Correct Balance of Navy's Foreign Military Sales Trust Fund Unknown

FGMSD-79-2: Published: Nov 15, 1978. Publicly Released: Nov 15, 1978.

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The Navy's foreign military sales (FMS) trust fund account is used to hold and account for cash collected from foreign countries until it is disbursed. The Department of the Treasury maintains trust fund records, but balances on those records result from data reported to it by the services. Cash collections and disbursements are accounted for in detailed sales case accounting records which are maintained by the Defense Department's Security Assistance Accounting Center. The Center is also responsible for managing the trust fund.

Problems in the Navy's accounting and reporting of FMS disbursements and collections were disclosed when the sales case accounting records were transferred to the Center. The Navy was directed to reconcile the cash balance on the trust fund records with the cash balance shown on official detailed sales case accounting records. Despite more than a year's effort involving thousands of staffdays, the Navy has not been able to reconcile these balances. As a result, the correct amount of cash being held for foreign countries is not known. Some of the adjustments made by the Navy were in error or were not adequately supported. Differences between the Treasury trust fund and sales case accounting records have continued to increase, and, at June 1, 1978, totaled $554 million. Under the Navy's current system, there will continue to be a significant amount of transactions in-float at any time, and, therefore, there will continue to be differences in the balances.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should have the Secretary of the Navy: direct that prompt action be taken to determine the trust fund cash balance that can be documented for each foreign country and require that Treasury records and sales case accounting records be adjusted accordingly; and insure that procedures are implemented to identify transactions in-float so that in the future the Treasury trust fund balance can be regularly reconciled to sales case accounting records. The Secretary of Defense should direct the Defense Audit Service to review and report to him whether: all adjustments to Treasury trust fund and sales case accounting records are valid, the Treasury trust fund and sales case accounting record balances have been effectively reconciled and are accurate, and procedures have been implemented to enable regular reconciliations of the two sets of records in the future.

    Agency Affected:

 

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