Opportunities to Improve Controls over Department of Defense's Overseas Contingency Operations Cost Reporting
Highlights
From September 2001 through January 2010, Congress provided about $1.023 trillion in supplemental and annual appropriations in response to Department of Defense (DOD) requests for funding to support overseas contingency operations (OCO). In March 2010, DOD reported obligations of about $825 billion attributed to OCO for the period September 2001 through January 2010. DOD uses available cost-related information, along with other financial information, to evaluate OCO trends, formulate OCO funding requests, and monitor the costs of overseas operations. In addition, Congress considers this information in its deliberations on DOD requests for additional OCO funding. Our prior reviews have found the financial information in DOD's monthly OCO reports to be of questionable reliability. For example, we identified problems in DOD's processes for recording and reporting obligations, such as not including all OCO costs and the lack of a systematic process for ensuring that data are correctly entered into those systems. Consequently, we concluded DOD's reported OCO costs should be considered approximations. Based on our prior work, we made a number of recommendations to improve the reliability of OCO reported costs, with which DOD generally concurred. Consistent with our recommendations, DOD has taken steps intended to improve OCO cost reliability, such as clarifying cost category definitions and requiring military services (Army, Navy, Air Force, and Marine Corps) and other DOD components to analyze variances in reported OCO costs. Further, in fiscal year 2009, DOD initiated the Contingency Operations Reporting and Analysis Service (CORAS), an automated system and database through which DOD intended to provide more transparent, accurate, and timely reporting on costs attributed to OCO. Prior to the CORAS initiative, DOD had relied on manual procedures for accumulating data and reporting on costs attributed to OCO from the military services. With CORAS, the intent was to (1) eliminate such manual practices where feasible and instead use automated processes to retrieve and accumulate key financial OCO data from the military services' financial systems using a DOD-wide database and (2) add the capability to report on OCO-related funding (appropriations) and disbursements, as well as obligations. To determine whether DOD had designed adequate internal controls over reporting of OCO cost-related data, we reviewed internal control criteria related to reliably reporting financial data. We reviewed DOD and military service standard operating procedures and practices in comparison with federal and department standards and guidance to determine whether they contained key controls.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should direct the Under Secretary of Defense (Comptroller), in coordination with the military service secretaries (as appropriate), to revise the Army procedures to include specific steps required to retain documentation of the activities performed and related results. |
Closed – Implemented
In August 2020, Army provided an updated Overseas Contingency Operations (OCO), standard operating procedure that included steps to retain documentation of the activities performed and related results.
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| Department of Defense | The Secretary of Defense should direct the Under Secretary of Defense (Comptroller), in coordination with the military service secretaries (as appropriate), to revise the Marine Corps and Air Force procedures to include specific steps required to validate data in the OCO report including reconciliations and retain documentation of the activities performed and related results. |
Closed – Implemented
In August 2020, the Marine Corps and Air Force provided updated Overseas Contingency Operations (OCO), standard operating procedures that included steps to validate OCO report data, use variance analysis and reconciliations, and retain documentation of the steps performed and related results.
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| Department of Defense | The Secretary of Defense should direct the Under Secretary of Defense (Comptroller), in coordination with the military service secretaries (as appropriate), to establish Navy procedures to include specific steps required to validate data in the OCO report including variance analysis and reconciliations, and retain documentation of the activities performed and related results. |
Closed – Implemented
In August 2020, Navy provided an updated Overseas Contingency Operations (OCO), standard operating procedure that included steps to validate OCO report data, use variance analysis and reconciliations, and retain documentation of the steps performed and related results.
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| Department of Defense | The Secretary of Defense should direct the Under Secretary of Defense (Comptroller), in coordination with the military service secretaries (as appropriate), to revise DOD requirements in FMR 7000.14-R, Volume 12, Chapter 23, Contingency Operations, to provide clear, detailed guidance on (1) conducting reconciliations and other validations and (2) documenting military service-level reviews and DOD Comptroller-level reviews. |
Closed – Implemented
In commenting on the draft report, DOD concurred with the recommendation and cited actions in process to revise its Financial Management Regulation (FMR). In 2016, the Office of the Under Secretary of Defense (Comptroller) (OUSD(C)) stated that the Components provided comments and edits to the draft Chapter 23. DOD completed the updates to FMR 7000.14-R, Volume 12, Chapter 23, Contingency Operation and provided it to us for review in May 2019. We determined that the updates provided clear and detailed guidance on conducting reconciliations and other validations and documenting military service level and DOD Comptroller level reviews. We determined that the actions taken addressed the recommendation.
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| Department of Defense | The Secretary of Defense should direct the Under Secretary of Defense (Comptroller), in coordination with the military service secretaries (as appropriate), to revise DOD Comptroller guidance to provide clear, detailed steps for identifying and separately disclosing adjustments related to prior-period omissions or errors in current month reporting. |
Closed – Not Implemented
In its comments on the draft report, DOD stated it would explore the possibility of separating current month obligations from prior-period omissions or errors in the monthly Cost of War reports. As of July 2014, no changes were made to the fiscal year instructions for contingency operations cost reports related to clear, detailed steps for disclosing prior-period omissions or errors in the current month reporting. However, DOD considers this recommendation closed as of February 2011. According to a DOD IG official, the department was not in agreement with this recommendation to separate current month obligations from prior-period omissions or errors. The instructions for contingency operations cost reports requires a footnote disclosure for adjustments. DOD believes this is adequate. The footnote disclosure requirement existed at the time of our audit.
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