Pentagon Won’t Release Its Plan to Get Rid of Slush Fund

The war spending budget, called the Overseas Contingency Operations (OCO) account, was intended to fund unexpected costs of our wars overseas. It’s not part of the Department of Defense’s base budget, so isn’t subject to the spending caps established by the Budget Control Act of 2011 to rein in out-of-control spending. Predictably, it has become a slush fund that allows a variety of Pentagon and Congressional pet projects to circumvent the spending caps. At a recent confirmation hearing, Senator Bob Corker (R-TN) called the fund “dishonest.” The subject of the hearing, President Trump's nominee to head the Office of Management and Budget (OMB) Representative Mick Mulvaney (R-SC), agreed with that assessment. OCO is so off track that the Senate Appropriations Committee, which is responsible for funding the government, directed the Secretary of Defense to show how OCO funds that are currently paying for “enduring requirements”—ongoing and predictable activities that should be paid for out of the base budget—could be migrated to the base budget. As then-Representative and now-Senator Chris Van Hollen (D-MD) pointed out, “It’s not a contingency if it’s forever.”

But a recent Government Accountability Office (GAO) report reveals that even though the Pentagon developed the required plan they refused to turn it over to Congress and to the public when it became clear Congress would not increase the Pentagon’s funding.

“The plan envisioned by the Administration would transition all enduring costs currently funded in the OCO budget to the base budget beginning in 2017 and ending by 2020,” the GAO wrote. “However, it was also asserted that the transition would not be possible if the sequester-level discretionary spending caps were to remain in place.” While the plan likely would have been another effort to advocate for more funds, it may also have included opportunities to improve cost controls and discipline. At the very least, it should be provided to Congress as requested.

Last year the Department of Defense acknowledged that about half of the $60 billion OCO account actually went to enduring requirements that should be funded in the base budget. The GAO’s review verified that the reality of how OCO is used no longer adheres to the defined purpose of the fund, which now pays for activities such as regular headquarter operations in the United States.

DoD estimates it has spent $1.6 trillion in OCO funds since 2001. But that number may not be accurate, the GAO found. The GAO also found the Pentagon’s financial systems were such a mess that “many legacy financial systems currently cannot distinguish between base and OCO obligations easily.” DoD’s inability to distinguish between major funding accounts does not bode well for it achieving auditability any time soon.

The GAO report makes clear yet again that the Pentagon’s and Congress's budget discipline over this account has totally broken down. Unfortunately the GAO focused its recommendation on updating the definition of OCO to reflect reality instead of challenging the propriety of that reality: the Pentagon’s and Congress’s abuse of the fund.

As a Member of the House, OMB Director nominee Mulvaney repeatedly challenged the abuse of OCO, including cosponsoring amendments to restrict these funds to overseas operations as this account was initially created to do. He reiterated his commitment in the confirmation process, saying that, “If confirmed, I hope to work with the Secretary of Defense to ensure that the OCO budget is strictly limited to the funding our military needs to conduct combat operations overseas, consistent with the troop levels needed to carry out the mission.”

OMB can decide what the Pentagon can and cannot include in OCO. One of the first key tests for the budgetary discipline promised by Mulvaney will be whether he allows the definition of OCO to continue to expand or restrains it to true overseas contingencies. If Mulvaney is really serious, maybe he’ll finally phase out OCO once and for all.