The Overseas Contingency Operations (OCO) account of the Pentagon was designed, not surprisingly, to cover contingencies that occur overseas. In fact, there are years’ worth of anecdotal evidence that the OCO account has been misused, by both Republican and Democratic administrations, as a slush fund to avoid both scrutiny and the budget caps put in place by the Budget Control Act of 2011 (BCA). Undermining the goals of the BCA through the use of OCO became popular when Congress and the executive branch agreed the account would be considered “off-budget” and, therefore, not counted against the cap on defense spending.
My organization, Taxpayers for Common Sense (TCS), has spent the last several years studying, writing about, and making recommendations regarding the OCO accounts. So we were thrilled (in the way only budget nerds can be) that the Government Accountability Office (GAO) released a report last week recommending changes to how the Congress and the Department of Defense fund war-related activities through the OCO accounts. I recommend this report to serious scholars of Pentagon spending as we await the release of the President’s Budget Request for Fiscal Year 2020 (FY20).
There is so much wrong with the abuses in OCO, but perhaps the most glaring is the idea that because the spending is off-budget it doesn’t count against the self-imposed spending caps: every OCO dollar counts against our rising deficit. And the GAO report notes the Congress has appropriated $1.8 trillion into this off-budget account since 2001. With the deficit set to hit $1 trillion later this year, it’s easy to argue that greater scrutiny of Pentagon spending could have significantly reduced this looming fiscal disaster.
GAO recommends four potential process reforms to instill some fiscal rigor to these accounts.
- “Move enduring costs to the base budget.” In other words, if it isn’t overseas and it isn’t an actual contingency, don’t pay for it out of OCO. The report identifies abuses of this common-sense standard. The report details that most of the costs of U.S. Central Command’s service component commands and theater special operations command headquarters are paid for by OCO. That’s an abuse.
- “Use specific purpose language.” In the annual Pentagon appropriations acts (both the DoD and VA/Military Construction bills) Congress should include language to set legally binding parameters for which activities may be funded by OCO. This is a sensible and necessary follow-on to previous guidance from the Office of Management and Budget on how OCO funds could be spent. GAO states that guidance is now out of date. I believe Congress should take back its Constitutional prerogative to dictate how appropriated funds may be spent.
- “Create separate appropriation accounts.” These accounts would segregate OCO dollars from money appropriated for “base budget” or enduring requirements. Combined with specific purpose language, this is the ultimate fiscal control over these accounts. Any attempts by the Pentagon to move money above a certain dollar threshold would trigger a reprogramming request and allow Congress to re-assert its control over the funds. This is something TCS has been advocating for several years in the annual authorization and appropriations process.
- “Use a transfer account.” Back in the 1990s, the Clinton administration used a transfer fund for emerging OCO expenses that the Army faced during operations in the Balkans. These expenses were both overseas and contingencies the Army had not anticipated when drafting its annual budget request. The transfer fund swept up unobligated balances from various Pentagon accounts at the end of the fiscal year to cover those unexpected costs to the Army accounts. GAO is recommending a slant on this with Congress specifically appropriating funds for overseas contingencies into a transfer fund that does not expire. The Pentagon would use base budget dollars for OCO requirements and then be reimbursed with funds from the transfer account.
Altogether, this GAO report recommends several common-sense solutions to the uncontrollable slush fund that OCO has been allowed to become. I look forward to working with the new Congress to establish greater legislative oversight and control of this account.