equipment account for nearly a quarter 
of reported obligations--about $21.5 billion for fiscal year 2007 
through June 2007. This amount is approximately one and a half times 
higher than reported obligations for procurement during all of fiscal 
year 2006. 

In previous work,[Footnote 18] we reported that a significant amount of 
multiyear procurement funding provided in the fiscal year 2006 
supplemental appropriation would remain available for use in fiscal 
year 2007. Most of these fiscal year 2006 multiyear funds have since 
been obligated. Since 60 percent, or about $24.7 billion, of the 
military services procurement funding was provided in the fiscal year 
2007 GWOT supplemental appropriation, which was not signed into law 
until late May 2007, it is likely DOD's reported obligations for 
procurement will increase as these additional funds are obligated. 
Since these procurement funds are available for obligation over 
multiple years, some procurement funding will likely be obligated in 
fiscal year 2008 and beyond. 

In other work,[Footnote 19] we have found that, although the Army and 
Marine Corps track and report equipment reset[Footnote 20] expenditures 
in the operation and maintenance accounts in detail, they do not report 
detailed equipment reset expenditures within the procurement accounts 
in a way that confirms that funds appropriated for reset are expended 
for that purpose. DOD's Financial Management Regulation does not 
require them to specifically report procurement expenditures for reset 
in detail. Our report also found that the Army and the Marine Corps 
cannot be assured their reset strategies will sustain equipment 
availability for deployed units as well as units preparing for 
deployment in support of GWOT while meeting ongoing operational 
requirements. Neither the Army nor the Marine Corps' reset strategies 
target shortages of available equipment and prioritize equipment needs 
of units preparing for deployment over longer-term modernization goals. 

Changes to the Fiscal Year 2008 GWOT Request for DOD Have Been 
Submitted: 

In October 2007, the President submitted an amendment to the fiscal 
year 2008 GWOT request for DOD to cover funding needs related to 
operational changes, particularly in Iraq, such as the administration's 
decisions in January 2007 to increase or "surge" troop levels in Iraq, 
and in September 2007 to begin to withdraw these troops during fiscal 
year 2008. The original fiscal year 2008 GWOT request, totaling $141.7 
billion, was submitted in early February 2007 before the operational 
changes in theater were implemented, and was prepared based on the same 
assumptions, such as troop levels and operational requirements, used 
for the original fiscal year 2007 GWOT supplemental request. As stated 
earlier, the GWOT funding request contained the caveat that it was 
based upon the department's best estimate of war funding needs at the 
time and, if circumstances warranted, the department would seek to 
amend the request as appropriate. In July 2007, the President submitted 
an amendment to the fiscal year 2008 GWOT request asking for an 
additional $5.3 billion for the rapid procurement of Mine Resistant 
Ambush Protected vehicles. The subsequent amendment submitted by the 
President in October 2007, totaling about $42.3 billion, will help fund 
among other things, Army and Marine Corps combat formations currently 
in Iraq through fiscal year 2008, the cost to redeploy five Army combat 
brigades deployed as part of the President's surge strategy in Iraq, 
additional Mine Resistant Ambush Protected vehicles, reconstitution of 
military equipment, and training and equipment to support Army 
deployment readiness. The President's revised fiscal year 2008 GWOT 
funding request for DOD totals about $189.3 billion. 

Changes in DOD's GWOT Funding Guidance Has Made It Difficult to 
Distinguish between Incremental Costs and Base Costs: 

Changes in DOD's GWOT funding guidance have resulted in billions of 
dollars being added to GWOT funding requests, for what DOD calls the 
"longer war against terror," making it difficult to distinguish between 
incremental costs to support specific contingency operations and longer 
term costs typically associated with DOD's base budget. Historically, 
emergency funding requests have generally been used to support the 
unexpected incremental costs of contingency operations, but usually for 
a limited time. Previous administrations have then moved these costs 
into the base budget. Contrary to this historical practice, in October 
2006, the Deputy Secretary of Defense issued a memo that expanded the 
ground rules for DOD's GWOT requests, allowing for the inclusion of 
costs for what DOD calls the "longer war against terror." This 
inclusion blurred the lines between incremental costs and longer-term 
costs that have historically been requested as part of the base budget, 
as discussed below. 

DOD's Emergency Funding Requests Have Historically Been Limited to 
Funding the Initial Incremental Costs of Contingency Operations, but 
Recent DOD Guidance Revised the Ground Rules to Allow for Additional 
Costs: 

Historically, DOD's emergency funding requests have been limited to 
funding the initial incremental costs of most contingency operations. 
This includes the early stages of World War II, as well as operations 
in Korea, Vietnam, Southwest Asia after the Persian Gulf War, Bosnia, 
Kosovo, and relief operations related to Hurricane Katrina and the 
tsunami in Indonesia. More recently, in fiscal year 2005 DOD began 
requesting funding for Operation Noble Eagle, which had previously been 
funded through emergency supplemental funding requests, through its 
base budget request. As soon as a limited and partial projection of 
costs could be made, past administrations have, in general, requested 
funding for ongoing military operations in DOD's base budget requests. 
In previous work,[Footnote 21] we encouraged DOD to include known or 
likely projected costs of ongoing operations in its base budget 
requests. As early as 1994, we stated our expectation that any 
emergency supplemental funding requests would only be used to cover the 
initial costs of a contingency operation in its first fiscal year. 
Further, if the operation continued into a new fiscal year, and if DOD 
had time within the budget and legislative cycle, DOD would build the 
expected costs of the operation into its base budget and allow Congress 
to expressly authorize and appropriate funds for its continuation. In 
2004 and 2006, we repeated our suggestion that once an operation 
reaches a known level of effort and cost are more predictable, more 
funding should be built into the base budget. Contrary to historical 
precedent and our suggestions, current administration policy dictates 
that the costs of ongoing military operations in support of GWOT, such 
as Operation Enduring Freedom and Operation Iraqi Freedom, should be 
requested as emergency funding, and since September 2001 this has been 
the practice. 

Accordingly, DOD's fiscal year 2006 and 2007 supplemental funding 
guidance directed DOD components to request funding to address the 
incremental costs specifically required to execute the mission 
objectives of Operation Iraqi Freedom and Operation Enduring Freedom. 
Only "must-fund" costs associated with Operation Iraqi Freedom and 
Operation Enduring Freedom were to be included. Subsequently, the 
October 2006 memorandum added that estimates were now to include 
incremental costs related to what the Deputy Secretary called the 
"longer war against terror," beyond those directly attributable to 
Operation Enduring Freedom and Operation Iraqi Freedom. Although the 
memorandum did not define the longer war, it mentioned related costs, 
including reconstitution or reset costs for combat losses, accelerated 
wear and necessary repairs to damaged equipment or replacement to newer 
models, and costs to accelerate specific force capability. DOD 
Comptroller officials stated that the intent of the October 2006 
memorandum was to provide DOD components with opportunities to request 
funding for equipment that, although not battle damaged or destroyed, 
was being depleted at a greater than normal or peacetime rate due to 
the ongoing nature of GWOT, but was not being replaced. 

DOD's Fiscal Year 2007 and 2008 GWOT Requests Included Costs for Long- 
Term Initiatives: 

As a result of the changes in DOD's GWOT funding guidance discussed 
above, the fiscal year 2007 GWOT supplemental and fiscal year 2008 GWOT 
funding requests included billions of dollars for long-term needs 
related to the "longer war against terror." In the initial fiscal year 
2007 supplemental funding request for DOD, the President included $300 
million to fund counterterrorism efforts outside of Iraq and 
Afghanistan as part of the regional war on terror, $1.7 billion to fund 
construction and other infrastructure improvements and purchase 
equipment to support efforts to grow the force by increasing the size 
of the Army and Marine Corps, and funding for procurement of aircraft 
that would not be operationally fielded for several years. However, 
funding for some of these items was also included in the fiscal year 
2007 base budget request for DOD. After the current surge strategy in 
Iraq was announced in January of 2007, the President amended the fiscal 
year 2007 GWOT supplemental request in March of 2007, realigning 
resources to cover funding for the deployment of additional personnel 
and equipment to Iraq and Afghanistan, as well as a new medical care 
fund for returning GWOT service members and the cost of efforts to 
combat terrorism in Pakistan. Funding for these resources was offset by 
reallocating funding from programs for fixed wing aircraft, the 
regional war on terror, and portions of the funding for infrastructure 
and equipment to support increased force levels in the Army and Marine 
Corps. However, DOD officials stated that these items were still 
requirements and funding for some of these items is still included in 
the President's fiscal year 2008 GWOT request for DOD. 

The fiscal year 2008 GWOT funding request for DOD also included funding 
for replacement aircraft that will not be available for years. For 
example, in the fiscal year 2008 GWOT request, DOD requested $230 
million for an F-35 Joint Strike Fighter. The Joint Strike Fighter 
funding requested was to support the replacement of an F-16 Falcon lost 
during combat operations. However, the replacement aircraft will not be 
available to support the current operations in the coming fiscal year, 
and will likely not be available for several years. The request also 
included funding for five CV-22 Vertical Lift Aircraft, the Air Force's 
variant of the Osprey tilt-rotor aircraft. These aircraft are intended 
to replace MH-53 Pave Low helicopters that are used to support special 
operations. Initial operational capability for the CV-22 is not 
scheduled until fiscal year 2009 and will not be immediately available 
for operational deployments. Although DOD has linked funding for these 
aircraft to recapitalization, officials stated that the department is 
only accelerating previously planned procurements and the funding is 
not intended for additional procurements. Also, funding for these 
systems remains as known requirements in current and future base budget 
documents. As a planned procurement and as-yet unfielded aircraft, it 
is unclear how these aircraft qualify as an urgent requirement and 
therefore, why they are included in the fiscal year 2008 GWOT request 
for DOD. 

The fiscal year 2008 GWOT funding request for DOD also includes about 
$1.6 billion to accelerate transformation and increase the overall end 
strength of the Army by 6,000 soldiers and Marine Corp by 4,000 
marines. The increase is part of a plan to ensure that there are 
sufficient personnel in these organizations to support deployment plans 
for GWOT and in the future. The request states the purpose of the funds 
is to improve the capability and effectiveness of U.S. forces and 
reduce the operation tempo stress of continued deployments. However, 
similar funding is being requested in DOD's base budget as known 
requirements in fiscal year 2008, and DOD's previous fiscal year 2006 
supplemental funding request and original fiscal year 2007 guidance on 
building its supplemental funding requests stated that funding for 
transformation activities would be funded through the base budget. It 
is therefore unclear why funding for these transformation activities in 
fiscal year 2008 would be considered incremental and included in the 
GWOT funding request rather than the DOD base budget. 

As a result of DOD's new GWOT funding guidance, the line between what 
has historically been requested as emergency funding and what has 
historically been requested as part of DOD's baseline budget costs has 
been blurred. Without a clear definition of the "longer war against 
terror" and clearer distinctions between what constitutes incremental 
versus base costs, decision makers lack an integrated picture and the 
ability to set priorities and make trade-offs between the costs of 
ongoing operations, such as Operation Iraqi Freedom and Operation 
Enduring Freedom, and DOD's long-term funding needs. If the 
administration believes that the nature of the defense challenge facing 
the United States has changed such that we are engaged in a long-term 
conflict, the implications--for example, in terms of force structure, 
investment priorities, and long term versus short-term costs--should be 
the focus of discussion with the Congress. Continuing to fund the GWOT 
through emergency funding requests reduces transparency and avoids the 
necessary reexamination and discussion of defense commitments and the 
trade-offs among funding needs that may be required. 

DOD Has Achieved Some Positive Results; Further Action Is Needed to 
Optimize Use of Tools Intended to Improve Cost Reporting: 

We determined that DOD made some progress in improving the transparency 
of monthly cost-of-war information for selected cost categories during 
the 5-month period in fiscal year 2007 covered by our review. DOD 
improved report transparency by adding written explanations to cost-of- 
war reports that described many of the reported GWOT obligated amounts 
for selected cost categories that varied significantly compared to the 
average reported amounts for the same categories. The purpose of these 
explanations is for DOD components to document their validation of the 
accuracy of these reported obligations. In addition, according to DOD 
officials, studying the causes of significant obligation variances also 
helped DOD components identify and correct inaccurately reported 
obligations. However, we identified instances where required 
explanations for significant variances in obligations were not 
disclosed due to inadequate management oversight. We also noted that 
application of DOD's prescribed variance methodology did not always 
identify GWOT obligations that were omitted from cost-of-war reports. 
Another step DOD has taken included the requirement for DOD components 
to affirm that monthly reported GWOT obligations provide a fair 
representation of ongoing activities. However, we determined that the 
military services and some components generally did not submit the 
affirmations required to be included with issued cost-of-war reports 
during the 5-month period of our review. We also found weaknesses 
regarding affirmation requirements that do not require components to 
disclose the basis for affirmation statements or note the overall 
outcome of variance analyses. Without more complete information and a 
more robust methodology, including standardized quality assurance 
processes, DOD does not have sufficient information to assess the 
reliability of cost data submitted by the components nor can it be 
confident that adequate steps have been taken to validate the cost 
data. 

Use of Variance Analysis Has Assisted DOD in Reviewing Reported 
Obligations, but the Methodology Has Some Limitations: 

DOD has taken steps to help ensure the reliability of the GWOT 
obligations through guidance that requires DOD components to explain 
significant variances in reported GWOT obligations and identify the 
cause of any adjustments. However, we identified problems with 
implementation of DOD's variance analysis guidance for the 5-month 
period we reviewed. First, we determined that DOD components did not 
provide explanations for about 6.1 percent of $19.6 billion in 
obligations that required explanation because they exceeded allowable 
variance percentage changes during the period from November 2006 
through March 2007. Second, we found that DOD's implementation of its 
prescribed variance methodology did not always identify obligations 
that were omitted from cost-of-war reports. 

Oversight of Variance Analysis Did Not Ensure That Explanations Were 
Always Provided: 

DOD's Financial Management Regulation[Footnote 22] requires each DOD 
component to review and validate its reported cost-of-war obligations 
as accurate. As part of this review, DOD components are required to 
perform a variance analysis. DOD components report cost-of-war 
obligations and variance analysis results to DFAS which, in turn, is 
required to provide the DOD Comptroller with a monthly consolidated 
cost-of-war report. DOD Comptroller officials told us that they rely on 
DFAS to help ensure that DOD components comply with variance analysis 
reporting requirements. However, as discussed below, we determined that 
issued reports did not include all required information and that the 
results of the variance analysis are not analyzed from a departmentwide 
perspective to determine whether any patterns or trends exist in the 
underlying reasons, which might require corrective action. While a DOD 
official informed us that if the DOD Comptroller's staff had any 
questions about reported information they could contact DOD components 
for clarification, the DOD Comptroller and other users of the cost-of- 
war reports did not always have readily available evidence that DOD 
components validated the accuracy of some amounts that represented 
significant changes in reported obligations. 

The DOD Financial Management Regulation[Footnote 23] assigned DOD 
components primary responsibility for computing variance percentages 
for obligation cost categories that include military and civilian 
personnel, personnel support, operating support, and transportation. 
DFAS also computed variance percentages as part of its oversight role. 
Variance percentages were computed using the formula: current month 
obligations minus the burn rate, divided by the burn rate, with the 
burn rate representing the average of cumulative obligations for the 
fiscal year.[Footnote 24] Obligations exceeding previously reported 
obligations by certain percentages required explanations in the form of 
footnotes that accompany cost-of-war reports. A more detailed 
explanation of the variance analysis calculation can be found in 
appendix III. DFAS provided DOD components with its variance analysis 
results to remind the components of the explanations that it expected 
to receive before the cost-of-war report was issued. 

DOD components reported a total of about $36.5 billion in GWOT 
obligations against fiscal year 2007 funding, excluding those for 
investments and Iraqi and Afghanistan security forces, for the 5-month 
period from November 2006 through March 2007. Of this amount, $19.6 
billion in obligations exceeded DOD's variance criteria and required a 
total of 367 explanations in the monthly cost-of-war reports. We 
determined that DOD components provided 263 explanations for 
approximately $18.5 billion in reported GWOT obligation amounts. Some 
of these explanations described operational changes that caused 
obligations to increase, such as increased troop deployments. Other 
explanations described adjustments to reported obligation amounts that 
were needed to correct mistakes in previously reported obligations. DOD 
components did not provide 104 required explanations for the remaining 
$1.2 billion in reported obligations. As a result, there is uncertainty 
regarding the extent to which DOD components conducted research to 
validate the accuracy of these reported amounts. 

As shown in figure 4, of the 104 variances that required explanations, 
the cost-of-war reports lacked 25 explanations for Air Force 
obligations and 13 explanations for Marine Corps obligations. While the 
Air Force and Marine Corps accounted for only 37 percent of the 104 
cases of missing explanations, they represented over 87 percent of the 
dollar value of the related obligations. 

Figure 4: Number of Missing Variance Explanations and Related Dollar 
Amount of Obligations by DOD Component: 

[See PDF for image] 

This figure contains two pie charts that depict the following data: 

Number of missing variance explanations: 
Air Force: 25; 
Marine Corps: 13; 
Navy: 2; 
Army: 1; 
Other DOD components: 63. 

Amount of obligations requiring explanation (dollars in millions): 

Air Force: $692; 
Marine Corps: $320; 
Other DOD components: $148. 

Source: GAO analysis of DOD data. 

Note: Other DOD components include 21 components such as the Defense 
Contract Audit Agency, Defense Logistics Agency, and Defense Legal 
Services Agency. The Navy's 2 missing explanations represented negative 
obligations of $588,000 and the Army's missing explanation represented 
$1,000. 

[End of figure] 

The lack of explanations makes it difficult for users of the report to 
understand large changes in obligation amounts, and be confident in the 
reliability of the cost-of-war reports. For example, we observed that 
the missing explanations included eight cases of negative obligations. 
In January 2007, we noted that one component reported negative $22.2 
million in obligations but provided no explanation. An explanation for 
negative obligations is important in order to inform decision makers 
whether amounts were de-obligated and are available for other purposes 
or whether previously reported obligations were incorrect and required 
adjustment. In addition, we noted 16 cases involving decreases in 
reported obligations to $0 dollars in the current month, with no 
explanation. In one case, the Defense Logistics Agency had reported 
previous average monthly obligations of $11.1 million and reported $0 
in obligations in the current month. Without proper explanation, it is 
uncertain whether the $0 represent no activity for the period or that 
there was an error in reporting, such as failure to report actual 
obligations incurred. Also, these explanations can be a valuable source 
of information on cost-of-war reporting issues that might need 
corrective action. For example, they could be used to determine the 
extent to which significant changes in reported obligations were due to 
valid operational changes versus the need to correct inaccurate amounts 
previously reported. However, DOD Comptroller officials told us that 
they were not aware of any DOD-wide analysis of the cost-of-war report 
and its supporting variance explanations that would determine 
problematic patterns, but agreed that such analysis could help reveal 
root causes of reporting problems that should be considered and 
corrected during efforts to improve the cost-of-war reporting process. 

DFAS officials told us that initially their oversight of the 
implementation of variance analysis reporting requirements by DOD 
components was not a priority. Instead, the DFAS staff was focused on 
ensuring that the process of consolidating the obligation information 
submitted by DOD components was working properly. For example, in 
October 2006, DFAS developed and implemented a standard electronic 
template to consolidate a component's obligations for the monthly cost- 
of-war report. The template does not provide spaces for entering 
explanations for significant changes in obligations identified as 
questionable through variance analysis. Instead, DFAS used an error- 
prone process for separately compiling the variance explanations that 
were to be provided as footnotes to the consolidated monthly cost-of- 
war report. While DFAS initiated steps to track receipt of 
explanations, it had no documented process for ensuring that all 
explanations submitted by DOD components were included in the issued 
cost-of-war reports. For example, Air Force and Marine Corps 
representatives provided us with eight copies of variance explanations 
that they told us they had submitted to DFAS but were not included in 
issued cost-of-war reports. DFAS did not provide them with draft copies 
of the cost-of-war reports and explanations so that they could verify 
that all their explanations were included in the consolidated cost-of- 
war reports. 

DOD Comptroller and DFAS officials stated that they recognized their 
process for consistently obtaining and including variance explanations 
by DOD components in the cost-of-war report is an area that needs 
improvement, and plan to take additional steps to improve the process. 
For example, according to DOD officials, a GWOT Variance Analysis 
Workgroup will be established to work with the components to determine 
the cause for noncompliance in providing required variance 
explanations. 

Other Techniques and Forms of Variance Analysis Could Help DOD Detect 
Additional Reporting Errors or Omissions: 

According to DOD officials, performing variance analysis was useful in 
enabling DOD components to research and validate the accuracy of 
significant changes in reported obligations and make adjustments as 
appropriate. However, we determined that some reporting issues could be 
detected through other types of analyses. For example, application of 
the prescribed variance methodology did not detect some reporting 
omissions or work well in electronic software formulas that involve 
division by zero to compute the variance percentage. Because DOD's 
variance analysis methodology depends upon the existence of previously 
reported obligations as the basis for comparative analysis, it was not 
always useful in instances where there were no obligations reported in 
the prior month's cost-of-war report. As discussed below, based on our 
work, DOD is now taking steps to perform other types of analyses 
intended to improve the identification of unreported obligations. 

Our work showed that a comparison of available funding with obligation 
data in cost-of-war reports is another technique for detecting 
unreported obligations. Using this comparison, our analysis of DOD's 
monthly cost-of-war reports for fiscal year 2007 identified about $1.5 
billion in unreported obligations. This underreporting occurred because 
the Marine Corps had failed to report certain fiscal year 2007 
obligations for procurement costs even though it had received multiyear 
funding for this purpose from previous years' appropriations. 
Specifically, the cost-of-war reports for October 2006 through February 
2007 showed no Marine Corps obligations against previous year funding, 
although our analysis of appropriations from fiscal years 2005 and 2006 
indicated that funding remained available. We brought this to the 
attention of the DOD Comptroller, DFAS, and the Marine Corps office 
responsible for submitting monthly obligation information to DFAS. 
Based on our work, the Marine Corps took steps to review and correct 
its previous months' obligations and DFAS included the unreported 
obligations of approximately $1.5 billion in the March 2007 DOD cost- 
of-war report. 

As a result of the Marine Corps data reliability issue discussed above, 
DFAS began to use the comparative analysis of GWOT funding and 
obligations data to pinpoint reporting inconsistencies. From this 
analysis, DFAS determined that an additional agency, Defense Security 
Services, had not been reporting GWOT obligations for the first 5 
months of fiscal year 2007 totaling about $1.4 million. DFAS has since 
added Defense Security Services to the list of reporting components and 
included its $1.4 million in unreported obligations in DOD's May 2007 
cost-of-war report. DFAS officials told us that during the preparation 
of future cost reports for the DOD Comptroller they plan to continue to 
apply this comparative analysis of GWOT funding against obligation data 
submitted by DOD components in an effort to detect other cost-reporting 
inconsistencies. 

Army and Marine Corps officials told us that they recognized other 
limitations associated with DOD's required variance analysis 
methodology. For example, the nature of the obligation process 
sometimes does not result in a level pattern of obligated amounts each 
month. Army officials told us that, in addition to using DOD's required 
variance formula, they also calculated variances using a comparative 
burn rate based on the prior 12 months of obligations for internal 
purposes because it provided a more realistic basis for comparison. We 
agree that variance analysis can be performed using different types of 
information as the baseline against which to compare the current 
month's activity. Selecting the most useful information to compare 
would entail consideration of the nature of the activity being 
analyzed, including whether the activity tends to be cyclical or more 
volatile. 

In addition, we determined that application of DOD's current variance 
methodology does not result in identifying spikes in reported 
obligations from $0 in the prior month's report to millions in the 
current month. Of the 104 obligations for which no explanation was 
included in applicable cost-of-war reports, 25 fit this situation. By 
following the DOD guidance for calculating the variance, if a component 
did not report obligations in previous months during the fiscal year, 
it will be unable to determine a variance percentage for the month in 
which it does report obligations because dividing the current 
obligations by zero is mathematically undefined. Thus, other forms of 
variance analysis may be more practical in situations where no 
obligations were incurred in the month(s) preceding the month the 
obligations were incurred. For example, we reviewed the reported 
monthly GWOT obligations and the associated variance analysis between 
November 2006 and March 2007 for the 25 cost categories for which no 
explanation was included in the applicable cost-of-war report and no 
prior obligations were incurred in fiscal year 2007. We found that GWOT 
obligations had been reported in the prior 12 months for 21 of 25 cost 
categories.[Footnote 25] Consequently, a comparative burn rate could 
have been calculated, a variance analysis performed and, if needed, a 
variance explanation provided if 12 months of reported obligations had 
been used. Further, our work revealed that 3 of the 21 cost categories 
would not require an explanation because the variance fell within 
established DOD thresholds. 

Affirmation Requirements and Implementation Could Be Improved: 

DOD's March 2006 guidance requires components to attest to the accuracy 
of their GWOT reporting and affirm, in writing, that the report 
provides a fair representation of the ongoing activities. As discussed 
below, we examined whether components had submitted the required 
affirmations during the 5-month period from November 2006 through March 
2007, and found that, of the 96 affirmations required to be submitted 
prior to the issuance of the cost-of war report, 58 had been included 
with the cost-of-war report and 38 were not. As we noted in our 
November 2006 report,[Footnote 26] DOD guidance for affirmations did 
not contain criteria or factors that could be considered during the 
review process. We did not make any recommendations regarding the 
affirmation process at that time because the process was new. However, 
in our current work, we again note that DOD's guidance lacks specific 
criteria or factors that could be considered during the review of 
obligation information that was provided to DFAS for inclusion in the 
cost-of-war report. In addition, we note that DOD guidance does not 
require that affirmation statements include a description of the basis 
for the affirming official's decision that the cost-of-war report 
provides a fair representation of ongoing activities. A description of 
the basis for the affirmation statement would provide users of the cost-
of-war reports with information that could be considered in their 
assessment of the credibility of the affirmation statement. On the 
other hand, the absence of such disclosures does little to further 
DOD's efforts to improve the reliability of the cost-of-war reporting 
process. 

Specifically, DOD affirmation guidance requires an overseeing senior 
financial official at each DOD reporting component to sign an 
affirmation statement attesting to the accuracy of submitted obligation 
information. Components must submit an affirmation to DFAS no later 
than 25 calendar days following the month in which the obligations were 
incurred. DFAS tracks the receipt of affirmation statements and 
includes those received with the issued cost-of-war report. Those DOD 
components that do not submit an affirmation statement by the cost-of- 
war reporting deadline are not identified in issued cost-of-war 
reports. 

Although the DOD Financial Management Regulation[Footnote 27] states 
that variance analysis should be included as part of the review to 
determine whether reported obligations represent a fair representation 
of ongoing activities, DOD's implementing guidance on affirmation 
statements does not specifically refer to the relevance of variance 
analysis in the affirmation process or provide examples of other steps 
that should be considered before affirmation statements are signed. 
Further, the affirmation guidance does not require disclosure of the 
steps performed to support an affirmation. 

DOD components reported a total of about $58 billion in GWOT 
obligations for the 5-month period from November 2006 through March 
2007 which required a total of 96 affirmations from 25 DOD 
components.[Footnote 28] We determined that 38 of the required 
affirmations covering $54.1 billion in obligations were not included 
with cost-of-war reports issued during this 5-month period. The Air 
Force, Army, Navy, and Marine Corps accounted for 17 of the missing 
affirmations covering approximately $53.3 billion while 11 other DOD 
components accounted for 21 missing affirmations covering $840 million 
in GWOT obligations. The cost-of-war reports for the Army and Marine 
Corps did not include any affirmations for the 5-month period. The cost-
of-war reports for the Air Force included 1 affirmation for January, 
and the Navy provided affirmations for February and March. 

The following provides more information on the missing affirmations for 
each of the services. 

* Army officials prepared and submitted 1 of the missing affirmations 
after the reporting deadline and did not prepare the other 4. According 
to Army officials, prior to March 2007, affirmation statements were not 
prepared because of personnel turnover and management changes during 
our review period. 

* Marine Corps officials stated that they did not prepare monthly 
affirmations because the Marine Corps is organizationally part of the 
Navy and, therefore, believed the Navy affirmation would cover the 
Marine Corps cost-of-war report. However, Navy officials stated that 
they were not responsible for affirming the Marine Corps GWOT 
obligation information during the period of our review. They further 
explained that although the Marine Corps provided them with a copy of 
its cost-of-war obligation information, the Marine Corps also submitted 
its obligation information directly to DFAS. The Marine Corps used its 
own accounting system which was different from the Navy's. Navy 
personnel were not familiar with the Marine Corps accounting system and 
were therefore not in a position to affirm the information obtained 
from the Marine Corps. The Navy subsequently informed us that, after 
our July 2007 meeting, the Marine Corps began providing its GWOT 
obligation information to the Navy and that the Navy affirmation now 
also covers the Marine Corps. 

* The Navy prepared 4 affirmations, 2 of which were not included in the 
cost-of-war reports because they missed the reporting deadline. The 
Navy did not prepare the remaining 1 affirmation for November 2006. 
Steps taken by the Navy included requiring each major command with GWOT 
obligations to submit an affirmation statement prior to preparing and 
submitting the Navy's signed affirmation statement. 

* The Air Force prepared 5 affirmations, 4 of which were not included 
with the issued cost-of-war reports because they missed the reporting 
deadline. Air Force personnel stated that the cost-of-war obligation 
information was reviewed by budget office staff responsible for 
monitoring the military personnel, operation and maintenance, military 
construction, and investment appropriations. Subsequently, the 
information was sent through the chain of command and the affirmation 
statement was signed by the authorizing official. The extended time 
frame for this review and approval process resulted in the Air Force 
routinely missing the reporting deadline. 

Affirmation statements can be a useful tool for improving the 
reliability of the reported obligation amounts to the extent that the 
affirmations are based on a review of the information and identify the 
sources used. We observed that 12 of the 58 submitted affirmations 
contained disclosures about the source of reported obligations. 
Specifically, three components disclosed that the source of all 
submitted data was their accounting system.[Footnote 29] However, none 
of the 58 affirmations described the analysis performed that could 
inform users of the cost-of-war report about the steps taken to test 
the reliability of reported obligation amounts in reaching the 
affirmation. Additionally, none of the affirmations we reviewed, 
including ones that were submitted late, specifically noted that DOD's 
required variance analysis was one of the steps that supported the 
affirmation statement or disclosed key points related to their variance 
analysis. 

We noted the Air Force affirmation statements for November 2006 and 
December 2006 did not contain the basis for the affirmations or 
disclose key issues resulting from its variance analysis. For example, 
November 2006 and December 2006 cost-of-war reports showed a 
significant change in reported amounts for military personnel 
obligations between these 2 months for Operation Noble Eagle. In 
November 2006, the reported obligations were $436,000 which increased 
to over $19 million the next month. A synopsis covering the key points 
of the Air Force's variance analysis could have helped assure report 
users that the Air Force had taken this change into consideration in 
affirming that its reported obligations were a fair representation of 
ongoing activities. We followed-up with an Air Force official on this 
reported change in obligations and found that the $436,000 in reported 
obligations was a reporting error. However, we found no explanatory 
footnotes included with the reports that explained the increase, as 
required. As a result, cost-of-war report users had no information to 
determine whether this change reflected a valid operational change or a 
reporting error at the time the November or December reports were 
issued. As previously shown in figure 4, we determined that cost-of-war 
reports, issued during the 5-month period of our review, were missing 
25 required explanations for Air Force obligations totaling about $692 
million. 

Conclusions: 

Total DOD reported obligations for GWOT have been steadily increasing 
over the last 6 years, and are on track to grow even higher by the end 
of fiscal year 2007. In some cases, significant similarities exist 
between the President's GWOT and base funding requests for DOD, making 
it difficult for decisions makers or the public to have a full, 
integrated picture of funding needs for any given policy. Without 
defining the longer-term war on terror and differentiating these costs 
from incremental costs of specific contingency operations, decision 
makers within the congressional and executive branches may not have a 
comprehensive view of overall funding needs to make potential trade- 
offs. We recognize emergency funding requests are necessary to support 
unforeseen costs of operations and that estimating future costs are 
challenging. This does not, however, mean that estimates for the 
expected costs of ongoing operations, for longer-term transformation, 
and for procurements should not be provided as part of the base budget. 
If the administration believes that the nature of the defense challenge 
facing the United States has changed and that the country is involved 
in a long-term conflict, the cost implications of that change should be 
part of the annual budget debate. The use of emergency funding requests 
and budget amendments for ongoing operations of some duration reduces 
transparency, impedes the necessary examination of investment 
priorities, inhibits informed debate about priorities and trade-offs 
and, in the end, reduces credibility. 

DOD has taken steps to improve its GWOT-related cost-reporting 
procedures and GWOT cost reporting continues to evolve. At the same 
time, further actions are needed to develop more explicit guidance on 
variance analysis and affirmation statements to enhance the 
transparency of cost-of-war reports. Without more complete information 
and a more robust methodology, including standardized quality assurance 
processes, DOD does not have sufficient information to assess the 
reliability of obligation data. As we have previously reported, and DOD 
has acknowledged, systemic weaknesses persist in DOD's financial 
management systems and business operations, which continue to impair 
its financial information. Until more explicit guidance is provided, 
and further progress in resolving core financial management problems is 
achieved, DOD and the military services will have difficulty providing 
the public and Congress with reliable information on the cost of the 
war and details on how appropriated funds are being spent, or have 
historical information useful in determining future funding needs. 

Recommendations for Executive Action: 

This report makes 11 recommendations. To improve transparency and 
fiscal responsibility related to funding the war on terrorism, and to 
permit Congress and the administration to establish priorities and make 
trade-offs among those priorities in defense funding, we recommend that 
the Secretary of Defense direct the Under Secretary of Defense 
(Comptroller) to (1) issue guidance defining what constitutes the 
"longer war against terror," identify what costs are related to that 
longer war, and build these costs into the base defense budget; (2) 
identify incremental costs of the ongoing GWOT operations that can be 
moved into the base budget; and (3) in consultation with the Office of 
Management and Budget consider limiting emergency funding requests to 
truly unforeseen or sudden events. 

To help improve the reliability of the obligation information included 
in the monthly cost-of-war report, we recommend that the Secretary of 
Defense direct the Under Secretary of Defense (Comptroller) to take the 
following actions regarding the implementation of the variance analysis 
and affirmation statements: 

* Develop and implement written procedures for DFAS to use in compiling 
the variance explanations and in performing quality assurance steps to 
monitor the process. 

* Require DFAS to provide draft copies of the consolidated cost-of-war 
report to DOD components so that they can verify that all of their 
explanatory footnotes have been included. 

* Develop and implement written procedures for the DOD Comptroller to 
periodically perform a DOD-wide analysis of the cost-of-war report and 
supporting explanations to identify trends and root causes of systemic 
reporting problems that should be considered and corrected during 
efforts to improve the cost-of-war reporting process. 

* Conduct a study of the current formula for the variance analysis to 
determine whether it provides the most useful information for 
identifying anomalies and taking correcting action. At a minimum, such 
a study should consider the nature of the activity being analyzed, 
including whether the activity tends to be cyclical or more volatile, 
and whether a different baseline comparison, such as the average of the 
previous 12 months' obligations, would result in improved analysis of 
obligation information. 

* Revise guidance over the monthly affirmation statements to include 
criteria or factors that should be considered during the monthly review 
process. 

* Revise the guidance over the monthly affirmation statements to 
require disclosure of the basis for affirmation statements, including 
key points of related variance analysis, if any, and sources used to 
obtain information on the amount of reported obligations. 

* Take steps to ensure compliance with guidance on variance analysis 
and affirmation statements. 

* Revise the cost-of-war report format to disclose when component 
management has not affirmed to the accuracy and fair representation of 
reported obligations or provided all variance explanations, as 
required. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, DOD generally agreed 
with 10 of our recommendations and did not agree or disagree with an 
11th recommendation. The department's comments are discussed below and 
are reprinted in appendix IV. DOD also provided technical comments and 
we have incorporated them in the report as appropriate. 

DOD agreed with our recommendation that guidance be issued to define 
what constitutes the "longer war against terror" and with the intent of 
our recommendation that more incremental needs of the ongoing GWOT 
operations be identified and moved into the base budget. However, DOD 
did not indicate that it plans to take any action to implement these 
recommendations. In its comments, DOD noted it had included funding in 
the base budget for initiatives that it characterized as reflecting 
requirements related to the longer war against terror, such as 
increasing Army and Marine Corps force levels, and regional war on 
terror initiatives. We recognize that DOD has requested funds for these 
items in the base budget. We also note that DOD has requested funding 
for some of the same items in its GWOT funding requests. For example, 
funding for increases in force levels is requested in both DOD's fiscal 
year 2008 base budget and GWOT funding requests. This type of overlap 
reinforces our point that the department needs to clarify the nature of 
its funding needs. Specifically, as stated in our report, without a 
clear definition of the "longer war against terror" and clearer 
distinctions between what constitutes incremental versus base costs, 
decision makers lack an integrated picture and the ability to set 
priorities and make trade-offs between the costs of ongoing operations 
and DOD's long-term funding needs. Also, we continue to believe that 
since operations in support of GWOT have been ongoing since 2001 and 
are therefore well beyond the initial phase where level of effort and 
costs are less known, DOD could identify additional incremental GWOT 
needs that could be moved into the base budget. Such action would 
assist the Congress in evaluating priorities for the department and 
making trade-offs among all funding needs. Therefore, we continue to 
believe our recommendations have merit and that DOD should take steps 
to implement the specific actions we recommended, which are to (1) 
issue guidance defining what constitutes the "longer war against 
terror," identify what costs are related to that longer war, and build 
these costs into the base defense budget and (2) identify incremental 
costs of the ongoing GWOT operations that can be moved into the base 
budget. 

DOD did not agree or disagree with our third recommendation that the 
use of emergency funding requests be limited to truly unforeseen or 
sudden events. Instead, DOD noted that the Office of Management and 
Budget, not the Secretary of Defense, makes the determination 
concerning the use of emergency funding requests. Therefore, to 
recognize the role of the Office of Management and Budget, we have 
changed the recommendation to read: "We recommend that the Secretary of 
Defense, in consultation with the Office of Management and Budget, 
consider limiting emergency funding requests to truly unforeseen or 
sudden events." 

Regarding the remaining eight recommendations to help improve the 
reliability of the obligation information included in the monthly cost- 
of-war report, DOD agreed with six and concurred with the intent of the 
remaining two recommendations. 

DOD agreed with our six recommendations that cover analysis of reported 
cost-of-war information, review of the variance analysis methodology, 
and clarification of guidance on affirmation statements. DOD also 
identified actions that it stated are under way to further improve the 
cost-of-war reporting and variance analysis and affirmation processes, 
such as revising procedures for DFAS when compiling variance 
explanations, performing quality assurance, and monitoring the process 
and establishing a Variance Analysis/Affirmation Work Group to 
determine causes for noncompliance with variance and affirmation 
guidance and recommend improvements. Regarding revising the guidance 
relating to affirmation statements, DOD stated that the Under Secretary 
of Defense (Comptroller) provided clarification to the guidance on 
analysis of contingency operation costs in the DOD Financial Management 
Regulation and policy memorandums. At this time, we have not yet had an 
opportunity to evaluate DOD's planned actions or the revised guidance 
to verify whether they meet the intent of our recommendations, but will 
review these actions and revisions as part of any follow-up work on 
GWOT cost reporting. 

DOD concurred with the intent of our recommendation to provide DOD 
components with the opportunity to verify that all their explanatory 
footnotes have been included in cost-of-war reports. We agree that 
DOD's proposed actions satisfy the intent of this recommendation. DOD 
also concurred with the intent of our remaining recommendation to 
revise the cost-of-war report format to disclose when component 
management has not affirmed to the accuracy and fair representation of 
reported obligations or provided all variance explanations, as 
required. Although DOD explained that it is already reviewing its 
procedures for submitting affirmation statements and variance 
explanations and the reasons for late submissions in an effort to 
correct the problem, DOD did not comment on whether it would disclose 
instances of noncompliance in cost-of-war reports. We continue to 
believe that users of the cost-of-war report should have sufficient 
information to assess the reliability of reported cost information, 
including information about components that have not complied with 
steps intended to improve the reporting process. 

We are sending copies of this report to other 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 [hyperlink, http://www.gao.gov]. 

If you have any questions regarding this report, please contact Sharon 
Pickup at (202) 512-9619 or pickups@gao.gov or McCoy Williams at (202) 
512-9095 or williamsm1@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. GAO staff who made major contributions to this 
report are listed in appendix V. 

Signed by: 

Sharon L. Pickup: 
Director: 
Defense Capabilities and Management: 

Signed by: 

McCoy Williams: 
Director: 
Financial Management and Assurance: 

List of Congressional Committees: 

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

The Honorable Kent Conrad: 
Chairman: 
The Honorable Judd Gregg: 
Ranking Member: 
Committee on the Budget: 
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 L. Hunter: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable John M. Spratt, Jr.: 
Chairman: 
The Honorable Paul Ryan: 
Ranking Member: 
Committee on the Budget: 
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: Scope and Methodology: 

To assess the Department of Defense's (DOD) reported obligations for 
the Global War on Terrorism (GWOT) in fiscal year 2007, the outlook of 
obligations for the remainder of the fiscal year, and its funding 
requirements for fiscal year 2008, we analyzed DOD's Supplemental and 
Cost of War Execution Reports from October 2006 through June 2007 to 
identify reported obligations by operation and by appropriation 
account. We excluded classified programs from our review because 
obligations for those programs are not reported in DOD's Supplemental 
and Cost of War Execution Reports. We also reviewed applicable 
supplemental and annual appropriations in fiscal year 2007 and reviewed 
DOD reports on the transfer or reprogramming of funds among various 
appropriation accounts or budget activities to support GWOT. We then 
reviewed DOD's reported obligations for past fiscal years to determine 
if fiscal year 2007's reported obligations were greater than, equal to, 
or less than those of previous years. We also compared the military 
services' reported GWOT obligations through June 2007, the latest 
available reported obligation data at the time of our review, to the 
appropriations provided to calculate the proportion of funds obligated 
through June, and have included this analysis in appendix II. We then 
compared those proportions to the proportion of the fiscal year that 
has elapsed through June to assess whether funding is likely to be 
greater than, less than, or equal to obligations.[Footnote 30] We also 
interviewed key officials from the Office of the Under Secretary of 
Defense (Comptroller) and the Army, Navy, Marine Corps, and Air Force 
to understand projected GWOT obligations through the end of the fiscal 
year. We recognize that funds are not obligated equally each month 
throughout the fiscal year and that the supplemental appropriation 
funding was not signed by the President until May. 

GWOT obligations provided in this report are DOD's claimed obligations 
as reported in the DOD Supplemental and Cost of War Execution Reports. 
As previously reported, we found the data in DOD's Supplemental and 
Cost of War Execution Reports 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 should 
therefore be considered approximations. In addition, DOD has 
acknowledged that systemic weaknesses with its financial management 
systems and business operations continue to impair its financial 
information. Despite the uncertainty about obligation data, we are 
reporting the information because it is the only way to approach an 
estimate of the costs of the war. Also, despite the uncertainty 
surrounding the true dollar figure for obligations, these data are used 
to advise Congress on the cost of the war. 

To examine the effect of changes in DOD's GWOT funding guidance on 
DOD's base budget and GWOT funding requests, we reviewed relevant DOD 
policy and guidance relating to the submission of DOD's fiscal year 
2007 emergency supplemental request for GWOT and its fiscal year 2008 
GWOT funding request. We spoke with DOD officials regarding DOD's base 
budget and GWOT funding requests to determine what changes occurred in 
these submissions as a result of the guidance. We also interviewed key 
officials from the Office of the Under Secretary of Defense 
(Comptroller), Army, Navy, Marine Corps, and Air Force to determine how 
they interpreted and implemented this guidance. 

To examine DOD's efforts to improve the reliability of GWOT obligation 
data, we reviewed guidance issued by DOD regarding analysis and 
reporting of obligations for contingencies, reviewed the data reported 
in DOD's cost-of-war reports, and interviewed key officials from the 
Office of the Under Secretary of Defense (Comptroller), Defense Finance 
and Accounting Service, Army, Navy, Marine Corps, and Air Force about 
their processes and procedures. We compared DOD's obligation data 
reported in DOD's monthly cost-of-war reports with funding DOD was 
provided in annual and supplemental appropriations to determine if any 
anomalies in the cost reporting had occurred. 

To determine the extent to which the process for required variance 
explanations was effectively implemented, we reviewed the Office of the 
Under Secretary of Defense (Comptroller) guidance on variance analysis 
issued in August 2005 and June 2006, including the formula used to 
calculate the variance percentage and average amount of fiscal year 
obligations, which is called the burn rate. We obtained monthly files 
containing the October 2006 to March 2007 cost-of-war reports from the 
Defense Finance and Accounting Service-Indianapolis. Using the June 
2006 Office of the Under Secretary of Defense (Comptroller) guidance, 
we analyzed reported obligations in cost-of-war report files applicable 
to fiscal year 2007 funding from November 2006 through March 2007 to 
identify the number of required variance explanations and the related 
amount of dollar obligations. We did not evaluate the adequacy of 
explanatory footnotes or confirm that errors reported in footnotes were 
corrected. We identified 25 cases for which a burn rate could not be 
calculated because the prior month's cumulative obligations for fiscal 
year 2007 were zero. For these cases, we calculated a burn rate based 
on the prior 12 months' cumulative obligations. October 2006 
obligations were not analyzed because the fiscal year 2006 cost-of-war 
report information needed to perform the variance calculation was not 
readily available. We also did not include the cost categories for 
investment costs, Iraq Security Force Fund, or Afghanistan Security 
Force Fund because the annual spending plans needed to perform the 
variance calculation were not readily available. We met with 
representatives from the Office of the Under Secretary of Defense 
(Comptroller) and officials in Defense Finance and Accounting Service- 
Indianapolis and held periodic telephone discussions with them from May 
2007 to August 2007 regarding oversight responsibilities for the cost- 
of-war reporting process, and other analyses for improving the 
reliability of the monthly cost-of-war report. We also requested the 
variance explanations submitted by DOD components to Defense Finance 
and Accounting Service-Indianapolis. We compared required variance 
explanations identified by our work to those obtained from the Defense 
Finance and Accounting Service-Indianapolis and reported with the 
monthly cost-of-war report. In July 2007, we met with military service 
representatives for the budget offices of the Army Navy, Marine Corps 
and Air Force, to discuss their respective processes for preparing 
variance explanations, and requested the variance explanations 
submitted to Defense Finance and Accounting Service-Indianapolis for 
the monthly cost-of-war report. We focused on the military services 
because their reported obligations represented almost 94 percent of the 
funds obligated in the cost categories we reviewed from November 2006 
to March 2007. We also compared required variance explanations 
identified by our work to those obtained directly from the four 
military services. Finally, we documented whether a required variance 
explanation was included in the explanatory footnotes to the monthly 
cost-of-war report. 

To determine the extent to which the process for required affirmations 
was effectively implemented, we reviewed the Office of the Under 
Secretary of Defense (Comptroller) guidance on affirmation statements 
issued by DOD components in March 2006 and June 2006. We met with 
representatives from the Office of the Under Secretary of Defense 
(Comptroller) and officials in the Defense Finance and Accounting 
Service--Indianapolis and had periodic telephone discussions with them 
from May 2007 to August 2007 regarding oversight responsibilities for 
the affirmation process. Defense Finance and Accounting Service- 
Indianapolis staff provided us with copies of the affirmations 
submitted by DOD components from November 2006 to March 2007 for the 
monthly cost-of-war report, as well as information used to track the 
monthly submission of affirmations. We met with military service 
representatives in July 2007 from the budget offices of the Army, Navy, 
Marine Corps and Air Force to discuss their process for reporting 
affirmations, and requested the affirmations prepared and submitted to 
the Defense Finance and Accounting Service-Indianapolis for the monthly 
cost-of-war report. Finally, we reviewed the affirmations and the 
Defense Finance and Accounting Service tracking information, and 
documented when affirmations were missing or were provided to the 
Defense Finance and Accounting Service-Indianapolis after the reporting 
deadline. 

We interviewed DOD representatives regarding GWOT obligations, policy, 
guidance, and funding for fiscal year 2007 and the reliability of cost 
reporting in the following locations: 

* Office of the Under Secretary of Defense (Comptroller), Washington, 
D.C. 

* Defense Finance and Accounting Service Center, Indianapolis, Indiana. 

* Headquarters, Department of the Army, Washington, D.C. 

* U.S. Army Installation Management Command, Washington, D.C. 

* Headquarters, U.S. Army Forces Command and Headquarters, Third Army 
(Army Central Command), Fort McPherson, Georgia. 

* Army Materiel Command, Fort Belvoir, Virginia. 

* Army Budget Office, Virginia. 

* Headquarters, U.S. Marine Corps, Washington, D.C. 

* Marine Corps Central Command, MacDill Air Force Base, Florida. 

* Department of the Navy, Headquarters, Washington, D.C. 

* Department of the Air Force, Headquarters, Washington, D.C. 

* Air Force Air Combat Command, Langley Air Force Base, Virginia. 

* Navy Aircraft Structural Life Surveillance Branch, Patuxent River 
Naval Air Station, Maryland: 

We performed our work from November 2006 through August 2007 in 
accordance with generally accepted government auditing standards. 

[End of section] 

Appendix II: DOD's Fiscal Year 2007 GWOT Appropriations and 
Obligations: 

In fiscal year 2007, Congress provided the Department of Defense (DOD) 
with about $161.8 billion in annual and supplemental 
appropriations[Footnote 31] for the Global War on Terrorism (GWOT), of 
which about $142.9 billion was appropriated to the military services 
for military personnel, operation and maintenance, and procurement. The 
remaining funds, about $18.9 billion, were provided for defensewide 
agencies; research, development, test and evaluation; and military 
construction. As shown in table 1, the military services received about 
$17.7 billion for military personnel, about $82.7 billion for operation 
and maintenance, and about $42.4 billion for procurement. 

Table 1: Fiscal Year 2007 Appropriations Identified for GWOT for the 
Military Services, (Dollars in billions): 

Military Personnel: Title IX; 
Army: 4.7; 
Navy: 0.1; 
Marine Corps: 0.2; 
Air Force: 0.4; 
Total: [Empty]. 

Military Personnel: Supplemental; 
Army: 9.1; 
Navy: 0.8; 
Marine Corps: 1.4; 
Air Force: 1.1; 
Total: [Empty]. 

Military Personnel: Total; 
Army: 13.8; 
Navy: 0.9; 
Marine Corps: 1.5; 
Air Force: 1.5; 
Total: 17.7. 

Operation and Maintenance: Title IX; 
Army: 31.7; 
Navy: 1.6; 
Marine Corps: 2.7; 
Air Force: 2.7; 
Total: [Empty]. 

Operation and Maintenance: Supplemental; 
Army: 31.3; 
Navy: 4.8; 
Marine Corps: 1.2; 
Air Force: 6.7; 
Total: [Empty]. 

Operation and Maintenance: Total; 
Army: 63.0; 
Navy: 6.4; 
Marine Corps: 3.9; 
Air Force: 9.4; 
Total: 82.7. 

Procurement: Title IX; 
Army: 10.1; 
Navy: 1.0; 
Marine Corps: 4.9; 
Air Force: 1.8; 
Total: [Empty]. 

Procurement: Supplemental; 
Army: 15.9; 
Navy: 2.2; 
Marine Corps: 2.3; 
Air Force: 4.3; 
Total: [Empty]. 

Procurement: Total; 
Army: 26.0; 
Navy: 3.2; 
Marine Corps: 7.2; 
Air Force: 6.1; 
Total: 42.4. 

Grand Total: 142.9. 

Source: GAO analysis of Pub. L. No. 109-289 (2006) and Pub. L. No. 110-
28 (2007). 

[End of table] 

As of June 2007, military services reported obligating approximately 80 
percent of military personnel funds provided in fiscal year 2007 for 
operations in support of GWOT. The Army and Navy have been obligating 
funds for military personnel at a rate that nearly mirrors the 
percentage of the fiscal year that has passed, while the Marine Corps 
and Air Force have experienced a more rapid execution of obligations. 
As figure 5 shows, after 9 months, or 75 percent of the fiscal year, 
the Army reported obligations of 77 percent, the Navy 76 percent, the 
Marine Corps nearly 100 percent, and Air Force 85 percent of available 
GWOT military personnel appropriations. The Air Force is reporting 
higher than anticipated obligations for military personnel due to the 
methods the Air Force Reserve and Air National Guard use to distribute 
pay and report obligations. A portion of the Air Force reserve 
component's pay is provided in a lump sum as personnel are activated 
for duty. Rather than a consistent and gradual rise in military 
personnel obligations over the course of the fiscal year, the Air Force 
will report significant periodic rises in the fiscal year's cumulative 
military personnel obligations. According to Air Force officials, the 
total reported obligations for military personnel will decrease in the 
later months of the fiscal year. Marine Corps obligations data reported 
through June 2007 show a higher than expected rate of military 
personnel obligations due to cost-reporting errors within the service's 
monthly Supplemental and Cost of War Execution Report data submission. 
According to a Marine Corps official, military personnel obligations 
for June 2007 were inadvertently entered twice into the service's 
Standard Accounting, Budgeting, and Reporting System which is used to 
compile data submissions to the Defense Finance and Accounting Service 
for the monthly cost-or-war report. According to Marine Corps 
officials, errors in reporting were related to staff turnover and 
inexperience amongst new personnel with the cost-reporting process. 
Further, officials expect the reporting problems to be corrected in 
future cost-of-war reports. 

Figure 5: Military Services' Fiscal Year 2007 Reported GWOT Military 
Personnel Obligations of Appropriations Identified for GWOT through 
June 2007: 

[See PDF for image] 

This figure is a vertical bar graph. The vertical axis of the graph 
represents percent from 0 to 100. The horizontal axis of the graph 
represents the four military services. 

The following data is depicted (values in millions of dollars) and all 
values add up to 100 percent for each service: 

Army: 
Fiscal year 2007 reported obligations through June 2007: $10,683.2; 
Fiscal year 2007 appropriations remaining unobligated: $3,140.7. 

Navy: 
Fiscal year 2007 reported obligations through June 2007: $697.9; 
Fiscal year 2007 appropriations remaining unobligated: $215.3. 

Marine Corps: 
Fiscal year 2007 reported obligations through June 2007: $1,547.4; 
Fiscal year 2007 appropriations remaining unobligated: $0.4. 

Air Force: 
Fiscal year 2007 reported obligations through June 2007: $1,247.4; 
Fiscal year 2007 appropriations remaining unobligated: $213.7. 

Source: GAO analysis of DOD data. 

Note: June represents 75 percent of the fiscal year. The line above is 
an indication of where DOD would be if it had obligated its available 
funding equally each month throughout the fiscal year. Reported 
obligations include those from both the active and reserve components. 
We have previously assessed the reliability of DOD's obligations data 
and found that they may not accurately reflect the true dollar value of 
GWOT obligations. 

[End of figure] 

As shown in figure 6, after 9 months, or 75 percent of the fiscal year, 
the Army reported obligations of 70 percent, the Navy 53 percent, the 
Marine Corps 67 percent, and the Air Force 62 percent of available GWOT 
operation and maintenance funds. All services reported lower than 
anticipated obligation rates for operation and maintenance. Both the 
Air Force and Navy officials, the two services with the lowest reported 
obligations, stated that execution of funds was slowed as a result of 
the delayed fiscal year 2007 GWOT supplemental appropriation and that 
obligation rates are expected to increase later in the fiscal year. For 
example, the Navy, the service with the lowest reported obligations for 
operation and maintenance, deferred obligations for facilities, 
sustainment, restoration, and modernization activities due to the delay 
in receipt of supplemental funding. Navy officials further stated 
although supplemental appropriations were approved in May, a number of 
contracts for these activities were not finalized in June, resulting in 
lower than expected Navy operation and maintenance obligations. Navy 
officials indicated that obligations for operation and maintenance will 
likely increase in the July 2007 DOD Supplemental and Cost of War 
Execution Report. Similarly, the Air Force responded to the delay of 
supplemental appropriations by deferring certain GWOT obligations, 
without causing operational effects. For example, some requests to the 
Air Force for airlift were filled and flown on time, but payment of 
these obligations was delayed until June. According to Air Force 
officials, the obligation rate for operation and maintenance is 
expected to increase during July of fiscal year 2007. 

Figure 6: Military Services' Fiscal Year 2007 Reported GWOT Operation 
and Maintenance Obligations of Appropriations Identified for GWOT 
through June 2007: 

[See PDF for image] 

This figure is a vertical bar graph. The vertical axis of the graph 
represents percent from 0 to 100. The horizontal axis of the graph 
represents the four military services. 

The following data is depicted (values in millions of dollars) and all 
values add up to 100 percent for each service: 

Army: 
Fiscal year 2007 reported obligations through June 2007: $35,033.2; 
Fiscal year 2007 appropriations remaining unobligated: $15,033.5. 

Navy: 
Fiscal year 2007 reported obligations through June 2007: $3,418.2; 
Fiscal year 2007 appropriations remaining unobligated: $2,994.6. 

Marine Corps: 
Fiscal year 2007 reported obligations through June 2007: $2,613.4; 
Fiscal year 2007 appropriations remaining unobligated: $1,265.9. 

Air Force: 
Fiscal year 2007 reported obligations through June 2007: $5,786.5; 
Fiscal year 2007 appropriations remaining unobligated: $3,601.2. 

Source: GAO analysis of DOD data. 

Note: June represents 75 percent of the fiscal year. The line above is 
an indication of where DOD would be if it had obligated its available 
funding equally each month throughout the fiscal year. Reported 
obligations include those from both the active and reserve components. 
We have previously assessed the reliability of DOD's obligations data 
and found that they may not accurately reflect the true dollar value of 
GWOT obligations. 

[End of figure] 

For fiscal year 2007, the military services were appropriated 97 
percent more for procurement than for fiscal year 2006, about $42.5 
billion. Approximately one-third or about $14 billion of these fiscal 
year 2007 procurement appropriations have been obligated through June. 
About 60 percent or $24.7 billion of the procurement funds were 
provided in the fiscal year 2007 GWOT supplemental appropriation, which 
was not signed into law until late May 2007. Since these procurement 
funds are available for obligation over multiple years, some 
procurement funding will likely be obligated in fiscal year 2008 and 
beyond. As shown in figure 7, the Army has reported obligations of 36 
percent, the Navy 25 percent, the Marine Corps 47 percent, and the Air 
Force 6 percent of available fiscal year 2007 procurement 
appropriations. 

Figure 7: Military Services' Fiscal Year 2007 Reported GWOT Procurement 
Obligations of Appropriations Identified for GWOT through June 2007: 

[See PDF for image] 

This figure is a vertical bar graph. The vertical axis of the graph 
represents percent from 0 to 100. The horizontal axis of the graph 
represents the four military services. 

The following data is depicted (values in millions of dollars), and all 
values add up to 100 percent for each service: 

Army: 
Fiscal year 2007 reported obligations through June 2007: $9,370.9; 
Fiscal year 2007 appropriations remaining unobligated: $16,618.6. 

Navy: 
Fiscal year 2007 reported obligations through June 2007: $804.2; 
Fiscal year 2007 appropriations remaining unobligated: $2,402.6. 

Marine Corps: 
Fiscal year 2007 reported obligations through June 2007: $3,388.4; 
Fiscal year 2007 appropriations remaining unobligated: $3,762.6. 

Air Force: 
Fiscal year 2007 reported obligations through June 2007: $389.4; 
Fiscal year 2007 appropriations remaining unobligated: $5,709.0. 

Source: GAO analysis of DOD data. 

Note: Portions of the military services fiscal year 2007 GWOT 
procurement appropriations are for classified programs and obligations 
against these funds will not be reflected in reported obligations. 
Therefore, differences between reported obligations and funding could 
potentially be lower than is reflected. We have previously assessed the 
reliability of DOD's obligations data and found that they may not 
accurately reflect the true dollar value of GWOT obligations. 

[End of figure] 

[End of section] 

Appendix III: Process for Calculating Variance Analyses: 

The revised June 2006 guidance requires Department of Defense (DOD) 
components to compare variance percentages to established threshold 
percentages for the cost categories, Military Personnel, Civilian 
Personnel, Personnel Support, Operating Support, Transportation, 
Working Capital Fund Support, Investment Costs, and Iraqi and 
Afghanistan Security Forces Funds. Determining the reasons for changes 
in these percentages or changes in reported Global War on Terrorism 
(GWOT) obligation amounts could be important red flags that may 
indicate questionable or erroneous reporting. For each cost category 
total except Investment Costs, and Iraqi and Afghanistan Security 
Forces Funds,[Footnote 32] the guidance requires the calculation of the 
variance percentage by dividing the current month obligations, minus 
the burn rate, by the average monthly obligations incurred thus far 
during the fiscal year, except for October, the first month of the 
fiscal year. The burn rate is an average that is computed based on the 
prior months' cumulative obligations for the current fiscal year. For 
example, the burn rate for December's calculation is the average of 
October's and November's obligations (2 months). On the other hand, the 
burn rate for October's calculation is an average of the prior 12 
months' obligations. Variance percentages are required to be computed 
using the following formula: (current month obligations - burn rate) / 
burn rate. Table 2 shows how DOD calculates the burn rate for the 
purposes of the variance analysis. 

Table 2: DOD's Formula for Calculating the Burn Rate for the Variance 
Analysis of Reported GWOT Obligation Amounts: 

Reporting month: October; 
Comparative burn rate calculation: Prior fiscal year costs / 12. 

Reporting month: November; 
Comparative burn rate calculation: October costs. 

Reporting month: December; 
Comparative burn rate calculation: October through November costs / 2. 

Reporting month: January; 
Comparative burn rate calculation: October through December costs / 3. 

Reporting month: February; 
Comparative burn rate calculation: October through January costs / 4. 

Reporting month: March; 
Comparative burn rate calculation: October through February costs / 5. 

Reporting month: April; 
Comparative burn rate calculation: October through March costs / 6. 

Reporting month: May; 
Comparative burn rate calculation: October through April costs / 7. 

Reporting month: June; 
Comparative burn rate calculation: October through May costs / 8. 

Reporting month: July; 
Comparative burn rate calculation: October through June costs / 9. 

Reporting month: August; 
Comparative burn rate calculation: October through July costs / 10. 

Reporting month: 
September; Comparative burn rate calculation: October through August 
costs / 11. 

Source: DOD. 

Note: Information is from DOD Comptroller Memorandum "Revised 
Instructions for Analysis of Contingency Operation Costs" (June 13, 
2006). 

[End of table] 

If the calculated variance percentage exceeds the established 
threshold, an explanation is required. Table 3 shows the thresholds for 
the cost categories included in the variance analysis requirements. 

Table 3: Thresholds for Determining If an Explanation Is Required for a 
Variance: 

Cost category: Military Personnel; 
Allowable variance (in percent, plus or minus): 15. 

Cost category: Civilian Personnel; 
Allowable variance (in percent, plus or minus): 15. 

Cost category: Personnel Support; 
Allowable variance (in percent, plus or minus): 20. 

Cost category: Operating Support; 
Allowable variance (in percent, plus or minus): 25. 

Cost category: Transportation; 
Allowable variance (in percent, plus or minus): 20. 

Cost category: Working Capital Fund Support; 
Allowable variance (in percent, plus or minus): 15. 

Source: DOD. 

Note: Information is from DOD Comptroller Memorandum "Revised 
Instructions for Analysis of Contingency Operation Costs" (June 13, 
2006). Obligations for two other cost categories: Investments and Iraqi 
and Afghanistan Security Forces Funds, require comparative analysis 
against their respective annual spending plan, plus or minus 30 
percent, instead of prior month's obligations. 

[End of table] 

[End of section] 

Appendix IV Comments from the Department of Defense: 

Under Secretary Of Defense: 
Comptroller: 
1100 Defense Pentagon: 
Washington, DC 20301-1100: 

October 29, 2007: 

Ms. Sharon L. Pickup: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
441 G Street, N.W.: 
Washington, D.C. 20548: 

Dear Ms. Pickup: 

Attached is the Department of Defense (DoD) response to the Government 
Accountability Office (GAO) Draft Report GAO 08-08, "Global War On 
Terrorism: DoD Needs to Take Action to Encourage Fiscal Discipline and 
Optimize the Use of Tools Intended to Improve GWOT Cost Reporting," 
dated October 8, 2007 (GAO Code 350947). 

The Department generally agrees with the recommendations to improve 
reliability of the Cost of War report and is developing additional 
procedures to ensure compliance with the variance analysis explanations 
and affirmation statements policies. 

The Department has taken additional steps to improve the cost reporting 
process. We have implemented a performance measure to track timeliness 
of Component submission of cost data, variance explanations and 
affirmation statements. This measure will be used to rate the DoD 
status on the President's Management Agenda Scorecard for Improved Cost 
of War Reporting. We have also established a GWOT Variance Analysis/ 
Affirmation Workgroup to review and address causes for late submission 
of variance analysis explanations and affirmation statements. 

The Department generally agrees with the recommendations related to 
changes in the DoD's future budget request for GWOT needs. We will 
continue to follow the Administration's guidance regarding budget 
submissions. 

Sincerely, 

Signed by: 

J. David Patterson: 
Principal Deputy: 

Attachment: As stated: 

[End of letter] 

GAO Draft Report Ė Dated October 2, 2007
GAO Code 350947 /GAO-08-68 

"Global War On Terrorism: DoD Needs to Take Action to Encourage Fiscal 
Discipline and Optimize the Use of Tools Intended to Improve GWOT Cost 
Reporting:" 

Department Of Defense Comments To The Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to issue guidance 
defining what constitutes the "longer war against terror," identify 
what costs are related to that longer war, and build these costs into 
the base defense budget. 

DOD Response: Concur. The Department included funding in the base 
budget to reduce the stress on the ground forces by increasing the Army 
and Marine Corps force level by 92,000 end strength by FY 2012. The 
base budget also included $745 million to support regional war on 
terror initiatives. The base budget request provided $500 million for 
Global Train and Equip efforts. All of these initiatives reflect the 
Department's effort to include appropriate requirements related to the 
longer war on terror in the base budget. The "longer war" includes 
incremental costs of the GWOT and funds anticipated insurgent activity, 
and unforeseen and sudden events, which are GAO validated uses of GWOT 
funds. As in previous GWOT requests, this would include battle losses 
and reconstitution of equipment, which are not items that would be 
included in the base budget. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to identify 
incremental needs of the ongoing Global War on Terrorism operations 
that can be moved into the base budget. 

DOD Response: Concur with the intent of the recommendation. Incremental 
needs are defined as additional costs to DoD Components that would not 
have been incurred if a contingency operation, like Operation Enduring 
Freedom or Operation Iraqi Freedom, had not been supported. The 
Department included funding in the base budget to reduce the stress on 
the ground forces by increasing the Army and Marine Corps force level 
by 92,000 end strength by FY 2012. The base budget also included $745 
million to support regional war on terror initiatives. The base budget 
request provided $500 million for Global Train and Equip efforts. The 
FY2007 appropriated supplemental funds and the FY2008 GWOT request are 
for incremental needs associated with military operations, force 
protection, reconstitution, and military intelligence above and beyond 
base operations. The FY2008 GWOT request was included with the FY2008 
President's Budget Request, and the Department provided over 6,000 
pages of budget justification material to support the request. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to limit the use of 
emergency funding requests to truly unforeseen or sudden events. 

DOD Response: The Secretary of Defense does not make the determination 
concerning use of emergency funding requests. The Office of Management 
and Budget makes that determination. 

Recommendation 4: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to develop and 
implement written procedures for DFAS to use in compiling the variance 
explanations and in performing quality assurance steps to monitor the 
process. 

DOD Response: Concur. The Department is currently refining and will 
implement revised procedures for the Defense Finance and Accounting 
Service to use when compiling variance explanations, performing quality 
assurance, and monitoring the process. 

Estimated Completion Date: December 15, 2007 

Recommendation 5: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to require the 
Defense Finance and Accounting Service to provide draft copies of the 
consolidated Cost of War (CoW) report to DoD Components so that they 
can verify that all of their explanatory footnotes have been included. 

DOD Response: Concur with the intent of the recommendation. The Defense 
Finance and Accounting Service (DFAS) is taking steps to improve the 
Global War on Terror Cost of War (CoW) footnote compilation process. 
The process will allow the Components an opportunity to review their 
portion of the draft footnotes prior to release of the final CoW report 
and identify any missing information. The DFAS plans to implement this 
revised process by December 15, 2007 for FY 2008 reporting. In 
addition, the Department has established a performance measure to track 
compliance with prescribed footnote requirements. 

Estimated Completion Date: December 15, 2007 (in conjunction with 
October 2007 CoW reporting). 

Recommendation 6: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to develop and 
implement written procedures for the DoD Comptroller to periodically 
perform a DoD-wide analysis of the cost-of-war report and supporting 
explanations to identify trends and root causes of systemic reporting 
problems that should be considered and corrected during efforts to 
improve the cost-of-war reporting process. 

DOD Response: Concur. The Defense Finance and Accounting Service is 
developing procedures to review variance explanations to identify 
systemic problems and work with the Component to address possible 
solutions. 

Estimated Completion Date: January 31, 2008 

Recommendation 7: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to conduct a study 
of the current formula for the variance analysis to determine whether 
it provides the most useful information for identifying anomalies and 
taking correcting action. At a minimum, such a study should consider 
the nature of the activity being analyzed, including whether the 
activity tends to be cyclical or more volatile, and whether a different 
baseline comparison, such as the average of the previous 12 months' 
obligations, would result in improved analysis of obligation 
information. 

DOD Response: Concur. The current variance analysis methodology is 
effective in identifying reported amounts that require further 
research. Prior to issuing the revised guidance in June 13, 2006, the 
Department reviewed the methodology, to include a rolling 12-month 
average, and determined that the current year bum-rate methodology was 
most representative of Global War on Terror (GWOT) activity. The GAO 
findings point to noncompliance by the Components in providing the 
required variance explanations. The Department has established a GWOT 
Variance Analysis/Affirmation Workgroup to determine the causes for the 
non-compliance. As part of the review, the Workgroup will determine if 
changes to the current variance analysis methodology will assist the 
Components in timely submission of required explanations. 

Estimated Completion Date: December 15, 2007 

Recommendation 8: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to revise guidance 
over the monthly affirmation statements to include criteria or factors 
that should be considered during the monthly review process. 

DOD Response: Concur. The Under Secretary of Defense (Comptroller) 
provided clarification to the guidance on analysis of contingency 
operations costs in the DoD Financial Management Regulation and policy 
memorandums. 

Recommendation 9: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to revise the 
guidance over the monthly affirmation statements to require disclosure 
of the basis for affirmation statements, including key points of 
related variance analysis, if any, and sources used to obtain 
information on the amount of reported obligations. 

DOD Response: Concur. The Under Secretary of Defense (Comptroller) 
provided clarification to the guidance on analysis of contingency 
operations costs in the DoD Financial Management Regulation and policy 
memorandums. 

Recommendation 10: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to take steps to 
ensure compliance with guidance on variance analysis and affirmation 
statements. 

DOD Response: Concur. The Department has established a Cost of War 
reporting performance measure to track, measure, and report the 
Components' compliance with the existing policy. The consolidated 
results will be used to measure the Department's status in achieving 
Improved Cost of War Reporting on the President's Management Agenda 
scorecard. The Department has also established a Global War on Terror 
(GWOT) Variance Analysis/Affirmation Workgroup to determine causes for 
non-compliance with current variance analysis and affirmation guidance 
and recommend improvements. 

Estimated Completion Date: December 15, 2007 

Recommendation 11: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to revise the cost-
of-war report format to disclose when Component management has not 
affirmed to the accuracy and fair representation of reported 
obligations or provided all variance explanations, as required. 

DOD Response: Concur with the intent of the recommendation. The 
Department is already reviewing its procedures for submitting 
affirmation statements and variance explanations and the reasons behind 
late submissions in an effort to correct the problem. 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Sharon Pickup, (202) 512-9619 or pickups@gao.gov: 

McCoy Williams, (202) 512-6906 or williamsm1@gao.gov: 

Acknowledgments: 

In addition to the contact named above, Ann Borseth, Assistant 
Director; Mary Ellen Chervenic, Assistant Director; Glenn Slocum, 
Assistant Director; Lisa Brownson; Francine DelVecchio; Susan Ditto; 
George Duncan; Tiffany Epperson; Karl E. Essig; Richard Geiger; Ron La 
Du Lake; Jennifer Leone; John A. Long; Brian Mateja; Lonnie McAllister; 
Christopher Miller; Steve Pruitt; Thomas Twambly; and George Warnock 
made key contributions to this report. 

[End of section] 

Related GAO Products: 

DOD Business Transformation: Lack of an Integrated Strategy Puts the 
Army's Asset Visibility System Investments at Risk. GAO-07-860. 
Washington, D.C.: July 27, 2007. 

Global War on Terrorism: Reported Obligations for the Department of 
Defense. GAO-07-1056R. Washington, D.C.: July 26, 2007. 

Global War on Terrorism: Reported Obligations for the Department of 
Defense. GAO-07-783R. Washington, D.C.: May 18, 2007. 

DOD Business Systems Modernization: Progress Continues to Be Made in 
Establishing Corporate Management Controls, but Further Steps Are 
Needed. GAO-07-733. Washington, D.C.: May 14, 2007. 

Federal Financial Management: Critical Accountability and Fiscal 
Stewardship Challenges Facing Our Nation. GAO-07-542T. Washington, 
D.C.: March 1, 2007. 

High Risk Series: An Update. GAO-07-310. Washington, D.C.: January 31, 
2007. 

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.: November 13, 2006. 

Global War on Terrorism: Observations on Funding, Costs, and Future 
Commitments. GAO-06-885T. Washington, D.C.: July 18, 2006. 

Global War on Terrorism: DOD Should Consider All Funds Requested for 
the War When Determining Needs and Covering Expenses. GAO-05-767. 
Washington, D.C.: September 28, 2005. 

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.: September 21, 2005. 

DOD Business Transformation: Sustained Leadership Needed to Address 
Long-standing Financial and Business Management Problems. GAO-05-723T. 
Washington, D.C.: June 8, 2005. 

Defense Management: Key Elements Needed to Successfully Transform DOD 
Business Operations. GAO-05-629T. Washington, D.C.: April 28, 2005. 

High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 1, 
2005. 

Department of Defense: Further Actions Are Needed to Effectively 
Address Business Management Problems and Overcome Key Business 
Transformation Challenges. GAO-05-140T. Washington, D.C.: November 18, 
2004. 

Military Pay: Army Reserve Soldiers Mobilized to Active Duty 
Experienced Significant Pay Problems. GAO-04-911. Washington D.C.: 
August 20, 2004. 

Military Pay: Army Reserve Soldiers Mobilized to Active Duty 
Experienced Significant Pay Problems. GAO-04-990T. Washington D.C.: 
July 20, 2004. 

Military Pay: Army National Guard Personnel Mobilized to Active Duty 
Experienced Significant Pay Problems. GAO-04-413T. Washington D.C.: 
January 24, 2004. 

Military Pay: Army National Guard Personnel Mobilized to Active Duty 
Experienced Significant Pay Problems. GAO-04-89. Washington D.C.: 
November 13, 2003. 

Contingency Operations: DOD's Reported Costs Contain Significant 
Inaccuracies. GAO/NSIAD-96-115. Washington, D.C.: May 17, 1996. 

DOD Budget: Analysis of Options for Funding Contingency Operations. 
GAO/NSIAD-94-152BR. Washington, D.C.: April 26, 1994. 

[End of section] 

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 Appropriations Act, 2007 in September 2006 
as "bridge" funding to support the expenses of 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 in May 2007. 

[3] DOD's original fiscal year 2008 appropriations request was $623.1 
billion including $481.4 billion for its base budget and $141.7 billion 
for its GWOT budget needs. 

[4] The 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 appropriations that have yet to be obligated, and 
obligations for classified activities which are not included in DOD's 
reported obligations. 

[5] Volume 12, Chapter 23 of the DOD Financial Management Regulation 
7000.14R generally establishes financial policy and procedures related 
to DOD contingency operations. It 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] 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 GAO, 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). 

[7] GAO, Global War on Terrorism: Observations on Funding, Costs, and 
Future Commitments, GAO-06-885T (Washington, D.C.: July 18, 2006). 

[8] For purposes of this report, we refer to the Office of the Under 
Secretary of Defense (Comptroller) as the DOD Comptroller. 

[9] Caps on discretionary spending set by Congress in the regular 
budget process are raised by the amount designated as "emergency." 

[10] The fiscal year 2005 funds were available for obligation during 
the last two months of fiscal year 2004. 

[11] Pub. L. No. 109-364 (2006). 

[12] See the Related GAO Products list at the end of this report. 

[13] DOD Comptroller Memorandum Analysis of Contingency Operation Costs 
(Aug. 30, 2005). 

[14] The cost categories include Military Personnel, Civilian 
Personnel, Personnel Support, Operating Support, Transportation, and 
Working Capital Fund Support. 

[15] DOD Comptroller Memorandum Revised Instructions for Analysis of 
Contingency Operation Costs (June 13, 2006). 

[16] Analyses of obligations for investments and the Iraqi and 
Afghanistan security forces funds require a comparison to the 
corresponding month on the annual spending plan for these respective 
cost categories. 

[17] Deputy Secretary of Defense Memorandum Improvement of Global War 
on Terror (GWOT) Cost of War Reporting (Feb. 26, 2007). 

[18] GAO-07-76. 

[19] GAO, Defense Logistics: Army and Marine Corps Cannot Be Assured 
Equipment Reset Strategies Will Sustain Equipment Availability While 
Meeting Ongoing Operational Requirements, GAO-07-814 (Washington D.C.: 
Sept. 19, 2007). 

[20] Reset is defined as the costs to repair, replace, and recapitalize 
equipment. 

[21] GAO, DOD Budget: Analysis of Options for Funding Contingency 
Operations, GAO/NSIAD-94-152BR, (Washington, D.C.: Apr. 26, 1994); 
Future Years Defense Program: Actions Needed to Improve Transparency of 
DOD's Projected Resource Needs, GAO-04-514 (Washington, D.C.: May 7, 
2004); and GAO-06-885T. 

[22] Department of Defense, Financial Management Regulation, 7000.14-R, 
vol. 12, ch. 23, p. 28 (September 2005). 

[23] Department of Defense, Financial Management Regulation, 7000.14-R, 
vol. 12, ch. 23, p. 28 (September 2005). 

[24] The burn rate for October represents the average of cumulative 
obligations for the prior fiscal year. 

[25] The other 4 missing explanations were due to DOD components 
reporting GWOT obligations for the first time. 

[26] GAO-07-76. 

[27] Department of Defense Financial Management Regulation, 7000.14-R, 
vol.12, ch. 23, p. 28 (September 2005). 

[28] The 25 DOD components include the Air Force, Army, Navy, and 
Marine Corps and 21 other components including American Forces 
Information Services, Counterintelligence Field Activity, Defense 
Contract Audit Agency, Defense Contract Management Agency, Defense 
Health Program, Defense Intelligence Agency, Defense Information 
Systems Agency, Defense Logistics Agency, Defense Legal Services 
Agency, Department of Defense Education Activity, Defense Security 
Cooperation Agency, Defense Threat Reduction Agency, Department of 
Defense Inspector General, Joint Chiefs of Staff, National Geospatial- 
Intelligence Agency, National Security Agency, Office of the Secretary 
of Defense, Office of the Undersecretary of Defense, Office of the 
Assistant Secretary of Defense, Special Operations Command, and the 
Washington Headquarters Services. 

[29] The Defense Contract Management Agency submitted 5 affirmations, 
Defense Threat Reduction Agency submitted 2 affirmations, and National 
Security Agency submitted 5 affirmations. 

[30] We compared what was appropriated for GWOT to the Army, Navy, 
Marine Corps and Air Force, for both active and reserve forces, in 
military personnel, operation and maintenance, and procurement to 
reported obligations, because these appropriations represent about 88 
percent of the funds available in fiscal year 2007. 

[31] Of the $161.8 billion, Congress provided $67.4 billion in Title IX 
of the Department of Defense Appropriations 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. 

[32] Analysis of Investments and Iraqi and Afghanistan Security Forces 
Funds required a monthly review of reported costs compared to the 
corresponding month on the annual spending plan. 

[End of section] 

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