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Highlights

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 DOD's 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 General's authority to conduct evaluations on his own initiative, GAO assessed (1) the outlook of DOD's reported GWOT obligations for fiscal year 2007 and funding requests for fiscal year 2008, (2) the effect of changes in DOD's GWOT funding guidance, and (3) DOD's progress in implementing variance analysis and affirmation statements. For this engagement, GAO analyzed fiscal year 2007 GWOTrelated appropriations and reported obligations, as well as DOD's corrective actions.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense 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, the Secretary of Defense should 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.
Closed - Implemented
The Administration, in the publication "A New Era of Responsibility," stated that the fiscal year 2010 budget would transparently present the full costs of the defense base budget and the incremental costs of ongoing operations in Iraq and Afghanistan. In addition, the Department of Defense (DOD) and the Office of Management and Budget collaboratively developed the February 26, 2009, Criteria for War/Overseas Contingency Operations Funding Requests. That criteria defines the items appropriately funded in the base budget and the items appropriately funded in the Overseas Contingency Operations budget. Items such as family support initiatives and recruiting and retention bonuses are included in the base budget. This criteria was first applied to DOD's Fiscal Year 2010 budget request, which was submitted to Congress in May 2009.
Department of Defense 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, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to identify incremental costs of the ongoing GWOT operations that can be moved into the base budget.
Closed - Implemented
The Administration, in the publication "A New Era of Responsibility," stated that the fiscal year 2010 budget would transparently present the full costs of the defense base budget and the incremental costs of ongoing operations in Iraq and Afghanistan. In addition, the Department of Defense (DOD) and the Office of Management and Budget collaboratively developed the February 26, 2009, Criteria for War/Overseas Contingency Operations Funding Requests. That criteria defines the items appropriately funded in the base budget and the items appropriately funded in the Overseas Contingency Operations budget. Items such as family support initiatives and recruiting and retention bonuses are included in the base budget. This criteria was first applied to DOD's Fiscal Year 2010 budget request, which was submitted to Congress in May 2009.
Department of Defense 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, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, in consultation with the Office of Management and Budget, consider limiting emergency funding requests to truly unforeseen or sudden events.
Closed - Implemented
In its comments, DOD stated that the Secretary of Defense does not make the determination concerning use of emergency funding request; the Office of Management and Budget makes that determination. In early 2009, the Department of Defense (DOD) and the Office of Management and Budget collaboratively developed criteria for deciding whether funding properly belongs in DOD's base budget or the budget for Overseas Contingency Operations. These criteria were first applied to DOD's Fiscal Year 2010 budget request. As a result, about $7.8 billion in funding was shifted from DOD's OCO budget request to its base budget request, while its OCO request was reduced by another $670 million. The criteria were subsequently updated in September 2010, and DOD indicated it would incorporate the criteria into its financial management regulation. In December 2017, DOD updated the DOD Financial Management Regulation 7000.14, Volume 12, Chapter 23: Contingency Operations, to reference these criteria. By referencing these criteria in its financial management regulation, which also covers the procedures for estimating contingency operations budgets, DOD strengthens its process for ensuring war funding requests are limited to truly unforeseen or sudden events.
Department of Defense To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, develop and implement written procedures for Defense Finance and Accounting Service (DFAS) to use in compiling the variance explanations and in performing quality assurance steps to monitor the process.
Closed - Implemented
Revised procedures for contingency operation cost report footnotes were issued by Office of the USD(C) on 4 Jan 2008, and distributed to DOD components by the GWOT Cost of War Program Management Office on 8 Jan 2008.
Department of Defense To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, 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.
Closed - Implemented
The Defense Finance and Accounting Service (DFAS) has taken steps to improve the Global War on Terrorism Cost of War footnote compilation process. As such, according to DOD, DFAS sends each component their portion of the draft footnotes for review prior to the office of the Under Secretary of Defense (Comptroller) releasing the monthly report. The Department has established a performance measure to track compliance with prescribed footnote requirements.
Department of Defense To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, 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.
Closed - Implemented
In November 2009, the Defense Finance and Accounting Service (DFAS) issued Standard Operating Procedures for Contingency Operations Data Validation, Version 2. According to DOD, the procedures require DFAS to review the Components' variance explanations to ensure that the explanations are complete and reasonable, summarize and consolidate the footnote explanations and prepare a package for review by OUSD, Comptroller and senior leadership of DFAS. These actions essentially meet the intent of the recommendation.
Department of Defense To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, 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.
Closed - Implemented
According to DOD, as a result of the Variance Analysis/Affirmation Workgroup, the variance analysis methodology was changed in January 2008 to allow analysis based on a monthly spend plan or a 12-month average.
Department of Defense To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, revise guidance over the monthly affirmation statements to include criteria or factors that should be considered during the monthly review process.
Closed - Implemented
According to DOD in August 2008, the Defense Finance and Accounting Service developed an affirmation checklist, which provides criteria for affirmation, to assist the components in completing their affirmation.
Department of Defense To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, 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.
Closed - Implemented
DOD agreed with our recommendation and stated efforts are underway to improve cost of war reporting and variance analysis and affirmation processes. According to DOD, the Defense Finance and Accounting Service developed an affirmation checklist, which provides criteria for affirmation, to assist the components in completing their affirmation. Additionally, the Under Secretary of Defense (Comptroller) issued revised instructions for contingency operations cost report footnotes to require Components to explain all sources and variable amounts used to identify and report cost data if the data source is other than the official accounting systems and/or any adjustments made to data originating from the official accounting records. These actions essentially meet the intent of the recommendation.
Department of Defense To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the variance analysis and affirmation statements, take steps to ensure compliance with guidance on variance analysis and affirmation statements.
Closed - Implemented
According to DOD in June 2008, DOD has implemented a compliance scorecard to track compliance with submitting costs, variance analysis explanations, and affirmation statements and the Under Secretary of Defense (Comptroller) issued a memorandum with revised guidance regarding Cost-of-War footnotes.
Department of Defense To help improve the reliability of the obligation information included in the monthly cost-of-war report, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to, regarding the implementation of the 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.
Closed - Implemented
According to DOD in 2008, the Defense Finance and Accounting Service uses a spreadsheet to monitor late and missing explanations and monitors missing explanations until they are received and identifies missing explanations or affirmations when the draft is submitted to the Under Secretary of Defense (Comptroller). If late explanations or affirmations are received before the release of the report, they are immediately provided so they can be included in the final report. These actions meet the intent of the recommendation.

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