The Administrations FY2005 Request for $25 Billion for Operations in Iraq and Afghanistan: Precedents, Options, and Congressional Action
CRS Report for Congress
The Administration’s FY2005 Request for
$25 Billion for Operations in Iraq and Afghanistan:
Precedents, Options, and Congressional Action
Updated July 22, 2004
Amy Belasco and Stephen Daggett
Specialists in National Defense
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress
The Administration’s FY2005 Request for $25 Billion for
Operations in Iraq and Afghanistan:
Precedents, Options, and Congressional Action
Administrations have periodically asked Congress to give the Department of
Defense flexibility in allocating funds to cover the costs of military operations. Most
recently, on May 12, 2004, the White House requested $25 billion as a “contingent
emergency reserve fund” for FY2005 to cover the costs of operations in Iraq and
Afghanistan for part of the fiscal year. If enacted in its current form, DOD could
transfer funds, in any amounts, to individual accounts as long as the Office of
Management and Budget agreed and Congress received a five-day advance
notification. The issue for Congress is a perennial one: to determine how much
flexibility the Defense Department may need to carry out military operations
Congress intends to support while also ensuring that funds are used for purposes and
in amounts that Congress endorses.
Faced with the challenge of balancing DOD’s need for some funding flexibility
for operations with congressional oversight responsibilities, Congress has responded
in various ways to DOD requests. In general, Congress has rejected Administration
requests to provide broad authority to finance military operations in advance. In the
run-up to the first Persian Gulf War in 1990, for example, Congress rejected an
Administration request for blanket authority to spend money contributed by allies.
Congress has, however, periodically appropriated money for ongoing or
anticipated military operations into flexible “transfer accounts,” where DOD can then
move funds into regular accounts to meet evolving requirements. At the same time,
Congress has generally imposed various restrictions and reporting requirements.
The least restrictive requirements Congress has imposed in recent years applied
to $20 billion that Congress appropriated in the immediate aftermath of the terrorist
attacks of September 11, 2001. Although the Administration requested similar
flexibility in later supplementals, Congress gradually reverted to normal practices
by limiting the amount of funding in flexible accounts and by requiring advance
notification if DOD decides to spend monies in ways that differ from those specified
in statutory or report language.
By the standards of earlier congressional action, the Administration’s current
request for a contingency reserve would allow the Defense Department broad
flexibility comparable to that granted by Congress immediately after September 11.
In congressional action on the FY2005 DOD authorization (H.R. 4200 and S. 2400),
and appropriations bills (H.R. 4613), both houses limited DOD’s flexibility by
allocating most of the $25 billion to regular appropriation accounts, and setting
various reporting requirements. This report reviews recent precedents for funding
military operations, outlines options for monitoring that spending, and analyzes
congressional action on the Administration’s $25 billion request for FY2005.
Congress is expected to vote on the conference version of the FY2005 DOD
Appropriations bill, H.R. 4613, which includes the $25 billion, before going on
recess on July 26, 2004.
Balancing Flexibility with Oversight...................................1
Proposed FY2005 Budget Amendment.................................3
Language of the Request........................................4
Flexible Funding: Options for Congress...............................14
Option 1: Provide Extensive Flexibility as After 9/11.............14
Option 2: Split Funding Between a Transfer Account and
Regular Appropriations with Brief Notification Period........14
Option 3: Put Most Funds in Regular Accounts with Longer
Notification and More Extensive Reporting................15
Option 4: Provide All Funds in Regular Accounts with
Some Flexibility, Longer Notification, and
Require Planning Assumptions..........................15
Option 5: Provide All Funds in Regular Accounts with
Some Flexibility, Require Longer Notification,
Planning Assumptions and Extensive Reporting.............15
Funding Flexibility In Regular Appropriations and Transfer Accounts.......19
Standard Statutory Restrictions on Moving Funds After Enactment......19
Standard Reprogramming Restrictions............................20
Effect of Thresholds on O&M Activities.......................21
Alternative Thresholds for War-Related Reprogramming..............21
Flexible Transfer Accounts.....................................22
Precedents for Flexible Funding Since 1990............................23
First Persian Gulf War: Flexibility for Combat Operations But with
Creation of the Defense Cooperation Account..................24
Creation of the Persian Gulf Working Capital Fund..............24
Appropriators Require That Funds Be Allocated to
Special Flexibility For Combat Operations.....................26
Providing Flexibility for Unanticipated Contingencies in the 1990s......27
“Readiness Preservation Authority” Proposal Is Rejected..........27
Congress Adopts the Overseas Contingency Operations
Flexible Funding After September 11, 2001........................29
FY2001 Emergency Terrorism Response Supplemental
Gives President Broad Discretion........................29
Some Appropriation Controls Apply To Second $20 Billion.......30
After-the-Fact Reporting Requirements........................31
Congressional Dissatisfaction with DOD Reporting..............32
FY2002 Emergency Supplemental: Considerable Flexibility
But In A Transfer Account..............................33
FY2003 Emergency Supplemental Provides Some Flexibility to
Fund Iraq War.......................................33
FY2003 Regular Budget Requests $10 Billion for Contingencies...35
FY2004 Emergency Supplemental Limits Amount of
Appendix A: Extent of Flexible Funding Since 9/11 Attacks..............37
Amount of Flexible Funding in Post 9/11 Supplementals..........37
Share of Flexible Funding in Post 9/11 Supplementals............38
Appendix B: Legislation...........................................39
List of Tables
Table 1. Congressional Action on Administration Request for $25 Billion
in FY2005 for Iraq and Afghanistan..............................10
Table 2. Precedents For Funding War, Occupation and Contingencies,
Table A1. Extent of DOD Flexibility in Supplementals Since 9/11 Attacks:
Table A2. Extent of DOD Flexibility in Supplementals Since 9/11 Attacks:
Share of Total Funding........................................38
The Administration’s FY2005 Request for
$25 Billion for Operations in Iraq
and Afghanistan: Precedents, Options,
and Congressional Action
Balancing Flexibility with Oversight
Administrations have frequently asked Congress to give the Department of
Defense flexibility in allocating funds to cover costs of military operations. Most
recently, on May 12, 2004, the White House requested $25 billion in a “contingent
emergency reserve fund” for FY2005 to cover costs of operations in Iraq and
Afghanistan during part of the fiscal year. Although the request sets illustrative
ceilings by appropriation accounts within the total, as written, DOD could transfer
the $25 billion for DOD’s expenses for Iraq and Afghanistan to any appropriation
account and in any amount after notifying Congress five days in advance. The issue
for Congress is to determine how much flexibility the Defense Department may need
to carry out operations Congress intends to support, while also ensuring that funds
are used in amounts and for purposes that Congress has approved.
Faced with the challenge of balancing DOD’s need for flexibility to respond to
the uncertainties of military operations with congressional oversight responsibilities,
Congress has responded to similar requests for DOD in different ways in recent
years. Before the September 11, 2001, terrorist attacks, Congress generally balked
at proposals to provide blanket authority for the Defense Department to finance
military operations without specific, advance congressional approval. Since 9/11,
however, Congress has been more willing to provide the Administration with
considerable flexibility to allocate funds for the “global war on terrorism” without
detailed congressional oversight. Since then, Congress has continued to provide the
Administration with funding flexibility, but it has gradually pared back the amount
of funding placed in flexible accounts, and it has also imposed a variety of reporting
requirements. This report
(1) briefly reviews the Administration’s request for flexibility in the $25
billion contingent emergency reserve fund that it has requested for
(2) discusses options Congress has to provide flexible funding for military
operations based on precedents discussed in more detail later in the report;
(3) reviews standard peacetime procedures governing reprogramming of
defense funds as a benchmark against which to assess flexibility Congress
has often provided for wartime or contingency operations;
(4) reviews congressional responses to Administration requests for funding
flexibility from the first Persian Gulf War in 1990 through post-9/11
wartime appropriations to date; and
(5) analyzes congressional action and current issues.
Although Congress has provided most of the DOD funding requested by the
Administration for the “global war on terrorism,” Congress has not provided most
of that funding in flexible accounts despite Administration requests. Of the $173
billion that the Administration has requested for Iraq, Afghanistan and enhanced
security for defense installations since the 9/11 terrorist attacks, the Administration
requested $104 billion in flexible funds and the remaining $69 billion in regular
appropriation accounts. In response, Congress appropriated a total of about $165
billion including $40 billion in flexible accounts and $124 billion in regular accounts
(see Appendix A).
The current request for $25 billion in a flexible account is larger than any
amount that DOD has received thus far. Since 1990, DOD has received between $2
billion and $14 billion in monies in any individual bill that can be moved after
enactment for war and war-related funding, with the remainder of the funding placed1
in regular appropriation accounts. In the most recent FY2004 Emergency
Supplemental, Congress provided $2 billion in flexible funding requested by DOD,
or about 3% of the total in the bill. (see Appendix A).
Appendix A includes tables comparing the amounts that Congress has provided
for military operations since 9/11 in flexible spending accounts and in regular
appropriations accounts. Appendix B provides a list of legislation with flexible
The discussion below and Table 1 analyze the Administration’s request and
congressional action on the FY2004 Administration request. Both the authorization
and appropriation bills reject the Administration’s request for broad discretion and
set allocations for most of the $25 billion requested, as well as require additional
reporting of how funds are spent, with advance notification of spending of
unallocated funds and after-the-fact reporting of funds allocated in appropriation
accounts or titles.
Congress is likely to vote on the conference version of the FY2005 DOD
Appropriations bill, H.R. 4613, before going on recess on July 26, 2004 but is not
likely to address the FY2005 DOD Authorization until after the recess. See the
section on congressional action below for an update of provisions on funding and
monitoring of the $25 billion for Iraq and Afghanistan in the conference version of
H.R. 4613 and a comparison of the House and Senate version of the authorization
1 In the FY2003 Emergency Supplemental, DOD received $15.7 billion in the Iraq Freedom
Fund but within that total, DOD had flexibility to use about $10 billion to $11 billion (see
discussion below). In the FY2001 Emergency Supplemental, DOD received $14 billion of
the $20 billion that the President could allocate at his discretion.
Proposed FY2005 Budget Amendment
On May 12, 2004, the White House sent Congress an amendment to its FY2005
budget request, asking Congress to appropriate $25 billion as “contingent emergency
funds” in the Iraq Freedom Fund (IFF), a transfer account that Congress established
in the FY2003 Emergency Supplemental, to be available until expended (see text in
next section).2 Within the total in the IFF, the Administration proposed the following
illustrative ceilings by appropriation account:
!$14 billion for Operation and Maintenance, Army;
!$1 billion for Operation and Maintenance, Navy;
!$2 billion for Operation and Maintenance, Marine Corps;
!$1 billion for Operation and Maintenance, Air Force;
!$2 billion for Operation and Maintenance, Defense-Wide; and
!$5 billion for other appropriations or DOD funds or classified
After consultation with the Director of the Office of Management and Budget
(OMB), however, the Secretary of Defense could transfer funds to other accounts or
to classified programs as long as the defense authorizing and appropriations
committees were notified five days in advance.
If enacted, this language would give the Secretary of Defense complete
discretion to transfer $25 billion among appropriation accounts to fund operations in
Iraq and Afghanistan, or related activities. Although the language sets illustrative
ceilings by appropriations account within the $25 billion total, the Secretary of
Defense could alter those ceilings, with the approval of OMB and five days after
notifying the defense committees. The language also provides that up to $5 billion
of appropriations could be transferred to any appropriation account or classified
activity, presumably including intelligence agencies. The language also permits the
Secretary of Defense to transfer any funds not needed back to the IFF, to be available
for subsequent retransfer. There is no time limit on the availability of the funds.
Once transferred, funds would be available for the same purposes and for the
same periods of time as the accounts to which they were transferred, and these
transfers would not count against DOD’s overall annual limits on general transfer
authority — standard language for transfer accounts. The request requires the White
House to submit an official budget request to Congress for the funds and designate
the funds as emergency. Other than the five-day notification to congressional defense
committees before transferring funds, no reports to Congress are required either
before or after transfers take place (see below). The Administration does not plan to
submit any justification materials for the $25 billion until that official budget request
2 Most funding for DOD is available for from one to three years depending on the type of
expense. Operation and Maintenance funding is available for one year.
3 Testimony of Joel Kaplan, Deputy Director of OMB before the Senate Appropriations
Committee, Defense Subcommittee, June 2, 2004.
Language of the Request
The specific language of the request is as follows:
For additional expenses, not otherwise provided for, necessary to support
operations in Iraq or Afghanistan, $25,000,000,000, available October 1, 2004,
and to remain available until expended: Provided, That the funds made available
under this heading shall be available only to the extent that an official budget
request for all or part of the funds is transmitted by the President to the Congress
and includes designation of the amount of that request as an emergency and
essential to support activities and agencies in Iraq or Afghanistan: Provided
further, That funds made available under this heading, may be available for
transfer for the following activities:
Up to $14,000,000,000 for “Operation and Maintenance, Army”;
Up to $1,000,000,000 for “Operation and Maintenance, Navy”;
Up to $2,000,000,000 for “Operation and Maintenance, Marine Corps”;
Up to $1,000,000,000 for “Operation and Maintenance, Air Force”;
Up to $2,000,000,000 for “Operation and Maintenance, Defense-Wide;
Up to $5,000,000,000 may be used to reimburse other appropriations or funds of
the Department of Defense and classified programs:
Provided further, That in addition to the transfers authorized in the previous
proviso, after consultation with the Director of the Office of Management and
Budget, the Secretary of Defense may transfer the funds provided herein to any
appropriation or fund of the Department of Defense or classified programs, to be
merged with and available for the same purposes and for the same time period
as the appropriation to which transferred: Provided further, the Secretary of
Defense shall notify the Committees on Appropriations and the Authorizing
Committees five days prior to the transfer of funds made available under the
previous proviso: Provided further, That upon a determination that all or part of
the funds transferred from this appropriation are not necessary for the purposes
provided herein, such amounts may be transferred back to this appropriation:
Provided further, That the transfer authority provided under this heading is in4
addition to any other transfer authority available to the Department of Defense.
Before submission of the request, congressional concerns about funding for Iraq
and Afghanistan centered on DOD’s initial plan to wait until January 2005 to submit
a supplemental request, and rely on peacetime funding to finance or “cash flow”
occupation costs for the first six months of FY2005. During hearings, members have
also asked about the full amount of funding likely to be needed in FY2005.
While submission of the amendment responds to that initial concern, members
have continued to ask about the total funding likely to be needed in FY2005. In its
transmittal letter, the Administration states that the contingent emergency reserve
fund is requested at a time when “we do not know the precise costs for operations
next year” but that “developments on the ground in Iraq indicate the need to plan for
contingencies...”; the letter also states that “we plan to pursue a full FY2005
4 Letter from President George Bush to Speaker of the House J. Dennis Hastert, May 12,
supplemental request when we can better estimate precise costs.”5 In testimony on
May 12, 2004, Secretary of Defense Rumsfeld stated because of the recent upsurge
in violence in Iraq and the decision to keep an additional 20,000 troops in Iraq, the
Administration decided to submit a request for $25 billion to ensure “there’s no
disruption in the resources for the troops.”6
In a hearing on May 13, 2004 about the request itself, both majority and
minority members of the Senate Armed Services Committee voiced considerable
concern about the amount of discretion in the request — some legislators
characterized it as a “blank check.”7 In response to questions from members, Deputy
Director of OMB, Joel Kaplan stated that the intent of the request was to identify
“those areas where we think there’ll be the greatest pressure points ... in particular,
the Army O&M [Operation and Maintenance] accounts,” but he acknowledged that
the language of the request was also designed “to make sure that commanders and
the secretary and the president have the flexibility, after notification to the Congress,
to direct those resources to the needs and the requirements.”8
In recent months, congressional concern about flexible funding available to
DOD for war and occupation-related funding has mounted. Such concerns have
grown with allegations of abuses in large support contracts and a recent allegation by
author Bob Woodward that the Administration spent funds appropriated in 2001 and
Deputy Secretary of Defense Wolfowitz, denied the charge, saying that the funds
were “to strengthen our [U.S.] capabilities in the region,” rather than strictly to
prepare for a war with Iraq.10
Members have also questioned DOD’s spending priorities for war and
occupation spending because of initial shortages of force protection equipment,
particularly body armor for troops and uparmored Humvees. The Administration
has also provided sparse information about the allocation of spending between Iraq,
Afghanistan, and enhanced security for defense installations, as well as the number
of troops deployed and current and future plans. For example, DOD has only
5 Letter from President George Bush to Speaker of the House J. Dennis Hastert, May 12,
6 Testimony of Secretary Rumsfeld, Hearing on DOD FY05 Budget Request before the
Subcommittee on Defense, Senate Appropriations Committee, May 12, 2004, p. 5; transcript
available from Reuters.
7 Senate Armed Services Committee, Hearing on Contingency Reserve Fund, transcript,
May 13, 2004, passim; available from Reuters; see also, BNA, Daily Report for Executives,
“House , Senate Lawmakers Take Steps to Oversee Iraq, Afghanistan War Spending,” June
8 Senate Armed Services Committee, Hearing on Contingency Reserve Fund, transcript,
May 13, 2004, p. 10; available from Reuters.
9 CRS Report RL32229, Iraq: Frequently Asked Questions About Contracting, by Valerie
10 Boston Globe, “White House Accused of Mishandling Fund Targeting Terror,” April 27,
provided the distribution of funding by mission to Congress in the FY2004
Emergency Supplemental request, and only for FY2004, but not for earlier years or
for the current request.11 Some have expressed dissatisfaction with the quality and
level of detail in DOD reporting on previous flexible funding. While flexible funding
gives DOD a special tool to respond to the uncertainties of operations, it may reduce
the information available to Congress on U.S. plans, actions and options, and hence
may make oversight more difficult.
Both the House and Senate provide the $25 billion requested by the
Administration for operations in Iraq and Afghanistan in the FY2005 DOD
authorization bill (H.R. 4200 and S. 2400) and the FY2005 DOD appropriation bills
(H.R. 4613 for both houses, H.Rept. 108-533 and S.Rept. 108-284), passed on June
22 and June 24 respectively. Appropriations conferees met July 15, 2004, to resolve
differences, and a conference report was filed on July 20 (H.Rept. 108-622). The
House and Senate are expected to vote on the FY2005 DOD Appropriations bill,
H.R. 4613, before the recess that begins on July 26, 2004. Table 1 below compares
the request with congressional action to date. Congress is not expected to address the
conference version of the FY2005 DOD Authorization until after the recess.
The conference version of the appropriations bill provides most of the funding
in regular appropriation account, giving DOD flexibility to allocate about 14% of the
$25 billion with funding levels that reflect a compromise between the House and
Senate version (see Table 1). The bill also includes more extensive reporting
requirements on operations in Iraq and Afghanistan than are currently in effect.
Authorization Issues. In the authorization bills, the chief differences in their
treatment of the $25 billion request are the:
!extent of funding flexibility for DOD;
!mix of funding provided;
!type of reporting requirements; and
!military manpower levels.
Funding Flexibility. Although both houses authorize the amount requested,
neither provides the Administration with the funding flexibility requested. Both the
House and Senate versions of the FY2005 DOD Authorization Act provide all but
$2.5 billion, or 10%, of the funds in individual appropriation accounts or by
11 Department of Defense, FY 2004 Supplemental Request for Operation Iraqi Freedom
(OIF), Operation Enduring Freedom (OEF), and Operation Noble Eagle (ONE), September
In its FY2005 justification materials for contingency operations, DOD also provided a
mission breakout as required by the FY2004 DOD Appropriations Act, but only for FY2004;
see DOD, FY2005 Justification for Component Contingency Operations and the Overseas
Contingency Operations Transfer Fund (OCOTF), February 2004; see the DOD website at
[ http://www.defenselink.mil/comptroller/def budget/fy2005/budget_j ustificatio n / p d f s / o ve
rseas/FY_2005_PB_Continge ncy_Op erations_J ustification.pdf].
appropriation title (e.g. operation and maintenance) (see Table 1). The House
authorization bill (H.R. 2400) distributes all the funds but gives DOD $2.5 billion in
general transfer authority, subject to the standard criteria governing transfers,
including prompt notification of transfers.12 The Senate version (S. 2400) allocates
$2.5 billion for transfers and also requires a five-day advance notification and
consultation with the Chair and ranking members of the four congressional defense
committees before transfers can be made.
The House designates the $25 billion for “emergency contingency operations”
for the global war on terrorism, consistent with the House version of the FY200513
budget resolution. In the Senate version, funding would not be available until the
Administration submits a request and designates the funding as emergency.
The House included its provision for the $25 billion in the reported version of
the bill, while the Senate adopted an amendment proposed by Senators Warner and
S t evens.14
Funding Mix Differs. Unlike the Administration and the Senate authorizers,
the House authorizers provide $3.4 billion for procurement of force protection
equipment, with types of equipment specified in report language (e.g., $1 billion for
uparmored HUMVees and bolt-on equipment for vehicles).15 The Senate authorizers
instead allocate higher amounts for operation and maintenance funding and no
procurement funding. The Administration has generally been reluctant to provide
reconstitution funding in supplementals, although DOD has transferred funds
provided in the FY2003 and FY2004 supplementals for force protection items such
as body armor and uparmored HUMVees. The House also allocates funds by
appropriation account, except for military personnel, whereas the Senate allocates
funds at the more general title levels and adopts the Administration’s funding
guidelines (see Table 1).
Reporting Requirements and Funding Limits. The Senate requires more
extensive reporting requirements than the House. The Senate requires both monthly
reports on the use of the $25 billion — by cost, purpose and amount and operation
— and quarterly reports on all funds expended for Operation Iraqi Freedom,
Operation Enduring Freedom (Afghanistan), and Operation Noble Eagle (enhanced
security for defense installation), and any other operation of the “Global War on
Terrorism.”16 Neither bill requires reporting on past, current, or future funding by
mission or operation (i.e. Iraq vs. Afghanistan), information that has been of
12 Congress must be notified promptly, transfer must be to an activity of higher priority and
that has not been denied by Congress (see below for discussion of standard reprogramming
13 See Section 1520 in H.R. 4200, H.Rept. 108-491; see also Section 402 in S.Con.Res. 95,
conference version as passed by the House.
14 See Section 1006 in S. 2400 engrossed as passed by the Senate. The Warner/Stevens
amendment (S.Amdt. 3260) was adopted on June 2, 2004.
15 See H.Rept. 108-491, pp. 376ff.
16 See Sections 1006 (e) and Section 1029D in S. 2400 as passed.
considerable interest to members. Nor do the bills require information on past,
current, or future troop levels, which plays a major factor in driving costs.
Both houses set a funding limit of $300 million and require reporting on the
Commanders Emergency Response Fund, a fund where local commanding officers
can dispense funds for community and small reconstruction projects.17 Both houses
also require reports on contractor personnel.18 And both houses provide for
reimbursement for body armor or protective gear within certain limits.19
Post Major-Combat Operations Report. The Senate also requires an
extensive report, by March 31, 2005, assessing goals, performance, lessons learned,
strategy, and participation of allies during the post-major combat operations period
after May 1, 2003, through December 31, 2004.20 The Senate also requires a report
on DOD’s prisoner population and facilities.21 This reporting requirement is similar
to the “lessons learned” report required after the first Gulf war (see below).
Funding for Irregular Forces. The House provides additional flexibility in
use of these funds by allowing the Secretary of Defense to spend up to $25 million
to support irregular forces, a controversial previous Administration request that was
rejected by Congress.22 Both the House and the Senate authorizers refused, however,
to give the Administration the authority it requested to “train and equip” foreign
forces for peace enforcement missions.23 The Senate did provide up to $150 million
to train Iraqi security forces.24
Military Manpower Levels. A chief bone of contention between the
Administration and Congress this year has been whether to increase the number of
active-duty personnel in the Army and the Marine Corps on a temporary or a
permanent basis in order to deal with the stresses created by the Iraq and Afghanistan
conflicts. By setting endstrength levels — which are then funded in the DOD
appropriation bill — the authorization bills play a key role in this issue. Both
authorization bills provide that higher endstrengh levels are funded in the $25 billion
for Iraq and Afghanistan.
Although both authorization bills would increase active-duty endstrength by
10,000 in the Army and and 3,000 in the Marine Corps each year for the next three
years, the House bill mandates these increases (although only through FY2007) and
17 See Sec. 1203 in H.R. 4200 and Sec. 311 and Sec. 864 in S. 2400.
18 See Sec. 1205 in H.R. 4200 and Sec. 102 in S. 2400.
19 See Sec. 304 in H.R. 4200 and Sec. 1072 in S. 2400.
20 See Sec. 1028 in S. 2400.
21 See Sec. 1029F in S. 2400.
22 See Sc. 1202 in H.R. 4200 and CRS Report RL31829, Supplemental Appropriations
GFY2003: Iraq Conflict, Afghanistan, Global War on Terrorism, and Homeland Security
by Amy Belasco and Larry Nowels, p. 26.
23 Section 1213 in H.R.. 4200.
24 Section 1204 in S. 2400.
the Senate bill makes them permissive levels. Although the Administration has
waived current ceilings, they oppose mandatory ceilings set by Congress, arguing that
they need the flexibility to adjust levels.
Table 1. Congressional Action on Administration Request for
$25 Billion in FY2005 for Iraq and Afghanistan
(in billions of dollars)
Admi n. HouseAuth. Sena t e House Sena t e Appro p.
Title/Appropriation AccountRequest:Illustrative H.R.bAuth. S. 2400bApprop.H.R.Approp. H.R.Conf. H.R.
Ceilingsa4200 4613b 4613b4613
Iraqi Freedom Fund c25.00.00.03.025.03.8
Military Personnel subtotal [0.0]5.32.03.9[.5]1.2
— Mil Pers, Army [0.0] NS NS2.6[0.0].9
— Mil Pers, Navy [0.0] NS NS0.2[0.0]0
— Mil Pers, MC [0.0] NS NS0.3[0.0].2
— Mil Pers, Air Force [0.0] NS NS0.9[0.0].1
Operation & Maintenance [20.0]16.320.514.6[18.4]17.1
— O&M, Army [14.0]9.614.511.7[14.1]13.6
— O&M, Navy [1.0]0.31.00.3[.5].4
— O&M, Marine Corps [2.0]2.42.01.3[2.2]1.7
— O&M, Air Force [1.0]1.61.00.7[0.2].4
— O&M, Defensewide [2.0]2.32.00.3[.7].4
— Defense Health [0.0]0.10.00.3[.7].7
Procurement subtotal [0.0]3.40.02.2[.7]1.4
— Army procurement d[0.0]0.00.00.0[1.8]0
— Army Aircraft [0.0]0.50.00.0[0.0]0
— Missile Proc, Army [0.0] 0.00.0*[0.0]0
— Wpns & tracked Vehicles, [0.0] 0.20.00.2[0.0].4
— Procur. Ammo, Army [0.0] 0.10.00.3[0.0].1
— Other Proc, Army [0.0] 1.60.01.2[0.0].8
— Aircraft Proc, Navy [0.0] 0.00.0*[0.0]0
— Navy and MC Ammo [0.0]*0.00.1[0.0]0
— Marine Corps, Proc [0.0] 0.10.00.1[.6].2
— Marine Corps forced[0.0]0.00.00.0[.6]0
— AF proc. aircraft[0.0].10.00.0[0.0]0
— AF, Other Proc [0.0] 0.00.0*[0.0].1
— Defensewide, Other Proc [0.0] 0.70.00.1[0.0].1
— Nat’l Gd & Res Equip. [0.0] 0.10.00.1[0.1] e.1
Revolv. and Mgt. Funds [0.0]0.00.01.3[.7] e1.5
— Def. Working Capital [0.0]0.00.01.2[.7]1.5
Transfer Authorityf [0.0] [2.5] [2.5] [2.0][0.0][1.5]
Coast Guard g [0.0]0.00.00.0[.1]e[.1]
Classified h[NS][2.2][NS][2.0]c f[1.3][1.8]
Administration request included non-binding illustrative ceilings and $5.0 billion unspecified,
amounts shown in brackets.b
As passed by each house. Both appropriation bills would make the funds available upon enactment
though the Senate bill requires that the Administration must first submit an official budget
Funds in Iraqi Freedom Fund (IFF) can be transferred to any account unless a ceiling is set; House
appropriations bill includes $2.0B in classified programs in IFF so flexible portion would be
$1.0 billion. Senate appropriations bill provides $25.0 billion in the IFF but sets floors for all
but $2.5 billion of the funds; allocations shown in brackets. Within IFF total, appropriations
conference includes $1.8 billion for classified and $100 million for the Coast Guard. In the
House, Senate and conference appropriations bills, DOD must inform the Congressional defense
committees of transfers from the IFF five days in advance and report transfers quarterly. Senate
authorization puts $2.5 billion in a transfer account to be allocated by DOD. d
The bills include these categories rather than accounts.e
Senate bill provides that “up to” the amounts shown in brackets would be available so DOD could
choose to spend.f
Transfer authority sets limit on the amount that DOD can move between accounts within
Funds would be transferred to the Coast Guard.h
Classified funds are transferred to the intelligence community.
* = Less than $100 million.
NS = Not specified
As passed by each house, H.R. 4200 and S. 2400; H.Rept. 108-491 and S.Rept. 108-260; Title IX in
H.R. 4613 as passed each house and conference version; H.Rept. 108-284, S.Rept. 108-553, and
Appropriation Issues. In the House and Senate versions of the FY2005
appropriation bill (H.R. 4613), the chief issues are
!differences in funding priorities;
!mechanisms for providing funding flexibility;
!extent of reporting requirements; and
!funding for Darfur region of Sudan and the new Iraqi embassy.
Funding Priorities. The conference version funding levels reflect a
compromise between the levels in the two houses and lower funding for
procurement. The conference version provides $1.2 billion for military personnel,
between the House and Senate proposals and close to the Senate’s amount for O&M.
The conference version also provides less funding for procurement, primarily for
Other procurement, Army, where force protection equipment such as uparmored
HUMVees is funded.
The House version provided more funding for military personnel ($3.9 billion)
than the Senate ($.5 billion). This reflects primarily funding the current higher
special pays for personnel in combat and the House authorization bill requirement25
that the Army increase military endstrength by 10,000 in FY2005. The House
appropriators provide funds in specific military personnel accounts to cover costs for
the first quarter of the year.
25 See Sec. 1531 in H.R. 4200 and H.Rept. 108-553, p. 371.
The Senate version provided $4 billion more in funding for operation and
maintenance activities (see Table 1). Both appropriation bills provide additional
funding for body armor for troops in the Army’s O&M accounts (e.g. $334 million
in the House and $295 million in the Senate) and over $2 billion for procurement,
much of it for force protection items (e.g., over $850 million for new vehicles or kits
to uparmor HUMVees).26
Funding Flexibility. Of the $25 billion total, the conference version provides
$3.4 billion or 14% in flexible funding. That $3.4 billion total includes $1.9 billion
of unallocated funding in the Iraqi Freedom Fund (the IFF also includes $1.8 billion
for classified programs and $100 million for the Coast Guard) and $1.5 billion in
Both the House and the Senate appropriation bills provided about the same level
of flexibility as the authorization bills, between $2 billion and $3 billion. The House
version includes $2 billion in the Iraq Freedom Fund (IFF) Committee but specifies
that $2.0 billion is for intelligence activities, leaving $1.0 billion for DOD to allocate.
To provide additional flexibility, the House appropriators include $2.0 billion in
transfer authority for the $25 billion in war-related funding, subject to standard
reprogramming rules. The Senate appropriators would give DOD $2.5 billion in the
Iraqi Freedom Fund to be allocated at DOD’s discretion, but no additional transfer
To ensure that the Army has sufficient funds available to finance its operations
in FY2004 — a current concern — the conference version (reflecting both houses)
makes the $25 billion available upon enactment.27 The conference version dropped
the requirement in the Senate bill that the Administration submit an official request.
Like both houses, the conference bill also designates the funds as emergency but no
longer requires an emergency designation from the executive branch.28
There is an ongoing debate about the size of the Army’s shortfall in funds to
finance its operations in Iraq in FY2004. DOD contends that sufficient funds will be
available.29, CRS estimated that the shortfall in operations and maintenance (O&M)
funding would range from $5.3 billion to $7.1 billion but that DOD could tap about
$7.0 billion in lower-than-anticipated costs elsewhere to finance the shortfall.30
Based on forecasts by the services, a new GAO report estimates that the Army will
face an O&M shortfall of $10.2 billion, with the other services reporting shortfalls
of about $3.0 billion more. To meet these shortfalls, GAO reports that the Army and
26 See H.Rept. 108-553, p. 375; and S.Rept. 108-284, p. 203.
27 See CRS Report RL32381, Adequacy of the Army’s FY2004 Funding for Operations in
Iraq by Amy Belasco.
28 See Section 9001 for availability in FY2004 and Sec. 9015 in the conference version and
Title IX in both the House and Senate versions of H.R. 4613 for emergency language.
29 Washington Post, “War Funds Dwindling, Pentagon Needs Billions More This Year in
Iraq and Afghanistan,” July 22, 2004.
30 CRS, CRS Report RL32381, Adequacy of the Army’s FY2004 Funding For Operations
in Iraq,” by Amy Belasco.
the other services plan to transfer funds from other accounts with surpluses and defer
some activities (like depot maintenance) to the following fiscal year.31 To
accommodate these shifts in funding, the conference version of the FY2005 DOD
appropriation bill (H.R. 4613) increases DOD’s general transfer authority from $2.1
billion to $2.8 billion.32
Reporting Requirements. The conference version of H.R. 4613 provides
most of the funding in regular appropriations bills and $2.0 billion in the Iraq
Freedom Fund, which would be subject to the five-day advance notification and
quarterly reporting that was included in both the House and Senate version of the bill.
The conference version did not adopt the Senate approach where all funds were
appropriated to the IFF with floors by appropriation account. Under that approach,
all transfers would have been under the reporting requirement (see Table 1).
Extending the availability of funds beyond one year also gives DOD additional
flexibility. All funds, except for procurement funds and IFF funds, are available for
one year in the conference version rather than one year in the House bill and two
years in the Senate bill.33
The conference bill adopted the extensive report to the Congress as a whole on
military operations and reconstruction activities in Iraq that was required in the
House bill. Required by April 30 and October 31, DOD is required to report on
amounts expended for Iraq and Afghanistan, progress in preventing attacks on U.S.
personnel, effects on readiness, recruitment, retention, and equipment, on reserve
forces. The report on treatment of prisoners in Iraq included by the House was
dropped in conference.34 The conference version did retain the House provison
(reflecting adoption of the Obey amendment on the floor) that the Administration
provide estimates of costs for military operations and reconstruction for Iraqi and
Afghanistan operations, reconstruction, and economic support for the period FY2006
to FY2011 unless the President certifies that the estimates cannot be provided
because of national security.35
The conference version also adopts the limits and reporting on the Commanders
Emergency Response Fund ($300 million), assistance to the Iraqi and Afghan armies
($250 million), Afghan Freedom Support Fund ($550 million), and quarterly reports
on amounts spent on coalition support (no dollar limit) for countries aiding the U.S.
in combating terrorism included by both houses. The conference also provides up
to $500 million in funds to “train and equip” only the Iraqi Army and the Afghan
31 GAO-04-915, Military Operations: Fiscal Year 2004 Costs for the Global War on
Terrorism Will Exceed Supplemental, Requiring DOD to Shift Funds from Other Uses, July
32 See Sec. 9003 (b) in H.R. 4613, conference version.
33 Procurement monies would be available for three years and IFF funds for two years in the
34 See Sec. 9010 in conference version. See Sec. 9012 in H.R. 4613 as passed by the House,
and H.Rept. 108-533, p. 369-p. 370.
35 See Section 9012 in H.R. 4613 as passed by the House and the conference version.
National Army, with a 15-day advance notification, a modification of the House
version that could be used for any Iraqi or Afghan military or security forces.36
Funding for Embassy Operations and Darfur, Sudan. Like the House
and Senate appropriation bills, the conference bill also provides $70 million for
disaster assistance and $25 million for refugee assistance for Darfur, Sudan, to be
transferred to the State Department, and like the Senate bill, $665 million for
embassy operations and $20 million for construction. All of these funds are
designated as emergency funding, and hence, are not subject to budget resolution
The conference bill also includes $100 million for wildfire management and38
$400 million for suppression.
Options for Congress
Since 1990, Congress has periodically given DOD discretion to allocate
appropriated funds after enactment by placing funds in flexible transfer accounts,
with the remaining funding provided in regular appropriations accounts. For flexible
transfer accounts, Congress has sometimes required advance notification for transfers
ranging from 5 days to 15 days. For funding in regular accounts, Congress generally
requires that DOD follow standard reprogramming practices under which DOD must
receive prior approval for transfers above specified thresholds.
Based on precedents since 1990, and going from least restrictive to most
restrictive, Congress could apply the following options to the FY2005 $25 billion
budget amendment for Iraq that is currently under consideration.
Option 1: Provide Extensive Flexibility as After 9/11. This option
parallels the provisions governing the initial $20 billion provided in the Emergency
Terrorism Response Supplemental passed on September 18, 2001, in the immediate
aftermath of the terrorist attacks (P.L. 107-38). That measure required only that the
President consult with the chairmen and ranking minority members of the
appropriations committees before transferring funds, that $10 billion of the amount
could not be transferred until 15 days after notifying the appropriations committees,
and that the Office of Management and Budget (OMB) report on funding allocations
quarterly to the appropriations committees.
Option 2: Split Funding Between a Transfer Account and Regular
Appropriations with Brief Notification Period. This approach was followed,
with some variations, in the FY2003 Iraq Emergency Supplemental (P.L. 108-11),
36 See Section Title IX in both versions of H.R. 4613 and Sec. 9006 in conference version.
37 See Sec. 14008 in Title X of conference version, Chapter 2 in Title IX of the House
version, and Title X in the Senate version of H.R. 4613.
38 See Chapter 3 in Title X of conference version of H.R. 4613.
and in the main appropriation of supplemental funding for the first Gulf War (P.L.
102-28). Both measures provided funding in regular appropriations accounts for
those expenses that could be predicted, but provided relatively large amounts ($10.0
billion to $11.0 billion in the FY2003 supplemental and $8 billion in the FY1991
Desert Storm supplemental) in a flexible transfer account for less predictable
expenses. Both also required 5- or 7-day advance notification to the congressional
defense committees for transfers from the flexible account and quarterly after-the-fact
reporting to the four defense committees.
Option 3: Put Most Funds in Regular Accounts with Longer
Notification and More Extensive Reporting. This approach parallels some
features of the Persian Gulf Conflict Supplemental Authorization and Personnel
Benefits Act of FY1991 (P.L. 102-25) and the FY2004 Emergency Supplemental
(P.L. 108-106). The FY2004 supplemental provided just $2 billion of the $65 billion
for the Defense Department in a flexible transfer account with the remainder in
regular appropriations accounts. Both measures on the first Persian Gulf war
required extensive reports on strategy, force levels, time lines, and monthly reporting
on transfers and allied contributions. Recent supplementals have required quarterly
reporting to the four congressional defense committees.
Option 4: Provide All Funds in Regular Accounts with Some
Flexibility, Longer Notification, and Require Planning Assumptions.
Congress could provide additional general transfer authority and could create special
higher reprogramming thresholds that would allow DOD to make changes to funding
after enactment more easily. Funding categories could reflect current reporting on
the costs of Iraq, Afghanistan and enhanced security for defense installations
(Operation Noble Eagle). This also reflects some features of the FY2004 Emergency
Supplemental (P.L. 108-106), which provided most funds in regular appropriations
accounts and provided $3 billion in general transfer authority. Legislative measures
for the first Gulf war and recent legislation on contingencies required that DOD
provide its planning assumptions. Reporting could be provided to the Congress as a
Option 5: Provide All Funds in Regular Accounts with Some
Flexibility, Require Longer Notification, Planning Assumptions and
Extensive Reporting. Under this approach, standard peacetime reprogramming
restrictions would apply, and DOD would have to submit extensive, monthly reports
on the cost and planning assumptions underlying costs in categories similar to current
reporting on contingency and war costs, and provide 15-day advance notice of
transfers to Congress as a whole.
Table 2 below summarizes flexible funding, notification, and reporting
requirements enacted by Congress for war, war-related, and contingency operations
since 1990, and standard reprogramming rules, all of which serve as the basis for the
Table 2. Precedents For Funding War, Occupation and Contingencies, FY1990-FY2004
atuteFunding in FlexibleLine-Item DetailThresholds for ChangesNotificationReporting
propriation or AuthorizationAcc’ts for ContingenciesRequirements Requirements
ntinuing Appropriations andEstablishes DefenseRequires that funds inReprogramming rulesPrior approval forFor property
pplemental Appropriations forCooperation Acc’t.Defense Cooperationapplies to changes to fundsreprogramming of $2contributions by allies,
eration Desert Shield for FY1990Acc’t can only be spentin regular approp. acc’ts.billion provided inrequires quarterly
. 101-403if authorized andregular acc’ts. reporting.
t. 1, 1990 appropriated.
rsian Gulf Conflict SupplementalEstablishes DefenseNoneApplies to all transfers.seven-day advanceFor transfers, DOD
thorization and PersonnelCooperation Acc’t fornotification to fourreported monthly.
efits Act of 1991allied contributions anddefense committees.For allied contributions,
iki/CRS-RL32422. 102-25Persian Gulf Workingrequired periodic reports.
g/wril 6, 1001 Capital Fund with $15For decreases in cost
s.orbillion.with draw down of
leakforces, DOD required toreport within 60 days of
httppplemental Appropriations forProvides $8B for combatNo specifics for $8B inNo thresholds for combatseven-day advance.For reduction in costs
eration Desert Shield and relatedoperations andcombat operations.operations.notification to cong.due to draw down of
penses procurementdefense committeesforces, report due 60
. 102-28for transfers fordays after enactment.
ril 10,1991combat costs.
atuteFunding in FlexibleLine-Item DetailThresholds for ChangesNotificationReporting
propriation or AuthorizationAcc’ts for ContingenciesRequirements Requirements
1996 Omnibus AppropriationsAdmin. requests increaseSection 2701 inRaises gen’l transferSame as standardSame as standard
tin 1996 general transferGeneral Provisionsauthority in FY1996 DODreprogrammingreprogramming
. 104-134authority from $2.4B tosectionapprops from $2.4B torequirementsrequirements.
ril 26, 1996 $3.1B.$3.1B “only to the extent
funds are transferred ... to
cover costs associated with
United States military
operation in support of the
(IFOR) in and around the
iki/CRS-RL32422ergency Terrorism Response$20 billion for entire U.S.NoneNoneNo notification forQuarterly reporting on
g/wpplemental of 2001gov’t. DOD share wasfirst $10 billion; 15-use of funds by OMB.
s.or. 107-38$14 billion. day notification for
leakpt. 18, 2001 2nd $20 billion.
://wikiergency Terrorism Response$20 billion for entire U.S.Report languageAny change to amounts setPrior approval forQuarterly reports on
httppplemental of 2001 attached togov’t..allocated funds by tenin report language.transfers andallocations of all funds
2002 DOD Appropriations ActDOD share was $3.5categories and somereprogrammings.provided under P.L. 107-
. 107-117billion. line-item detail. 38.
uary 10, 2002
2002 Emergency Supplemental$11.3 billion in theReport languageAny change to amounts setPrior notification forQuarterly reporting of
. 107-206Defense Emergencyprovides appropriationin report language.changes totransfers.
Response Fund, to beacc’t break with line-allocations.
treated as a transfer acc’t.item detail.
2003 OmnibusNone.Funds appropriated toSubject to regularStandardSemi-annual
. 108-7regular acc’ts.reprogramming rules. reprogramming rulesreprogramming reports.
b. 20, 2003apply.
atuteFunding in FlexibleLine-Item DetailThresholds for ChangesNotificationReporting
propriation or AuthorizationAcc’ts for ContingenciesRequirements Requirements
2003 Emergency Supplemental$15.7 billion placed inStatutory ceilings andNot applicable.5-day advanceQuarterly reporting of
. 108-11Iraq Freedom Fund butfloors limit flexibilitynotification totransfers.
ril 16, 2003DOD has discretion overto $10 billion to $11congressional
$10.0 billion to $11.0billion. defense committees
billion because offor transfers.
ceilings and floors.
2004 Emergency Supplemental$2.0 billion in IraqNone.Not applicable.5-day advanceQuarterly reporting of
. 108-106Freedom Fundnotification fortransfers.
v. 6, 2003transfers.
e Reprogramming Rules$5 million for OverseasFor regularFor changes to regularNotification requiredFor transfers and
iki/CRS-RL32422d FY2004 DOD AppropriationsContingency Operationsappropriations, lineapprop, acc’ts, priorfor new starts orreprogramming changes,
g/wt Transfer Acc’t (OCOTF) item detail provided inapproval fromprogramDOD reports semi-
s.or. 108-87report language. Nocongressional defenseterminations. annually. For transfers of
leakpt. 30, 2003details for OCOTF. committees required forOCOTF transfers OCOTF funds, DOD
changes of $10M-$20Mmust be forreports quarterly. For
://wiki(varies by acc’t) or forcontingencies. contingency operations,
httptransfers betw. approp.requires detailed
acc’ts. reporting with planning
assumptions in annual
ma t e r i a l s .
Funding Flexibility In Regular Appropriations
and Transfer Accounts
In providing flexibility for war and war-related spending, current restrictions
applying to regular peacetime DOD spending may serve as a baseline. For most
funds that are provided in regular appropriation bills, DOD can move monies after
enactment but only within the bounds of restrictions that are established partly by
statute, partly by language in congressional reports on annual defense funding bills,
and partly by understandings with congressional defense committees that are
reflected in Department of Defense financial management regulations.
In general, DOD must get prior approval from the congressional defense
committees to move funds between accounts, and, for certain purposes and above
certain threshold amounts, to change funding levels within appropriations accounts.
For other changes to funding levels within accounts, DOD issues internal
Standard Statutory Restrictions on
Moving Funds After Enactment
Congress provides most of DOD’s annual funding in regular appropriation
accounts, which cover fairly broad categories of expenses. Appropriations accounts
include “Military Personnel, Army,” “Operation and Maintenance, Navy,” “Aircraft
Procurement, Air Force,” “Research, Development, Test, and Evaluation, Defense-
Wide.” The language of annual congressional appropriations acts specifies the
amount available within each account, typically in the billions of dollars.
After enactment, DOD is permitted to move funds between appropriation
accounts or between specific programs within accounts in a process referred to as the
“transfer” or “reprogramming” of funds. In most government agencies, the term
“transfer” refers to shifts of funds between appropriations accounts, while
“reprogramming” refers to shifts of funds within accounts. The Defense Department,
however, uses the term “reprogramming” to refer to both kinds of activities.
As a matter of law, transfers between accounts are subject to strict limits. Each
year, in annual appropriations acts, Congress provides a specific amount of “general
transfer authority” which sets limits the amounts that may be transferred between
accounts. Section 8005 of the FY2004 Department of Defense Appropriations Act
(P.L. 108-87), for example, sets an overall limit of $2.1 billion on DOD’s general
transfer authority, requires prompt notification for transfers, requires that any transfer
be “necessary in the national interest,” and specifies that
“such authority to transfer may not be used unless for higher priority items, based
on unforeseen military requirements, than those for which originally appropriated
and in no case where the item for which funds are requested has been denied by39
Standard Reprogramming Restrictions
In addition to limits established by statute, Congress has imposed other
restrictions on DOD’s authority to change the funding levels that are specified in
appropriation acts or in report language.40 Though it is not stated in statutory
language, Congress requires that the Defense Department receive prior approval from
the four congressional defense committees for reprogramming of funds that would
(1) move funds between appropriation accounts (i.e., amounts subject to overall
general transfer authority limit), (2) start or end programs, or (3) change funding
levels above certain congressionally established threshold amounts.
Reprogramming Thresholds. In addition to approving all transfers of
funds between appropriation accounts, the congressional defense committees must
approve all changes in funding above certain threshold amounts, which vary by
appropriation account. The thresholds are:
!increases or decreases in funding for individual procurement
programs above $20 million;
!increases or decreases in funding for Research, Development, Test
& Evaluation (RDT&E) programs above $10 million;
!increases in funding to military personnel budget activities above
$10 million; or
!increases in funding to O&M activities at the budget activity level41
above $15 million.
DOD must also get prior approval for changes in any programs that are
designated as “congressional interest items” by any one of the four congressional42
defense committees. Increases to a program Congress has cut or decreases to a
program Congress has increased require advance congressional approval. For
39 Section 8005 of FY2004 DOD Appropriations Act, P.L. 108-87.
40 Although the statutory language in DOD’s appropriation bills sets funding amounts in the
billions of dollars at the appropriation account level, report language indicates congressional
intent for individual programs or budget activities.
41 DOD’s regulations require prior approval from the congressional committees for any of
the following changes in funding: more than $10 million for military personnel, more than
$15 million in a budget activity or depot maintenance funded in Operation and Maintenance
accounts, an increase or decrease of $20 million or a 20% decrease in a procurement line-
item, sub-program, or modification, or $10 million for increases or $20 million for decreases
to RDT&E; See Office of the Under Secretary of Defense (Comptroller), Budget Execution
Flexibility, FY2003, available on the web at [http://www.defenselink.mil/comptroller/
42 According to DOD’s financial regulations, a Congressional interest item is one where the
committees use the phrases “only for” or “only to” or where items are identified in
conference report tables; see “Reprogramming of DOD Appropriated Funds, DOD Financial
Management Regulation, Volume 3, Chapter 6, p. 6-1.
changes in funding below the thresholds and for programs that are not congressional
interest items, DOD issues internal reprogramming reports.43
It is important to note that the definition of a “program” or “budget activity”
subject to the thresholds varies between accounts. For procurement and RDT&E
programs, reprogramming limits are fairly restrictive because the thresholds apply to
individual “line items” or “program elements” that are defined very narrowly both
in Department of Defense budget justification material and in congressional
committee reports. The thresholds for both military personnel and O&M “budget
activities,” in contrast, apply to broad budget groupings in the billions of dollars that
encompass many activities, giving the services considerable flexibility.
Effect of Thresholds on O&M Activities. In Operation and Maintenance
(O&M), for example, the $15 million O&M threshold applies to four budget
activities within each service, each of which includes billions of dollars:
!Training and Recruiting; and
!Administrative and Servicewide.44
Within these limits, the services have discretion to move funds between Activity
Groups (AGs) and Subactivity Groups (SAGs) such as Air Force flying hours and
base operations support for military installations.
Because of concerns that DOD has sometimes moved funds out of readiness-
related activities, such as combat training for Army units, Congress has recently
required DOD to provide written notification of changes in funding to certain “sub
activity groups” (SAGs) within budget activities for O&M, such as Primary combat
forces, Air Force; or Aircraft depot maintenance, Navy.45 Prior approval of changes
is not required, however, except at the broader budget activity level.
Alternative Thresholds for War-Related Reprogramming
In order to give DOD greater flexibility to adjust appropriations in response to
changing circumstances, Congress could choose to establish new reprogramming
rules specifically for war and war-related spending. For example, the criteria for war-
related spending could require that funding must be directly related to combat or
occupation costs, be limited to incremental costs, and identify and take into account
savings in peacetime operations. These criteria are similar to the those that apply to
contingency costs funded in the Overseas Contingency Operations Transfer Account
43 These are known as internal reprogramming reports. For examples, see the DOD website
44 Office of the Under Secretary of Defense (Comptroller), Department of Defense Budget,
Fiscal Year 2004, Operations Programs (O-1), February 2004; see [http://www.defenselink.
45 See H.Rept. 108-187, p. 54.
(OCOTF), and that are covered in DOD’s financial regulations governing
Congress could also adopt special thresholds for war and occupation-related
expenses that could be applied to DOD’s current categories for reporting those costs.
DOD currently reports war and contingency costs monthly in categories such as
personnel, personnel support, operating support, and transportation, which are further
divided into type of personnel (active, reserve, civilians), type of support (personnel
vs. equipment), and type of transportation (air, sea, other).47 In addition, Congress
could require that DOD provide its current planning assumptions and then require
that DOD report changes to its underlying planning assumptions. This would provide
a mechanism that could aid congressional oversight of ongoing operations.
Important planning assumptions that underlie cost estimates include current and
anticipated manpower levels, mix of active-duty and reserve forces, planned rotations
of personnel, and anticipated operating tempo. DOD currently has a model, the
Contingency Operations Support Tool, that uses such assumptions to estimate
operational costs, but DOD has been unwilling to provide Congress with access to
this model or information about its assumptions. The Congressional Budget Office
(CBO) has been provided access to similar models in the past. 48
Flexible Transfer Accounts
To provide the Defense Department with greater flexibility in carrying out
peacetime activities for which costs are likely to fluctuate after funds have been
appropriated, Congress has set up transfer accounts into which funding is
appropriated for subsequent transfer to regular appropriations accounts for execution.
In annual defense appropriations bills, for example, funds for drug interdiction and
for environmental restoration are normally provided in transfer accounts. The
FY2004 Department of Defense Appropriations Act, for example, provides $396
million for the Army’s environmental restoration programs that can be transferred to
Provided, That the Secretary of the Army shall, upon determining that such funds
are required for environmental restoration, reduction and recycling of hazardous
waste, removal of unsafe buildings and debris of the Department of the Army,
or for similar purposes, transfer the funds made available by this appropriation.
46 See P.L. 107-117, Section 8115, and Chapter 23 in DOD, Financial Management
Regulations; see [http://www.defenselink.mil/comptroller/fmr/12/12_23.pdf].
47 See Defense Finance and Accounting Service, Consolidated Department of Defense
(DOD) Terrorist Response Cost Report, monthly reports.
48 Letter from Jim Nussle, Chairman, House Budget Committee and John Spratt, Ranking
Member, HBC, to Under Secretary of Defense (Comptroller), Dov S. Zakheim, November
3, 2003; in a subsequent meeting in February, 2004, DOD informed Congressional staff that
DOD would not provide the model or the additional information requested on personnel
levels, rotation plans, air and sea operations, aircraft deployed, transportation, maintenance,
coalition support or amount of recurring costs.
Some transfer accounts, like the Foreign Currency Fluctuation Account, set up
to allow the services to respond to shifts in exchange rates, are noncontroversial.
Others, like the Overseas Contingency Operations Transfer Fund (OCOTF),
established in the mid-1990s to centralize funding in regular appropriations bills for
contingency operations in Bosnia, Kosovo, and Southwest Asia, and the Defense
Emergency Response Fund (DERF), set up originally to financing overseas disaster
cleanup activities but used as a vehicle for DOD’s emergency funding after
September 11, have proved to be more problematic.49
While transfer accounts have the advantage that DOD can respond to
unanticipated changes in circumstances, they may have the disadvantage that
Congress may be unaware of, or disapprove of, particular uses of the funds provided
in the accounts. For example, controversy recently erupted when investigative
reporter Bob Woodward alleged that DOD used funds provided in the first post 9/11
Emergency Terrorism Response Supplemental for projects that were intended to
prepare for a future war with Iraq, an allegation denied by the Administration.50
Earlier in 2001, controversy developed about the Overseas Contingency
Operations Fund (OCOTF), a flexible transfer account used to fund contingencies,
when GAO found that some of those funds had been used for expenses that were not
truly incremental costs, or not related to contingency operations such as purchases
of cappuccino machines, golf memberships, and decorator furniture.51
After the 9/11 attacks, Congress again turned to flexible accounts to give DOD
discretion to move funds after enactment to fund combat operations in Afghanistan.
In later supplementals, Congress split funding between flexible accounts and regular
appropriations, a practice that was also adopted in funding for the first Gulf War.
Precedents for Flexible Funding Since 1990
Since 1990, Congress has provided DOD with substantial amounts of flexible
funding — ranging from $2 billion most recently to $14 billion in the first post 9/11
supplemental — using various special accounts, and has used a variety of tools for
oversight of those funds, including prior notification of transfers ranging from 5 days
to 15 days and various after-the-fact reporting in varying levels of detail. Typically,
Administrations have requested broad discretion, which Congress has rejected even
in the midst of combat operations as was the case during the first Persian Gulf War.
49 DOD initially spent funds directly out of this account rather than using it as a transfer
account. Starting in FY2002, in response to congressional direction, DOD returned to
transferring funds from this account to the services regular accounts.
50 CBS Television, Transcript, “Woodward Shares War Secrets” 60 Minutes, April 18, 2004;
Washington Post, “Wolfowitz Denies Woodward Report,” April 21, 2004.
51 GAO-02-450, Defense Budget: Need to Strengthen Guidance and Oversight of
Contingency Operations Costs, May 2002, p. 2;
[ h t t p : / / www.ga o.gov/ n ew.i t e ms / d02450.pdf ]
First Persian Gulf War: Flexibility for Combat Operations But
with Extensive Reporting
In 1990 and 1991, in the midst of the initial deployment of forces for the first
Gulf War and during combat operations, the Administration submitted two requests
that would allow the Defense Department full freedom to allocate funds contributed
by allies for Operation Desert Shield/Desert Storm. Congress rejected both
Creation of the Defense Cooperation Account. On September 17, 1990,
six weeks after Iraq’s invasion of Kuwait and the dispatch of some 50,000 U.S.
forces to Saudi Arabia to prevent an invasion of that country, the first Bush
Administration submitted a request for supplemental appropriations of $2.1 billion
to cover FY1990 costs of Operation Desert Shield.52 At that point, the
Administration requested the funding in regular defense appropriation accounts
despite the uncertainties in costs.
Relying on the analogy that contributions by allies were like gifts received by
the government, however, the Administration also requested that Congress establish
a trust fund in the Treasury to be known as the “National Defense Gift Fund,” into
which monetary contributions from allies or others would be deposited.
Under this proposal, the Secretary of Defense, with the approval of the Office
of Management and Budget, would have authority to transfer any amounts received
by the fund to the regular operating accounts of the Department of Defense without
further congressional action. In effect, the Administration requested that the
Secretary of Defense be given general authority to allocate all amounts received in
either money or properties from allies without further specific appropriations action
from the Congress.
Congress did not agree, however. At the end of September 1990, Congress
provided $2.1 billion in supplemental appropriations for Operation Desert Shield and
related expenses in H.J.Res. 655 (P.L. 101-403), a measure providing continuing
appropriations for FY1991. It appropriated the funds in regular defense accounts.
Moreover, Congress explicitly refused to provide general authority to the Secretary
of Defense to allocate funds received from allies.Instead, P.L. 101-403 established
the “Defense Cooperation Account” in the Treasury to receive contributions from
allied nations or from individuals, but it also provided that transfers from the account
could be made only as provided in subsequent appropriations acts. Only two weeks
later in mid-October, 1990, the U.S. would have 200,000 troops deployed in the
Creation of the Persian Gulf Working Capital Fund. Later, on February
25, 1991, when the air war was complete and the ground phase had just begun, the
Administration submitted its second supplemental appropriations request to cover the
52 CQ, 1990 CQ Almanac, “Gulf Crisis Grows Into War with Iraq,” p.719, 1990.
53 CQ, 1990 CQ Almanac, “Gulf Crisis Grows Into War with Iraq,” p.719, 1990.
incremental costs of operations in and around the Persian Gulf, and it again asked for
broad authority for the Secretary of Defense to allocate funds for costs of the war.
As a hedge to provide funds if allied contributions were not available, the
Administration requested that Congress establish another new account, to be called
the “Desert Shield Working Capital Account,” with $15 billion in appropriated funds,
on which the Secretary of Defense could draw, with the approval of the Office of
Management and Budget, to cover war costs. Funds were to be transferred from that
account to regular appropriation accounts, and the initial appropriation was to be
“replenished” from previous and future contributions from allies deposited in the
Defense Cooperation Account. In early September 1990, the Saudis had agreed to
help defray the cost of Operation Desert Shield.54
In this request, DOD provided extensive justification materials to underpin
requested funding levels, including planning assumptions for manpower levels for
active and reserves, operating tempo rates, transportation, and support costs, as well
as projections of contributions from allies.55 These justification materials — totaling
96 pages — are far more detailed and extensive than those provided for any of the
supplementals after 9/11.
Enacted April 6, 1991, the Persian Gulf Conflict Supplemental Authorization
and Personnel Benefits Act of 1991 set up a Persian Gulf Conflict Working Capital
Fund with $15 billion to act as a “bridge loan” until allied contributions became
available. Senate report language called on DOD to provide Congress with
seven-day advance notifications of transfers, to certify that amounts were incremental
costs, to list amounts and accounts for transfers, and to describe transfers at the
program, project and activity level.56 The House report required that reporting of
transfers follow regular reprogramming procedures including congressional
approval.57 A conference report was not issued.
DOD was also required to provide extensive monthly reports on both
incremental war costs and allied contributions using a set of cost categories that were
defined in statute, and that have since become the basis for current reporting of
contingency and war and war-related costs. The legislation required that DOD
distinguish between recurring and non-recurring costs, and report costs in functional
categories including personnel, personnel support, transportation, and operating
54 CQ, 1990 CQ Almanac, “Gulf Crisis Grows Into War with Iraq,” p.719, 1990.
55 Communication from the President of the United States, Request for Fiscal Year 1991
Supplemental Appropriations for the Department of Defense in support of Operation Desert
Shield./Desert Storm Pursuant to 31 U.S.C. 1107, February 25, 1991.
56 S.Rept. 102-18, p. 4.
57 See H.Rept. 102-16, p. 5.
58 P.L. 102-25, Sec. 101 to Sec. 106, and Sec. 401 and Sec. 402.
Appropriators Require That Funds Be Allocated to Regular
Accounts. Signed into law on April 10, 1991, about six weeks after the conclusion
of the war, the FY1991 Operation Desert Shield/Desert Storm Appropriations Act
(P.L. 102-28) rejected the Administration’s request for broad funding flexibility, and
set up Persian Gulf Regional Defense Fund with $15 billion in appropriated funds.
At the same time, however, Congress required that those funds could be used only
if allied contributions — to be transferred from the Defense Cooperation Account —
were not adequate, and only in amounts specified by appropriation account in the59
act. The act allocated a total of $34.6 billion by account. In effect, Congress
insisted on appropriating funds in the regular manner for specific, established defense
operating accounts for most of the funds, though there was one exception.
Special Flexibility For Combat Operations. To give DOD some
flexibility, Congress provided $6.0 billion for operation and maintenance and $1.9
billion for procurement “to finance the estimated partial costs of combat and other
related costs of Operation Desert Shield/Desert Storm,” with a requirement that the
Secretary of Defense could not transfer these funds until seven days after informing
the congressional defense committees.60 Although Congress appropriated these funds
by title (O&M and Procurement) rather than at the appropriation account level, the
amount was based on DOD information about potential combat operations plans.
At the time Congress acted on the FY1991 supplemental, DOD had estimated
“baseline” costs for the deployment of forces to the Gulf, but had not fully identified
combat costs. In its request, DOD presented a range of estimates for combat
including a daily rate that would vary depending on the scenario.61 In their respective
reports, the House and Senate used these estimates to recommend the amount to be
included in the combat cost fund.62
As it turned out, combat and some other funding requirements subsequently
changed and Congress responded in the 1992 supplemental appropriations bill (P.L.
102-229) by giving DOD discretion to move about 20% of the funds appropriated in
the previous supplemental into different accounts, including about $2.9 billion from
the Persian Gulf Regional Defense Fund and $6.6 billion in previously transferred
funds from the FY1991 Desert Storm Supplemental Appropriations Act.
59 DOD could draw on the $15 billion appropriated to the fund to the extent that
contributions from allies were not yet available but those funds had to be spent in individual
appropriation accounts specified in the act. Thus, the $15 billion provided a hedge to cover
any gap between the deposit of contributions and incurring of expenses for the war but its
allocation by account was specified.
60 P.L. 102-28, Combat Costs of Operation Desert Shield/Desert Storm.
61 Communication from the President of the United States, Request for Fiscal Year 1991
Supplemental Appropriations for the Department of Defense in support of Operation
Deserted Shield./Desert Storm Pursuant to 31 U.S.C. 1107, February 25, 1991, p. 72.
62 See H.Rept. 102-10, p. 2- p.3, and S.Rept. 102-23, p. 4.
Providing Flexibility for Unanticipated
Contingencies in the 1990s
At the end of FY1994, the United States unexpectedly deployed forces
simultaneously to Haiti and Southwest Asia, financed by funds that had been slated
for peacetime training and equipment maintenance. To meet immediate needs, the
Administration obligated $126 million under the Feed and Forage Act (41 U.S.C.
11), an emergency authority which allows the Defense Department to obligate funds
in excess of available appropriations for certain operational purposes, and ultimately
drew several hundred million in funds from the services’ peacetime operating
accounts.63 As a result, several operational units reported reduced levels of readiness
at the end of the fiscal year.
“Readiness Preservation Authority” Proposal Is Rejected. In reaction
to this experience, the Clinton Administration requested, in a FY1995 supplemental
submitted along with its FY1996 budget, that the Secretary of Defense be given
authority to obligate substantial funds for certain readiness-related military activities
in advance of congressional appropriations, which the Administration called a
“Readiness Preservation Authority.”64 Under this proposal, if the Secretary of
Defense, determines it is in the “national interest,” he could, with the approval of
OMB, incur obligations 50% “in excess of” the total amount appropriated for
Operating Forces in Operation and Maintenance accounts (O&M) to fund certain
“essential readiness functions and activities of the Armed Forces” in the second half
of the fiscal year. These additional obligations were to be offset by rescissions
“unless the President determines that emergency conditions exist.”65
So if the Readiness Preservation Authority were in effect now, the Defense
Department would have authority to obligate half of the $75 billion provided for
operating accounts, or $37.5 billion, in the second half of FY2005, for readiness-
related military activities without specific congressional approval. The funding could
cover the cost of operational training of all kinds, weapons repair and maintenance,
and operation of facilities that support operational forces, which together make up
about half of DOD’s O&M funding.66 Unless the President determined that there was
63 See CRS Report 98-823F, Military Contingency Funding for Bosnia, Southwest Asia, and
Other Operations: Questions and Answers, March 29, 1999. The Feed and Forage Act
permits obligation of funds only for “for clothing, subsistence, forage, fuel, quarters,
transportation, or medical and hospital supplies, which, however, shall not exceed the
necessities of the current year.”
64 This authority was requested in a general provision attached to the FY1995 supplemental
appropriations request (see Appendix A for language).
65 Operating Forces refers to Budget Activity 1 in the O&M title. For request, see Office of
Management and Budget, Budget of the U.S. government Fiscal Year 1996, Appendix,
“Readiness Preservation Authority,” p. 1089.
66 The other O&M Budget Activities are BA 02: Mobilization; BA 03: Training and
Recruiting (includes individual training, not operational training, which is in BA 01); and
BA 04: Administration and Servicewide Activities.
an emergency, however, the Administration would have to propose offsetting
rescissions to other programs.
In 1995, Secretary of Defense William Perry and Undersecretary of Defense
(Comptroller) John Hamre testified in support of the Readiness Preservation
Authority in congressional hearings. But neither the Armed Services Committees nor
the Appropriations Committees took any action on the proposal.67
Congress Adopts the Overseas Contingency Operations Transfer
Fund. Although Congress was unsympathetic to DOD’s request for broad authority
to increase O&M spending above the levels appropriated, concerns re-surfaced the
following year. As an interim measure, Congress agreed to DOD’s request to raise
its general transfer authority from $2.4 billion to $3.1 billion to “cover costs
associated with United States military operations in support of the NATO-led Peace68
Implementation Force (FOR) in and around former Yugoslavia.”
The following year, Congress provided a more permanent solution by setting up
the Overseas Contingency Operations Transfer Fund (OCOTF), to be drawn upon by
DOD to fund contingency operations. Between FY1997 and FY2001, Congress
appropriated from $1 billion to $5 billion annually to the OCOTF to cover the costs
of operations Bosnia and Southwest Asia (including Northern Watch and Southern
Watch in Iraq).
For OCOTF funding provided in regular appropriations, the Secretary of
Defense could transfer funds to operations at his discretion; for funds provided in
supplementals, both Congress and the Administration also had to designate the funds69
as an emergency. Congress also initially limited transfers to military personnel and
operations and maintenance accounts, which fund operation al expenses.
In FY2000, Congress added the requirement that OCOTF funds be spent strictly
on contingency operations, and required that DOD submit specific justification
materials for all contingency operations, including extensive reporting on manpower
levels for active and reserve forces, costs by type of expense, and weapon systems
deployed.70 DOD incorporated these reporting categories in its Contingency
Operations Support Tool (COST) model, and established reporting mechanisms to
capture the costs of individual contingencies. Both these categories and the reporting
mechanisms are currently used in reporting on the cost of Iraq, Afghanistan, and
Over several years, Congress gradually became disenchanted with the OCOTF,
in part because GAO reports found consistent overestimates in costs. The final blow
came in 2001, when GAO found that some of those funds had been used for
67 For a more extensive discussion of the proposal, see Louis Fisher, “Department of
Defense Readiness Preservation Authority,” CRS Report 95-447, March 31, 1995.
68 See Section 2701 of the FY1996 DOD Appropriations Act, P.L. 104-134 .
69 This requirement was included in the FY1997 through FY2000 DOD appropriation acts.
70 P.L. 106-79, OCOTF provision and Sec. 8110.
expenses that were regular expenses rather than incremental costs, or were not related
to contingency operations, such as purchases of cappuccino machines, golf
memberships, and decorator furniture.71 In reaction, Congress cut funding for the
OCOTF in FY2002 to from $3.9 billion to $5 million, and transferred funding for
Balkan operations and Southwest Asia to regular appropriation accounts.72
Flexible Funding After September 11, 2001
After the terrorist attacks of September 11, 2001, Congress provided the
Administration with broad authority to provide funds for disaster assistance, local
preparedness, countering terrorism, improving airport security, repairing damage and
supporting national security. In the next three emergency supplementals that
provided funds for the occupation of Iraq and Afghanistan and enhanced security for
defense installations (known as Operation Noble Eagle), Congress continued to use
flexible transfer accounts but gradually reduced the amount of flexible funding and
FY2001 Emergency Terrorism Response Supplemental Gives
President Broad Discretion. On September 12, 2001, the Administration
formally requested that Congress immediately appropriate $20 billion to respond to
the previous day’s terrorist attacks. As requested, the President would have had
complete discretion to allocate the funds to federal agencies to provide assistance to
victims, fund the cost of preparedness, support efforts to counter terrorism, increase73
transit security, repair facilities, and “support national security.” This request is
similar to the discretion requested in the current FY2005 budget amendment.
Congress took swift action on the Administration’s request by providing $40th
billion in emergency supplemental appropriations on September 14, two days after
the Administration’s request and four days after the attacks. The President signed the
act into law (P.L. 107-38) on September 18, 2001, six days after the attacks.
In this first emergency supplemental, Congress gave the Administration
unprecedented discretion to allocate $20 billion in funds to any federal agency in
response to the terrorist attacks. At the same time, however, Congress provided
double the amount of funding requested and required that the allocation of the second
$20 billion be included in a subsequent appropriations act, thus re-asserting
The first $20 billion in funding was initially placed in a government-wide
Emergency Response Fund, to be transferred later to individual agencies. All
transfers from that fund were subject to four general requirements:
71 GAO-02-450, Defense Budget: Need to Strengthen Guidance and Oversight of
Contingency Operations Costs, May 2002, p. 2; available on the GAO website at
[ h t t p : / / www.ga o.gov/ n ew.i t e ms / d02450.pdf ] .
72 H.Rept. 107-350, p. 209 and S.Rept. 107-109, p. 53.
73 Letter from President George W. Bush to Speaker of the House J. Dennis Hastert,
September 12, 2001.
!that “the President shall consult with the chairmen and ranking
minority members of the Committees on Appropriations prior to the
transfer of these funds”;
!that the funds may be transferred only for specified purposes,
including “supporting national security,”
!that not less than half of the $40 billion shall be for “disaster
recovery activities and assistance related to the terrorist acts in New
York, Virginia, and Pennsylvania on September 11, 2001”; and
!that the Office of Management and Budget provide quarterly reports
to the Appropriations Committees on use of the funds.74
Under P.L. 107-38, the President had discretion to transfer $10 billion of that
total immediately to any federal agency, and to transfer a second $10 billion to any
federal agency 15 days after OMB submitted a proposed allocation of the funds and
a plan for use of the funds by each agency to the appropriations committees. The
remaining $20 billion, however, was available only after the President submitted an
additional supplemental appropriations request for the funds, and Congress passed,
and the President signed, a subsequent appropriations bill.
At the time, there was considerable debate about whether the 50% floor for
recovery and assistance activities was met. More recently, some members have
raised questions about whether the requirement for consultation was met.75
Of the $20 billion to be allocated at the President’s discretion, DOD received
$14.0 billion with most of the funds dedicated to upgrading intelligence systems and
prosecuting the war in Afghanistan. These funds were deposited into the Defense
Emergency Response Fund (DERF), a fund originally set up for unanticipated DOD
assistance provided during disasters.76
Some Appropriation Controls Apply To Second $20 Billion. In the
supplemental attached to the regular FY2002 defense appropriations bill, P.L. 107-
Of that total, DOD received $3.5 billion that was appropriated to the Defense
Emergency Response Fund (DERF) in amounts specified using a unique set of 10
major functional categories developed by DOD in the aftermath of the attack rather
than regular appropriation accounts. These categories included, for example,
74 P.L. 107-387; see also CRS Report RL31187, Combating Terrorism: 2001 Congressional
Debate on Emergency Supplemental by Amy Belasco and Larry Nowels, September 27,
75 Ibid, and Senator Byrd, Press Release, “Statement by Senator Robert C. Byrd,” April 20,
2004; see also, Senate Armed Services Committee, “Transcript of hearing on Contingency
Reserve Fund,” May 13, 2004, p. 4; transcript available from Reuters.
76 See CRS Report RL31187, Combating Terrorism: 2001 Congressional Debate on
Emergency Supplemental Appropriations by Amy Belasco and Larry Nowels, September
“increased worldwide posture,” which funded combat operations in Afghanistan, and
“Increased Situational Awareness” for intelligence and reconnaissance activities.77
Within these functional categories, Congress set specific program amounts in
the conference report and designated those funding allocations as congressional
interest items, “for purposes of complying with established procedures regarding
transfers and proposed reprogramming of funds.”78 In other words, DOD would need
to get prior approval for any transfers of funds that differed from amounts specified
in the report. But because DOD chose to spend funds directly out of the DERF
account, this provision did not have any effect.79
After-the-Fact Reporting Requirements. P.L. 107-38 required that OMB
provide quarterly reports to the appropriations committees on the use of the $40
billion in funds originally appropriated. For DOD, OMB’s quarterly reports only
included the total funds obligated under each of the ten categories with no details on
specific purposes, projects, activities, or appropriation accounts.80
In order to improve visibility over all spending under P.L. 107-38, Congress
also required in the conference report that within 45 days of enactment and quarterly
thereafter, DOD provide the appropriations committees with a
“revised, comprehensive and detailed report, using the guidelines in the House
report, regarding the overall allocation of all appropriations for defense and
intelligence activities (including obligations up to that point, and forecasted81
expenditures) made available from Public Law 107-38.”
For the $3.5 billion appropriated to the DERF from the second $20 billion,
Congress required in statutory language that DOD provide Congress with a report
“specifying the projects and accounts to which funds provided in this chapter are to
be transferred,” suggesting that Congress assumed that the DERF would operate as
a transfer account.
The House report also stated that all funding provided under P.L. 107-38 was
to be “subject to traditional reprogramming procedures,” with DOD required to
submit an allocation plan for previous funding, and later a Base for Reprogramming”
77 Congress set amounts by either appropriation accounts, or, in the case of DOD, by the ten
major categories adopted by DOD in the aftermath of the attacks; see Emergency Terrorism
Response supplemental attached to the F2002 DOD Appropriations Act, P.L. 107-117; see
78 See H.Rept. 107-350, p. 424.
79 See for example, Office of the Under Secretary of Defense, Comptroller, Defense
Emergency Response Fund, Execution Report, September 11, 2001 to January 31, 2002.
80 See for example, OMB, Letter transmitting first quarterly report on the use of the
Emergency Response Fund (ERF) appropriations (with enclosure), January 23, 2002.
81 See H.Rept. 107-350, p. 425.
to be used as the baseline for any later transfers.82 Based on that assumption, the
House report also required that DOD provide quarterly reports with an allocation
plan for both the $14.0 billion provided to DOD from the first $20 billion and the
$3.5 billion provided in the FY2002 DOD Appropriation Act, including details
typical for reprogramming reports, such as:
!funds transferred by appropriation account;
!amounts obligated and expended;
!amounts for O&M and military personnel using categories for
ongoing contingency operation since Bosnia and Kosovo.
In addition, DOD was to “identify savings dues to cancellation or downsizing or
normal peacetime education, training, professional development, or other activities
due to individual and unit activations or deployments in the war on terrorism.”83
Again, although DOD provided periodic reporting, DOD did not submit any prior
approval reprogramming requests because no funds were transferred between DOD
Congressional Dissatisfaction with DOD Reporting. Although DOD
did give periodic briefings to the appropriations committees, using the ten broad
functional categories adopted immediately after the terrorist attacks, considerable
dissatisfaction was voiced about the quality of DOD’s reporting. In the House report
issued in November 2001, two months after the terrorist attacks, DOD reporting was
characterized as “at best, intermittent and scattershot,” and both the House report and
the conference report called on DOD to return to reliance on traditional appropriation
accounts in future requests and provide “similarly configured, detailed supporting
materials,” in order to ensure proper program review, fiscal discipline and controls,84
and oversight by both the executive and legislative branches.”
Although DOD’s decision to spend funds directly from the DERF and use ten
new functional categories was an untraditional approach, it may have also given
DOD more visibility on war and war-related funds than is the case when DOD uses
traditional appropriation accounts. In that traditional approach, the services
sometimes have difficulty in segregating peacetime from wartime costs, making it all
the more difficult to see trends in either peacetime or wartime costs over time.
Assessing DOD spending for war and occupation-related spending has also
become problematic, not only because of inconsistent reporting categories, but also
because DOD has not provided information on the its planning factors for this
spending — for example, operating tempo measures such as tank miles or flying
hours, how frequently forces will be rotated, or active and reserve manpower levels
82 H.Rept. 107-298, p. 295.
83 See H.Rept. 107-298, p. 296.
84 H.Rept. 107-298, p. 294 to p. 295; H.Rept. 107-350, p. 425.
for forces in-country and those providing support to Iraq, Afghanistan, and enhanced
security for defense installations.85
FY2002 Emergency Supplemental: Considerable Flexibility But In
A Transfer Account. In the FY2002 Emergency Supplemental, DOD requested
that Congress provide $11.3 billion of the $13.4 billion total for DOD in the Defense
Emergency Response Fund (DERF) because of the “dynamic nature of these
[Afghanistan] operations,” and because “the global war on terrorism will be variable86
and dynamic and, as the President has said, will more than likely go on for years.”
By the time Congress considered the supplemental in the spring and summer of 2002,
the Taliban regime in Afghanistan had fallen several months earlier, but combat
operations were underway to eliminate small groups of Al Qaeda and Taliban fighters87
Congress agreed, nonetheless, to provide $11.3 billion in the DERF but required
that the DERF operate as a transfer account so that funds would be transferred to
regular appropriation accounts and under the control of the services rather than being
spent directly from the DERF. Congress also required that DOD report quarterly on
transfers from the DERF. Congress was also to be notified in advance — no
specified number of days — if DOD planned to spend the funds in ways that differed88
from allocations in conference report language.
Like the proposed FY2005 budget amendment, as enacted, the FY2002
Emergency Supplemental included “contingent emergency funding.” For funding to
be exempt from caps on discretionary spending that applied in FY2002, both the
Administration and Congress have to designate that funding as emergency. The
Administration designated all funding in its request as emergency funding.
In its action on the Administration’s $28 billion request, however, Congress re-
allocated $5.1 billion to other programs so that those funds no longer had an
executive branch emergency designation. For that reason, Congress designated the
funds as “contingent emergency funding,” that would only be available to agencies
if the Administration also designated the funds as emergency. The president chose
not to do so, so those funds never became available to agencies.
FY2003 Emergency Supplemental Provides Some Flexibility to
Fund Iraq War. In its FY2003 Emergency Supplemental request, submitted shortly
after the war in Iraq began, DOD asked that Congress provide $59.9 billion in the
85 DOD has periodically briefed Congressional committee staffs and provided snapshots at
individual points in time but has been required to provide any consistent reporting on either
past experience or future plans.
86 Department of Defense, FY2002 Supplemental Request to Continue the Global War on
Terrorism, March 2002, p6-p.7 and p. 166-p.17;see
87 See CRS Report RL30588, Afghanistan: Post-War Governance, Security, and U.S. Policy,
by Kenneth Katzman, p. 9- p.10.
88 H. Report 107-593, p. 129-p.130.
DERF and $2.9 billion in regular appropriation accounts to fund combat and post war
operations in Iraq as well as ongoing operations in Afghanistan and enhanced
security for defense installations.
Submitted on March 25, 2003, two days after the war with Iraq began, DOD’s
request was to cover the costs of four to five months of pre-deployment buildup that
had already occurred, combat operations that had just begun, transitional costs during
the post war period, and reconstitution of forces after the war. In its justification
materials, DOD argued that “because we cannot know exactly what military
operations might look like, it is impossible to know exactly the pace, scope, and
accounts related to expenditures,” and “for this reason, we are requesting that the
majority of the funding [should] be appropriated in a [flexible DERF] transfer
Preferring to accelerate allocation of funds to the services, the appropriators
moved $44.0 billion of the requested funds to individual accounts, but kept $15.7
billion in a newly-established flexible transfer fund, the Iraqi Freedom Fund (IFF) in
order to give DOD “flexibility to manage the war effort” and the “many unknowns
in the conduct of combat operations.”90
To provide additional flexibility, Congress also provided $2 billion in general
transfer authority for funds in the FY2003 Emergency Supplemental.91 At the same
time, Congress required that DOD follow standard reprogramming procedures,
including prior approval procedures when appropriate.92 As in the previous
supplemental, DOD was required to provide five-day advance notification of
transfers from the IFF.
Within the IFF, Congress set statutory ceilings and floors on various types of
expenses, (e.g. fuel and classified programs).93 Once the amounts governed by the
ceilings were taken into account, the Secretary of Defense had flexibility to transfer
a total of between $10 billion and $11 billion to respond to the uncertainty of major
combat operations.94 The FY2005 Budget Amendment requests a larger amount of
flexible funds for DOD.
89 DOD, FY2003 Supplemental request for Military Operations in Iraq and the Global War
on Terrorism, March 25, 2003, p. 4;see [http://www.defenselink.mil/comptroller/defbudget/
90 S.Rept. 108-33, p. 12.
91 P.L. 108-11, Section 1311.
92 H.Rept. 108-76, p.66.
93 P.L. 108-11, Iraq Freedom Fund.
94 CRS Report RL31829, Supplemental Appropriations FY2003: Iraq Conflict, Afghanistan,
Global War on Terrorism, and Homeland Security by Amy Belasco and Larry Nowels, p.
Reporting Requirements. As in previous supplementals, DOD was
required to report transfers of funds quarterly. The appropriators also stated that they
expected DOD to be able to produce “better, more refined projections of expected
costs,” later in the year and to provide the committees with a “comprehensive
financial analysis and update for FY2003,” including both actual and projected
obligations for both peacetime and war-related spending.95 Although these reporting
requirements were more extensive than in the previous two supplementals, the
reports were not required to include planning assumptions or cost drivers as Congress
required in monthly reports after the first Gulf War.
In addition, the appropriators added several new restrictions to ensure that funds
in the supplemental were not used to fund programs previously denied by Congress96
or for items that would not be available within four years. In report language, the
appropriators required advance approval of funding for any investment items that97
would be fielded more than 18 months from enactment.
FY2003 Regular Budget Requests $10 Billion for Contingencies.
Earlier in 2002, in its regular FY2003 budget, DOD requested discretion to transfer
$20.1 billion from the Defense Emergency Response Fund either for force protection,
communication, or other projects, including up to $10 billion to be “used to fund
continued operations for the war on terrorism.”98 Congress initially refused to
provide the $10 billion for unspecified war costs.
The Administration later provided an allocation of the $10.0 billion by
appropriations title (for example, “Military Personnel” for all services). Although the
Armed Services committees authorized the funds, Congress initially refused to
appropriate funds. Later in the year in response to DOD concerns that there could be
a shortfall of funding for Afghanistan and intelligence activities, Congress included
these funds in the FY2003 Consolidated enacted on February 20, 2003, (P.L. 108-7)
but provided the funds in regular appropriation accounts.99
FY2004 Emergency Supplemental Limits Amount of Flexible
Funding. Reversing course in the FY2004 Emergency Supplemental, DOD
requested all but $2.0 billion of the $65.6 billion for DOD in regular appropriation
accounts to fund ongoing operations in Iraq and Afghanistan and enhanced security.
The only exception was $2.0 billion requested in the Iraq Freedom Fund to cover the
cost of foreign forces or to pay for U.S. troops if foreign forces did not become
available. Congress accepted this rationale (P.L. 108-337).
95 H.Rept. 108-76, p. 61.
96 P.L. 108-11, Sec. 1302 and Sec. 1303.
97 H.Rept. 108-76, p.64.
98 Office of Management and Budget, Appendix to the FY2003 Budget, February 2002, p.
99 See H.Rept. 108-10; See P.L. 108-7, Division M, Sec. 107.
Submitted in September 2003, the FY2004 Emergency Supplemental was
intended to “sustain the level of support necessary to continue our operations in Iraq
and Afghanistan ... “and “other areas around the world,” and to pay for a force
structure that was expected to decline from five to two-plus active U.S. Army
divisions in Iraq.100 DOD’s reduced request for flexible funds was predicated on the
greater predictability of costs after the end of the war.
With the recent upsurge in violence, and the decision to keep an additional
20,000 troops in Iraq for the indefinite future, the Army has expressed concern that
it will not have sufficient funds to last the year. Others observers, including DOD
officials, believe that funds can be transferred from other activities where expenses
have been lower than anticipated. Although the Army’s costs are likely to be higher
than anticipated, their needs may be able to be accommodated by transferring funds
from other services and other areas within the Army. Rather than relying on a
flexible account, DOD may be able to use the additional transfer authority that it was
provided in the FY2004 Emergency Supplemental.101 Expanding general transfer
authority, but requiring that reprogramming practices are followed, may be an
alternative approach to giving DOD flexibility while maintaining traditional
As in the previous two supplementals, DOD was required to provide five-day
advance notification of transfers from the IFF (or the DERF in FY2002), and to
report quarterly to the congressional defense committees on all transfers. In addition,
the FY2004 supplemental also formally closed the Defense Emergency Response
100 Department of Defense, FY2004 Supplemental Request for Operation Iraqi Freedom
(OIF), Operation Enduring Freedom (OEF), and Operation Noble Eagle (ONE), September
21, 2003; available on the DOD website at [http://www.defenselink.mil/comptroller/def
101 CRS Report RL32381, Adequacy of the Army’s Funding for Operations in Iraq.
102 See P.L. 108-106, Sec. 1105 (b).
Appendix A: Extent of Flexible Funding
Since 9/11 Attacks
In the two and a half years since the September 11, 2001 terrorist attacks, the
Department of Defense (DOD) has received $165 billion in supplemental funding for
the war and occupation of Iraq and Afghanistan and enhanced security for defense
installations (referred to by DOD as Operation Noble Eagle). The Administration
requested much of this funding for the “global war on terror” in flexible accounts,
emphasizing the difficulties of predicting the cost of combat operations and
Amount of Flexible Funding in Post 9/11 Supplementals. Although
Congress has provided most of the DOD funding requested by the Administration for
the “global war on terrorism,” Congress has not provided most of that funding in
flexible accounts despite Administration requests (see Table A1). Of the $173
billion that the Administration has requested for operations in Iraq and Afghanistan
and for enhanced security for defense installations since the 9/11 attacks, the
Administration requested $104 billion in flexible funds and the remaining $69 billion
in regular appropriation accounts. In response, Congress appropriated $44 billion in
flexible accounts and $127 billion in regular accounts.
Table A1. Extent of DOD Flexibility in Supplementals Since 9/11
Attacks: Funding Amounts
(in billions of dollars)
FundingEmergencyFY2002 FY2003FY2003FY2004 Total
Level &TerrorismSuppl. Supp. P.L.OmnibusSupp.
Amount ofResponseP.L. 107-206108-11P.L. 108-7P.L. 108-
Provided in Flexible Fund
Request 21.2 11.3 59.9 10.0 2 .0 104.4
Enacted 15.0 11.3 12.2 0 .0 2.0 40.5
Provided in Regular Appropriation Accounts
Request 0 .0 2.7 2 .7 0.0 63.6 69.0
Enacted 2.3 2 .1 46.9 10.0 65.3 124.5
Request 21.2 14.0 62.6 10.0 65.6 173.4
Enacted 17.3 13.4 59.1 10.0 65.2 165.0
Notes and Sources: Includes effects of later rescissions. CRS calculations based on requests and
Share of Flexible Funding in Post 9/11 Supplementals. In previous
supplementals, the Administration requested that between 80% and 100% of DOD’s
funding be provided in a flexible fund (see Table A2 below). While Congress has
generally provided the amount of funds requested, with the exception of the P.L. 107-
38, the supplemental passed in the aftermath of the attacks, and the FY2002
Emergency Supplemental (P.L. 107-206), Congress, has not been willing to provide
the degree of flexibility requested.
Since then, Congress has pared back DOD’s requests, providing about 20% in
a flexible account in the FY2003 Supplemental (P.L. 108-11) and 3% in the FY2004
Supplemental (P.L. 108-106).
Table A2. Extent of DOD Flexibility in Supplementals Since 9/11
Attacks: Share of Total Funding
(as percent of total)
F unding EmergencyTerrorism FY2003
Level &ResponseFY2002 Supp. P.L.FY2003FY2004
Amount ofSupp. P.L.Suppl. 108-11OmnibusSupp.Total
Flexibility107-38 &P.L. 107-206P.L. 108-7P.L. 108-106
Provided in Flexible Fund
Request 100.0% 80.7% 95.7% 100.0% 3.0% 60.2%
Enacted 86.7% 84.3% 20.6% 0.0% 3.1% 24.5%
Provided in Regular Appropriation Accounts
Request 0 .0% 19.3% 4.3% 0.0% 97.0% 39.8%
Enacted 13.3% 15.7% 79.4% 100.0% 96.9% 75.5%
Total Funding Received
Re q ue s t
Notes and Sources: Includes effects of later rescissions. CRS calculations based on requests and
Appendix B: Legislation
P.L. 101-403, October 1, 1990 (H.J.Res. 655)
Making continuing appropriations for the FY1991, supplemental appropriations
for “Operation Desert Shield” for the FY1990, and for other purposes.
P.L. 102-25, April 6, 1991 (S. 725)
Persian Gulf Conflict Supplemental Authorization and Personnel Benefits Act
P.L. 102-28, April 10, 1991 (H.R. 1282)
Making supplemental appropriations and transfers for “Operation Desert
Shield/Desert Storm” for the fiscal year ending September 30, 1991, and for other
P.L. 104-134, April 26, 1996 (H.R. 3019)
Omnibus Consolidated Rescissions and Appropriations Act of 1996.
P.L. 107-38, September 18, 2001 (H.R. 2888)
2001 Emergency Supplemental Appropriations Act for Recovery from and
Response to Terrorist Attacks on the United States.
P.L. 107-117, January 10, 2002 (H.R. 3338)
Department of Defense and Emergency Supplemental Appropriations for
Recovery from and Response to Terrorist Attacks on the United States Act, 2002.
P.L. 107-206, August 2, 2002 (H.R. 4775)
2002 Supplemental Appropriations Act for Further Recovery From and
Response to Terrorist Attacks on the United States.
P.L. 107-248, October 23, 2002 (H.R. 5010)
Department of Defense Appropriations Act, 2003.
P.L. 108-7, February 20, 2003 (H.J.Res. 2)
Consolidated Appropriations Resolution, 2003.
P.L. 108-11, April 16, 2003 (H.R. 1559)
Emergency Wartime Supplemental Appropriations Act, 2003.
P.L. 108-87, September 30, 2003 (H.R. 2658)
Department of Defense Appropriations Act, 2004.
P.L. 108-106, November 6, 2003 (H.R. 3289)
Emergency Supplemental Appropriations Act for Defense and for the
Reconstruction of Iraq and Afghanistan, 2004.