Background The appropriation and execution of DOD’s base and OCO amounts is  part of the broader federal budget process. In this process, Congress, the  President, and federal agencies take a number of steps to formulate a  budget, enact appropriation acts, and execute the federal budget for each  fiscal year. A summary of the budget process is depicted in figure 1  below. In DOD’s budget process, the military services and defense agencies  submit a budget request—known as the Budget Estimate Submission— that addresses their estimated annual funding requirements for both base  and OCO activities. In building their OCO budget requests, the military  services and defense agencies use criteria that OMB developed in  collaboration with DOD, for deciding whether items belong in the base  budget or in OCO funding requests. The services also use guidance  issued within their own organizations, as well as utilize OCO-specific  budget guidance included in DOD’s Financial Management Regulation. Congress then takes action on the budget request and appropriates  funding for both base and OCO activities into the same appropriation  accounts, such as service-specific O&M accounts. Explanatory  statements or conference committee reports accompanying annual  appropriations acts provide congressional direction on how OCO and  base funding amounts should be obligated. However, the congressional  direction for funding is generally not legally binding. Congress also has  the discretion to make available amounts for base activities or enduring  costs through OCO appropriations, even if DOD considers such costs to  be part of the base budget. The Budget Control Act of 2011, amending  the Balanced Budget and Emergency Deficit Control Act of 1985,  imposes government-wide discretionary spending limits for fiscal years  2012 through 2021 to reduce projected spending by about $1 trillion. All  amounts appropriated to DOD are subject to limitations on discretionary  spending. Appropriated amounts designated by Congress for OCO that  would otherwise exceed the annual limits established for discretionary  spending will instead result in an adjustment to the overall spending limit  established for a particular fiscal year, and will not trigger a sequestration,  which is an automatic cancellation of budgetary resources provided by  discretionary appropriations or direct spending laws. Upon enactment of an appropriation, the Secretary of the Treasury issues  a warrant to federal agencies, which is an official document that  establishes the amount of moneys authorized to be withdrawn from the  central accounts that the Department of Treasury maintains. The  Treasury does not employ a process to separate OCO funding from base  funding in its role in warranting funds to federal agencies, including DOD.  After receiving budget authority, agencies make allotments, delegating  budget authority to various agency officials allowing them to incur  obligations. Agencies then disburse amounts by cash or cash equivalents  to liquidate obligations. DOD Components  We Reviewed Use  Coding and Other  Control Activities to  Separately Account  for OCO and Base  Amounts during  Budget Execution The DOD components in our review use coding and other internal control  activities to separately account for OCO and base amounts in their O&M  accounts during budget execution. To record and track OCO and base  amounts separately, the DOD components use coding in their financial  systems during the allotment, obligation, and disbursement of funds. For  example, during the allotment phase, the Army and the Defense Security  Cooperation Agency use codes in their financial systems to divide,  distribute, and track their appropriated funds into separate categories— including one for OCO and one for base. Army and Defense Security  Cooperation Agency officials stated that the separate categories are  maintained through the obligation phase. The Air Force, the Marine  Corps, and the Navy use specific codes to track OCO transactions within  multiple systems they use to allot and obligate OCO and base amounts.  For example, the Air Force uses an Emergency and Special Program  code to track and record allotments and obligations of OCO amounts within its budgeting and accounting systems. The Marine Corps uses  three-digit, alphanumeric codes called Special Interest Codes to track and  record costs associated with high-interest activities, such as OCO, during  obligation. Figure 2 describes the steps that DOD takes to separate OCO  and base amounts. We identified some internal control activities that the DOD components in  our review have put into place to ensure separate accounting of OCO and  base amounts, such as controls over information processing. A variety  of control activities can be used in information processing, including  controls incorporated directly into computer applications to ensure  accuracy, as well as policies and procedures that apply to information  systems. For example, Army and Defense Security Cooperation Agency  officials stated that the financial systems they use incorporate system  controls that automatically maintain the categories of funding designated  during allotment through subsequent actions, including obligation, which  ensures an amount in the OCO category maintains its OCO-specific  coding throughout the budget execution process. Also, the Army restricts  the number of personnel who are able to reassign the coding of funding  from one category to another. Navy officials explained that two of three  financial accounting systems used by the Navy receive OCO allotments  automatically from the Navy’s budgeting information system, which  eliminates the need for manual entry of allotment amounts. Also, Marine  Corps guidance requires entry of an identifying OCO code in the Marine  Corps’ financial system when recording an OCO-related transaction,  which can prevent data reporting errors. In addition to controls over information processing, each DOD component  in our review incorporates reviews of their OCO execution as one of their  internal control activities. Internal control activities also include reviews,  such as reviews of data or expected results, by management throughout  an organization. The financial management offices of these components  periodically review the OCO-related allotments they make within their  components to confirm the amounts are properly recorded. For example,  the Air Force, the Army, the Marine Corps, the Navy, the Defense  Security Cooperation Agency, and U.S. Special Operations Command  review OCO-related execution amounts at least monthly to determine if  amounts are within their established spending plans and that OCO coding  is recorded correctly, among other things. In addition, officials from each  service and the Defense Security Cooperation Agency stated that officials  review OCO-related obligations and verify they are legitimate OCO  expenses. The DOD Inspector General and the services’ audit agencies have found  weaknesses in the services’ processes of accounting for OCO costs or in  other related internal control activities. For example, in March 2018, the  US Army Audit Agency found that while the Army had a strategy and  processes to capture and report its financial data for Operation Inherent  Resolve for fiscal year 2016, processes to account for some obligation  data needed improvement. Moreover, an official from the Office of the  Secretary of Defense (Comptroller) stated that, while the DOD  components included in our review have processes to separate OCO and  base amounts, other DOD components may not have similar processes,  and not all components have auditable financial systems. Four Alternatives to  the Current  Processes That  Congress and DOD  Use to Separate  Funding for OCO and  Base Activities Would  Entail Tradeoffs We identified at least four alternatives to the processes Congress and  DOD use to separate funding for DOD’s OCO and base activities. Each  alternative would require action at different phases of DOD’s budget  process and entail tradeoffs. Appendix II provides additional information  on requirements and costs to implement the alternatives reported by  respondents that we summarize, as well as other alternatives to provide  funding to DOD that respondents independently identified. In addition,  appendix II provides summary information on the positive and negative  aspects of Congress’ current process for providing funding for OCO and  base activities, as described by respondents. Alternative #1: DOD Could  Request Funding for  Enduring Costs through Its  Base Budget Rather Than  Its OCO Budget The first alternative to the current process would be for DOD to request all  funding for enduring costs through its base budget rather than its OCO  budget. DOD is considering a plan to move enduring costs associated  with OCO activities from its OCO budget request into its base budget  request for fiscal year 2020. In its budget justification materials for fiscal  year 2019, DOD estimated that it would shift between $45.8 billion and  $53.0 billion from its OCO request to its base budget request from fiscal  years 2020 through 2023. However, moving DOD’s enduring costs to its  base budget request may require increased base O&M appropriations  provided in annual DOD appropriations acts. Appropriations that are not  designated as OCO, such as base O&M amounts, and that exceed  annual discretionary spending limits established by the Budget Control  Act of 2011, as amended, would trigger a sequestration. Respondents  to our questionnaire identified several positive and negative aspects of  this alternative, which we summarize in table 1. Alternative #2: Congress  Could Add Specific  Purpose Language to  Annual DOD  Appropriations Acts  Concerning OCO Amounts The second alternative would be for Congress to specify in annual DOD  appropriations acts the purposes—programs, projects and activities—for  which OCO amounts may be obligated. As we noted above, DOD  currently determines what constitutes OCO activities based on criteria  developed in 2010 in coordination with OMB and DOD 7000.14-R,  Financial Management Regulation. Explanatory statements and  conference committee reports accompanying annual appropriations acts  include direction on how OCO amounts should be allocated for specific  activities; however, explanatory statements and committee reports are not  legally binding unless incorporated by reference into the appropriations  act. Either specific purpose language or language incorporating  explanatory statement or committee report language could be included in  DOD’s annual appropriations. Respondents to our questionnaire identified  several positive and negative aspects of this alternative, which we  summarize in table 2. Alternative #3: Congress  Could Create Separate  Appropriation Accounts for  OCO and Base Funding The third alternative entails Congress creating separate appropriation  accounts for OCO and base funding. Under the current approach, both  OCO and base amounts are appropriated into and executed out of the  same appropriation accounts. By contrast, under this alternative,  Congress would create separate Treasury-level appropriation accounts  for funding for OCO and base activities. For example, there could be an  O&M appropriation account for the Army’s base activities and an O&M  appropriation account for the Army’s OCO activities. Funding for OCO  and base activities would no longer be comingled, but could be  transferred between accounts with statutory authority. Respondents to  our questionnaire identified several positive and negative aspects of this  alternative, which we summarize in table 3. Alternative #4: Congress  and DOD Could Use a  Transfer Account to Fund  Contingency Operations Under the fourth alternative, Congress would appropriate funds into a  non-expiring transfer account for contingency operations. These funds  would be available for DOD’s use during multiple fiscal years. DOD would  use its base appropriations to initially fund OCO activities and later use  funds from the transfer account, as needed, to reimburse its base  appropriation accounts. One example is the Overseas Contingency  Operations Transfer Fund, which was originally established by Congress  in fiscal year 1997 to meet small-scale, recurring operational demands of  the department by transferring amounts to the military services and  agencies based on execution needs as the year progresses.  Respondents to our questionnaire identified several positive and negative  aspects of this alternative, which we summarize in table 4. Each Alternative Would  Require Action at Different  Phases in the Budget  Process and Entail  Tradeoffs The four alternatives we identified would require Congress and DOD to  take action at different phases within DOD’s budget process. In the first  alternative, DOD would move enduring costs to the base budget request  during the budget formulation phase. In the second alternative, Congress  would specify the activities to be funded by OCO amounts in the annual  appropriations acts during the congressional appropriation phase.  Similarly, in the third alternative, Congress would create separate  appropriation accounts for OCO and base activities during the  congressional appropriation phase. In the fourth alternative, using transfer  accounts would require actions during two phases—the congressional  appropriations phase and the budget execution phase. Congress would  appropriate funds into a transfer account during the congressional  appropriation phase, and DOD would later use funds from the transfer  account, as needed, to reimburse its base appropriation accounts during  budget execution. In figure 3, we depict the phase of the budget process  in which these alternatives would take place. Each alternative includes tradeoffs that Congress and DOD would have to  consider to strike the desired balance between agency flexibility and  congressional control. For example, adding specific purpose language  would better align obligation of OCO amounts with congressional intent;  however, doing so could also reduce DOD’s financial flexibility and  responsiveness to changes in operations. Understanding the implications  of each alternative is important to avoid unintended consequences. Our  summary of the positive and negative aspects of the alternatives reported  by respondents could be a reference for Congress and DOD as they  consider potential changes to processes for separating the funding of  amounts for OCO and base activities. Agency Comments  and Our Evaluation We requested comments from DOD, the Department of the Treasury, and  provided an informational copy of the draft report to OMB. DOD provided  technical comments on the draft report, which we incorporated as  appropriate. We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretary of the Treasury, the  Director of OMB; the Under Secretary of Defense for the Comptroller; the  Secretaries of the Air Force, the Army, and the Navy; the Commandant of  the Marine Corps; the Commanding General of U.S. Special Operations  Command, and the Director of the Defense Security Cooperation Agency.  In addition, the report is available at no charge on the GAO website at  http://www.gao.gov. If you or your staff have any questions about this report, please contact  me at (202) 512-2775 or fielde1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff members who made key contributions to  this report are listed in appendix IV. Appendix I: Scope and Methodology To describe selected Department of Defense (DOD) components’ use of  internal controls to separately account for overseas contingency  operations (OCO) and base amounts, we reviewed documentation of the  internal controls that DOD organizations in our review have designed to  separate these amounts in their operation and maintenance (O&M)  account. We focused on the O&M account because Congress provides  most of the OCO amounts for DOD in O&M. In addition, we focused on  the military services that receive service-specific OCO appropriations,  and the two non-service DOD components (U.S. Special Operations  Command and the Defense Security Cooperation Agency) that are  allotted the most OCO funding appropriated to the O&M Defense-wide  account. We collected information for this objective through interviews  and written requests for information from financial management officials in  the Office of the Secretary of Defense (Comptroller), the offices of the  military services, U.S. Special Operations Command, the Defense  Security Cooperation Agency, and the Defense Finance and Accounting  Service. Our review focused on the design of the internal control systems  and did not assess the effectiveness of these internal controls. To identify alternatives to separate funding for DOD’s OCO and base  activities, we searched for relevant literature from 2001 through July  2018. Specifically, we searched for alternative processes that (1) DOD  could use to separately account for OCO funding or (2) Congress could  use to provide separate OCO funding to DOD because both DOD and  Congress could be involved in implementing alternatives to separate  funding for OCO and base activities. We started with 2001, because this  was the first year that funds were appropriated for the Global War on  Terror (GWOT), now known as OCO. We conducted searches of various  databases and websites, such as ProQuest and the National Academy of  Sciences website. Our literature search identified 235 sources, which  primarily consisted of journal articles, reports, and news articles. Two  analysts independently reviewed the full text of the literature sources to  determine which were relevant. When they disagreed, a third analyst  independently reviewed the full text of a source to make the final  determination. We determined that 22 sources were relevant. We did not  identify any sources that described alternative processes for DOD to  separately account for OCO funding; therefore, we do not address this in  our report. We did identify three alternatives related to how Congress  provides OCO funding to DOD and how DOD requests OCO funding from  Congress. We summarized these alternatives and obtained feedback  from our internal subject matter experts familiar with Congress’ process  for providing funding for OCO and DOD’s process for separating OCO  and base funds. We revised the wording of the alternatives based on their  feedback to ensure that we described them accurately. Our internal  subject matter experts suggested a fourth congressional alternative. We  summarized all four alternatives in our report. In collaboration with a survey specialist, we developed a questionnaire to  solicit opinions from knowledgeable individuals (“respondents”) regarding  Congress’ and DOD’s current processes and the four alternatives. Our  internal subject matter experts also provided feedback on the draft  questionnaire. We included the summaries of all processes and asked  respondents to identify the positive and negative aspects, as well as the  costs and requirements, associated with each. We also asked  respondents to describe any additional alternatives apart from the four we  described in the questionnaire. We identified questionnaire respondents within and outside DOD who  were sufficiently knowledgeable about Congress’ and DOD’s current  processes in several ways. We identified respondents within DOD by  emailing the engagement points of contact, who were budget and  financial management officials in the headquarters for the military  services and other DOD components included in our review. To identify  respondents outside of DOD, we contacted individuals identified by an  internal subject matter expert and contacted additional individuals  identified in our literature review. We provided respondents with a brief  summary of the questionnaire and asked them if they would be able and  willing to respond to questions on these topics. We also asked  respondents to recommend additional knowledgeable individuals at the  end of the questionnaire. Respondents identified were current officials in  DOD financial management offices, former DOD officials, and defense  budget analysts from think tanks. In addition, we contacted officials from  the Congressional Research Service and the Congressional Budget  Office, whom we identified as assigned to analyze defense budget issues  related to OCO. We included questions at the start of the questionnaire to  determine if respondents were sufficiently knowledgeable about either the  current congressional process, the current DOD process—or both—to  offer perspectives on the alternatives presented. We sent the questionnaire as a Microsoft Word form via email to 23  respondents, including 10 within DOD and 13 outside DOD. We began  sending the questionnaires on August 1, 2018, and continued as we  identified more respondents. We sent up to two reminder emails with a  copy of the questionnaire to anyone who had not yet responded. We  received the last questionnaire on September 10, 2018. We received a  total of 19 questionnaires back from respondents. We excluded two  completed questionnaires from our analysis based on our screening  criteria for determining if respondents were sufficiently knowledgeable  about Congress’ and DOD’s current processes. Therefore, we included  17 questionnaires in our analysis—10 from DOD officials and 7 from  respondents outside DOD—for a response rate of 81 percent. We  calculated the response rate using a total possible number of 21  questionnaires instead of 23 to account for the two questionnaires we  excluded from the analysis. Fifteen of the 17 respondents to our  questionnaire were current or former DOD officials. Results of this  questionnaire are not generalizable beyond our respondents. To enable us to provide the information to Congress within the time  frames required by the mandate, we did not pretest the questionnaire.  However, we believe that the questionnaire was a sufficiently valid data  collection tool for reporting positive and negative aspects identified by  respondents. We developed the questionnaire with assistance from a  survey specialist, and we revised the questionnaire content based on  feedback from our internal subject matter experts. Most respondents  provided answers that indicated they correctly interpreted the questions  as stated in the questionnaire. In addition, we took steps to provide  clarification to the few respondents who misunderstood questions and  excluded responses we could not reasonably assure were understood.  Four of the 23 original recipients of the questionnaire requested  clarification or misunderstood two questions in our questionnaire. We  provided clarification to those respondents via email and requested that  they update their questionnaire responses based on this new information.  Two did so. The other two respondents did not reply to our clarification  email, and we excluded their responses to the misunderstood questions.  Not all respondents provided answers to all questions in our  questionnaire. We extracted the data from the Word questionnaires and  imported them into Excel for qualitative analyses. We inspected the Excel  files to ensure that data were not missing or were not imported incorrectly  and made iterative corrections to the process to ensure accurate data  were analyzed. Because we did not pretest the questionnaire, we do not  report the number of respondents who provided any answers but rather  we present qualitative positive and negative aspects based on the  responses. We conducted a content analysis in which two analysts independently  categorized each response from each questionnaire to identify  similarities. For our purposes, similarities existed when two or more  respondents gave the same or very similar answers to a particular  question. The summaries of the responses we developed were based on  comments from two to nine respondents. The analysts discussed any  discrepancies in their categorizations until they reached agreement.  Subsequently, an internal subject matter expert provided feedback on the  summary. Using that feedback, the analysts consolidated summaries that  were related and clarified the wording of all the summarized responses.  We identified positive and negative aspects for questions regarding the  current processes and the four alternatives presented in the  questionnaire. We did not summarize positive and negative aspects for  questions regarding the additional alternatives described by respondents.  We did not include this information because although two respondents  described similar alternatives, they did not identify similar positive and  negative aspects about this alternative. In addition, none of the remaining  questionnaires included similar responses. We list any additional  alternatives identified by respondents in appendix II. The verbatim  wording from key sections of the questionnaire we administered is  presented in appendix III. In addition, section 1523 of the National Defense Authorization Act for  Fiscal Year 2018 contained additional provisions for us to review other  processes related to the execution of OCO funds. In particular, section  1523 contained a provision for us to review the processes the Department  of the Treasury employs to separate expenditures of amounts  appropriated for OCO from expenditures of all other amounts  appropriated for DOD. We assessed the steps that the Department of the  Treasury takes in the execution of the federal budget after funds have  been appropriated and determined that the Department of the Treasury  does not employ a process to separate OCO funding from base funding in  its role in making appropriations available to DOD. In addition, section  1523 of the act included another provision for us to compare the  processes DOD and the Department of Treasury use to separate  expenditures of OCO amounts to the generally accepted accounting  principles. The Federal Accounting Standards Advisory Board issues  federal financial accounting standards and provides guidance on federal  generally accepted accounting principles. The Federal Accounting  Standards Advisory Board’s Handbook of Federal Accounting Standards  and Other Pronouncements, as Amended (Current Handbook) is the most  up-to-date, authoritative source of generally accepted accounting  principles developed for federal entities. However, the Current Handbook  does not address the separation of OCO from non-OCO appropriations,  obligations, and disbursements. Therefore, it is not possible to compare  the processes DOD and the Department of the Treasury use to the  generally accepted accounting principles based on existing standards and  guidance. We conducted this performance audit from March 2018 to January 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. Appendix II: Additional Information on the  Current Process and Alternatives to Provide  OCO Funding Additional information from our questionnaire is provided below, including  information about (1) the positive and negative aspects of Congress’  current process for providing funding for the Department of Defense’s  (DOD) overseas contingency operation (OCO) and base activities, (2) the  requirements and costs to implement the four alternatives we discussed  earlier, and (3) other alternatives for providing funding to DOD. Positive and Negative  Aspects of Congress’  Current Process to  Provide Funding for OCO  and Base Activities We asked respondents to report on the positive and negative aspects of  Congress’ current process for providing funding for DOD’s OCO and base  activities. We summarize those aspects in table 5. Requirements and Costs  to Implement the Four  Alternatives Respondents reported on the requirements and costs to implement the  four alternatives in our questionnaire. The requirements respondents  identified to implement the four alternatives are summarized in table 6. Regarding the costs, respondents reported that two alternatives would  require minimal or no additional costs, while the other two alternatives  would involve higher costs to DOD. The costs respondents identified to  implement the four alternatives are summarized in table 7. Alternatives for Providing  Funding to DOD that  Respondents  Independently Identified We also asked respondents to describe any other alternatives for  separating funding for DOD’s OCO and base activities, apart from the  four alternatives described above. Respondents identified several  alternatives for providing funding to DOD, including alternatives that  would not provide separation of OCO and base funding. The other  alternatives that respondents described are shown in table 8. Appendix III: Key Questions from GAO’s  Questionnaire on Separation of OCO and  Base Amounts Below we show the verbatim wording of the descriptions of the  alternatives to separate amounts for DOD’s OCO and base activities as  summarized in the questionnaire. Each description was presented  separately in the questionnaire followed by a standard set of questions  that are all presented below these descriptions. We also show the  verbatim wording of any clarification text sent via email to respondents  who misunderstood the description of the alternative. DOD could move requests for funding of enduring activities from its  OCO budget to its base budget request. Enduring activities are those  that began in response to contingency operations but have continued  after these operations ended. An example of an enduring cost would be  maintaining residual headquarters staff at U.S. Central Command in  Qatar to train, advise, and assist as missions have evolved from  contingency to ongoing activities. We understand that in the in FY 2020,  the Department plans to move funding for enduring activities from its  OCO budget to its base budget request. DOD’s OCO funding request  would then reflect only the incremental costs of existing contingency  operations. The Congress could specify activities for which DOD should use  OCO amounts within the annual appropriations acts. Currently, DOD  determines what activities constitute OCO activities based on criteria  developed in 2010 in coordination with OMB. Under this alternative,  explicit purpose language designating specific funds for specific activities  would be added directly into the appropriations acts or the explanatory  statement, then incorporated into the appropriations act by reference. “Under the current approach, funds are designated for specific sub-activities in the  explanatory statement. However, these designations are generally not legally binding  unless incorporated by reference into the appropriations act itself. Under this alternative  approach , specific purpose language or language of incorporation would  be included in the appropriations act. The distinction between the current approach and  the alternative presented here is that legally binding language concerning specific  amounts for specific OCO activities would appear in the appropriation act.” The Congress could create separate appropriation accounts for  amounts designated for OCO and amounts designated for base  activities. “In the current approach, amounts are designated for OCO and base activities within a  single appropriation account. In the alternative proposed in Question 5, the Congress  would create two separate appropriation accounts for OCO and base activities amounts.  For example, there would be one appropriation account for OCO amounts for O&M, and  another appropriation account for base activity amounts for O&M.” DOD could use a transfer account (such as the Overseas  Contingency Operations Transfer Fund, or OCOTF) through which  the Department could meet operational demands by transferring  funds to the military services and agencies based on execution  needs as the year progresses. The Congress would appropriate funds  into a transfer account. These funds would not expire and be available for  DOD’s use during multiple fiscal years. DOD would use its base activities  appropriations to fund OCO activities and later draw from the transfer  account as needed to reimburse its base appropriation accounts. Below we show the verbatim wording from key sections of the  questionnaire we administered. We used Questions 2 and 3 as screening  questions to help determine if respondents were sufficiently  knowledgeable about the current congressional or DOD processes.  Question 4 and its sub-questions below were repeated for each  alternative presented above (i.e., as Questions 4 through 7 in the  questionnaire). We also asked sub-questions “b” through “e” in Question  4 for the current approaches Congress and DOD use (presented in  Questions 2 and 3). Finally, we asked respondents to identify up to five  additional alternatives in Questions 8 through 12.  2.  Are you familiar with any of the current approaches that the  military services or DOD organizations use to separate operation  and maintenance (O&M) amounts designated for Overseas  Contingency Operations (OCO) from amounts designated for  base activities during the allotment, obligation, and/or  disbursement phases? Please check one box.   Please continue to “a” through “e”   Please skip to Question 3   Please skip to Question 3  3.  Are you familiar with the current approach that Congress uses to  designate amounts for OCO in the appropriations process for  DOD? Please check one box.   Please continue to “a” through “e”   Please skip to Question 4   Please skip to Question 4  4.  GAO has identified the following as a possible alternative to the  current approach for separating amounts designated for OCO  from amounts designated for base activities in the  appropriations process:  a.   Were you aware of this alternative before completing this   questionnaire? Please check one box. Please continue to “b” through “e”  b.  What are the positive aspects associated with this alternative,  if any? Please consider factors impacting both taxpayers and  the DOD. The box will expand as you type.   c.  What are the negative aspects associated with this  alternative, if  any? Please consider factors impacting both  taxpayers and the DOD. The box will expand as you type.   d.  What are the costs associated with this alternative, if any? Please  consider costs impacting both taxpayers and the DOD. The box  will expand as you type.   e.  What are the requirements associated with implementing this  alternative? Consider factors such as: changes to existing  systems, policies, or processes; new systems, policies, or  processes; new budget estimations; required training; etc.  These could be requirements for DOD or the Congress. The  box will expand as you type.   8.  Are you aware of any alternative approaches for separating  amounts designated for OCO from amounts designated for base  activities other than the ones listed above? Please consider both  approaches DOD could implement on its own (such as  approaches to separating OCO from base in the O&M account or  changes that make that unnecessary) and legislative approaches  the Congress could take. We are aware of the Enterprise Resource  Planning (ERP) systems listed above. For this question, we are  interested in the implementation of new potential alternatives other  than the ERP system. Please check one box.    Please continue to “a” through “e” to tell us about  one alternative. If you are aware of more than one,  you will be able to tell us about others in Questions   9-12.     Please skip to Question 13   Please skip to Question 13  a.   If yes, please briefly describe the first alternative approach. The box will expand as you type. Appendix IV: GAO Contact and Staff  Acknowledgments GAO Contact Elizabeth Field, (202) 512-2775 or fielde1@gao.gov. Staff  Acknowledgments In addition to the contact named above, Richard K. Geiger, Assistant  Director; Arkelga Braxton, Assistant Director; Rebekah Boone; Amie  Lesser; Felicia Lopez; James P. Klein (Analyst-in-Charge); Shylene Mata;  Sheila Miller; Richard Powelson; and Michael Silver made key  contributions to this report.
Since 2001, DOD has received more than $1.8 trillion in OCO funds. DOD defines “contingency operations” as small, medium, or large-scale military operations, while “base” activities include operating support for installations, civilian pay, and other costs that would be incurred, regardless of contingency operations. Congress separately appropriates amounts for base and OCO activities into the same appropriation accounts and directs how funds are to be spent by designating amounts in conference reports or explanatory statements accompanying the annual appropriations acts. The National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to report on the feasibility of separating OCO expenditures from other DOD expenditures. This report (1) describes internal controls that selected DOD components use to separately account for OCO and base amounts during budget execution and (2) identifies and examines alternatives that Congress or DOD could use to separate funding for OCO and base activities. GAO reviewed documentation of DOD internal controls for separating OCO and base amounts in the O&M account, interviewed financial management officials, and, among other things, conducted a literature review to identify alternatives that Congress or DOD could use to separate funding for OCO and base activities. Also, GAO administered a questionnaire to DOD and non-DOD officials to identify positive and negative aspects of these alternatives. Selected Department of Defense (DOD) components use coding and other internal control activities to separately account for overseas contingency operations (OCO) and base amounts in their operation and maintenance (O&M) accounts during budget execution. To record and track OCO and base amounts separately, the military services, U.S. Special Operations Command, and the Defense Security Cooperation Agency use coding in their financial systems. These DOD components also have instituted some internal control activities to help ensure separation of OCO amounts. For example, Army and Defense Security Cooperation Agency officials stated that the financial systems they use incorporate system controls that automatically maintain the categories of funding, such as OCO, designated during allotment through subsequent actions to ensure the OCO coding remains throughout budget execution. GAO identified at least four alternatives to the processes used to separate funding for DOD's OCO and base activities: Move enduring costs to the base budget . DOD could request funding for enduring costs—costs that would continue in the absence of contingency operations—through its base budget rather than its OCO budget. Use specific purpose language . Congress could use legally binding language in the annual DOD appropriations acts to specify the purposes—programs, projects and activities—for which OCO amounts may be obligated. Create separate appropriation accounts . Congress could create separate appropriation accounts for OCO and base funding. Use a transfer account . Congress could appropriate funds for OCO into a non-expiring transfer account. DOD would fund OCO with its base budget and later reimburse its base accounts using funds from a transfer account. Implementing these alternatives would require Congress and DOD to take action in different phases of the budget process (see figure). Each alternative includes tradeoffs that Congress and DOD would have to consider to strike the desired balance between agency flexibility and congressional control. The alternatives, and GAO's summary of their positive and negative aspects identified by questionnaire respondents, could be a reference for Congress and DOD as they consider potential changes to processes for separating the funding of amounts for OCO and base activities.