From the U.S. Government Accountability Office, www.gao.gov Transcript for: Overseas Contingency Operations Description: Audio interview by GAO staff with John Pendleton, Director, Defense Capabilities and Management Related GAO Work: GAO-17-68: Overseas Contingency Operations: OMB and DOD Should Revise the Criteria for Determining Eligible Costs and Identify the Costs Likely to Endure Long Term Released: January 2017 [ Background Music ] [ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. It's January 2017. Since 2001, Congress has provided more than $1.6 trillion in appropriations to fund overseas contingency operations, or OCO. These operations can include peacekeeping support, major humanitarian assistance, noncombatant evacuations, and disaster relief efforts. The Department of Defense's OCO budget request has generally focused on operations in Iraq and Afghanistan, but more recently the request has also included more activities elsewhere. A team led by John Pendleton, a director in GAO's Defense Capabilities and Management team, recently looked at how these funds are actually being used. Jacques Arsenault sat down with John to talk about what they found. [ Jacques Arsenault: ] What are overseas contingency operations funds, and how do they differ from regular appropriations? [ John Pendleton: ] Overseas contingency operations funds, or OCO, are basically funds to cover war costs, in addition to the regular budget. They were actually originally called Global War on Terror funds. The name changed a few years ago, but the intent was to cover the incremental cost, so the military didn't have to pay for the war operations out of their basic budget, out of hide, so to speak. [ Jacques Arsenault: ] Right. So, with the regular budget and appropriations cycle, they're planning based on, what are the major ongoing expenses that they're going to have, and you can't necessarily make all those plans about the war, so this provides, I guess, more flexibility? [ John Pendleton: ] In peacetime, the military's basic mission is to train and engage with partners, and other things, and so their budgets are based on those kinds of activities. The war costs obviously add a significant cost. It takes fuel to get them there. You've got to pay them. You've got to pay contractors. And so, overseas contingency operations funding was designed to allow the Congress to provide the funding needed to cover those costs, which would be incremental in addition to what they were originally planning for. [ Jacques Arsenault: ] So then, what are these funds being used for? [ John Pendleton: ] Well, since 2001, Congress has provided about 1.6 trillion, with a T, trillion in funds to cover these war costs. This fiscal year, DOD has asked for 65 billion, and that's about 10 percent in addition to their regular budget, and it's being used to cover operations in Iraq and Afghanistan. That's the bulk of it. More recently, we've assisted in Syria and Libya, and there's some money for that, but it's even now being used to conduct deterrence operations in Europe. So, it's adjusted from what it was traditionally used for. [ Jacques Arsenault: ] So, about how much of the funding is used for these kind of other uses beyond the big fights in Iraq and Afghanistan? [ John Pendleton: ] It's a fair amount, but it's a little bit complicated, and there's a couple part to it. First, the department flags some items as non-war that they're doing, in reports to Congress, and that's been $6 or $7 billion a year in recent years, even as the total amount of overseas contingency operations funds have dropped. But, the second part is bigger and more difficult to unravel. These are the costs that are enduring. This means they would continue even after current operations stopped. For example, many of the bases in the Middle East, even outside of Iraq and Afghanistan, support ongoing operations, but I don't think anybody thinks we would close them, even if the wars were to stop. [ Jacques Arsenault: ] Right. It doesn't really sound like a contingency, as much as something that we're planning for, and are going to have in place. [ John Pendleton: ] Absolutely, and it's difficult to identify precisely how much these enduring costs are, but they're substantial. We talked to DOD about it, and they think it's as much as $30 billion of the 65 billion that they've asked for this year. So, it's a fair amount of money. [ Jacques Arsenault: ] How does DOD decide what should be included in these OCO requests? [ John Pendleton: ] We've been looking at this for more than a decade, and we've cautioned previously that the funding was becoming blended in such a way that it would be difficult to separate it out. We urged DOD to work with the Office of Management and Budget, who provide the guidance here, to craft criteria to provide guidance for what would be included, and they did that. They took our recommendation back in 2010 and provided that guidance. The problem is, a lot has changed since 2010, but the guidance hasn't been updated. So you've got a situation now where you're using OCO for things that the guidance didn't contemplate, like the operations in Europe, and in fact, about $3.4 billion was requested in this fiscal year in order to provide army units the opportunity to go over and train with partners. So, it's a fairly substantial amount that's outside the guidance at this point. [ Jacques Arsenault: ] So, without criteria being updated in the last six years, it sounds like it's hard to even assess, you know, what should or shouldn't be included. [ John Pendleton: ] You know, it sound wonky, but it's about controls. We're now using OCO for things that we really didn't envision, and that guidance needs to be updated to provide some boundaries for the use of OCO. And, without clear guidance, it's going to be very difficult to disentangle the OCO costs from the regular budget going forward. [ Jacques Arsenault: ] So then, can you talk about the recommendations that GAO is making in this report? [ John Pendleton: ] We make two recommendations. First, they need to update the guidance. They need to know that the left and right boundaries are, and allow folks to assess whether or not what they're doing is appropriate. Second, I think they need to get a complete and reliable estimate of the enduring costs. They said it was in the range of 20 to 30 billion, maybe closer to 30, but it's pretty imprecise, and it's a big number, but they need to know that that number is, to inform future budget requests. Ideally, these enduring costs should be paid for with the regular budget. [ Jacques Arsenault: ] Finally, then, what would you say is the bottom line of this report? [ John Pendleton: ] GAO's repeatedly raised concerns about the lack of transparency created when enduring costs are paid for with year-to-year war funds. I mean, if you compare it to your home budget, it's obviously much bigger. You wouldn't want to pay your mortgage with a credit card. Your mortgage is a predictable, important part of your family, and it needs to be paid for out of your main budget. If you don't, there's risk involved. And, the problem at this point is that DOD has significant, but not precisely known long-term costs blended into its OCO funding, and it could be $30 billion, possibly more. When we've sent these reports over, DOD has responded by saying, "Yes, we'd love to do these things, but we can't, because we don't have room under the existing budget caps." And, the bottom line is, $30 billion is a lot of money, even at DOD, and the department needs to figure out how they're going to pay for it, long term. [ Background Music ] [ Narrator: ] To learn more, visit GAO.gov and be sure to tune in to the next episode of GAO's Watchdog Report for more from the congressional watchdog, the U.S. Government Accountability Office.