Defense Continues To Subsidize Sales of Secondary Items to Foreign Governments Because of Poor Pricing Policies

GAO provided a supplement to its report evaluating recent Department of Defense (DOD) actions to improve its financial management of the foreign military sales program and to reduce its budget by eliminating subsidies to the program. That review focused on the actions taken by DOD to revise and implement the policies, procedures, and accounting systems used to price sales of secondary items to foreign customers; GAO found that DOD continued to make large subsidies to the foreign military sales program because prices charged for secondary items sold from DOD inventories were not sufficient to replace the items. Although GAO had reported this situation 3 years ago, DOD had not taken adequate corrective actions at the time of the report.