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

FGMSD-80-47: Published: Jun 3, 1980. Publicly Released: Jun 10, 1980.

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A report was undertaken on the accounting differences between cash balances reported to foreign customers by the Department of Defense (DOD) and cash balances carried in those customer's trust fund accounts for all services, and on financial management problems DOD experienced in the administration of the Foreign Military Sales Program.

Specifically, GAO found that as of September 30, 1979, detailed accounting records for foreign military sales customers differed by $1.5 billion from trust fund records showing cash on hand. After considering normal processing delays, system deficiencies, and identifiable accounting errors, unexplained differences were still about $390 million. GAO was unable to determine the cause of these differences because DOD activities have not routinely reconciled all key accounting records. Unless and until these differences are explained, the correct cash balances held in trust for 97 foreign customers cannot be determined.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Defense Audit Service made an attempt to perform a reconciliation of the Trust Fund account and failed because the system lacked sufficient valid data. Therefore, the recommendation is no longer valid.

    Recommendation: The Secretary of Defense should direct the military departments and the Security Assistance Accounting Center to establish adequate control over customer trust funds by identifying and correcting existing differences in trust fund and supporting detailed sales case records.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: The Defense Audit Service performed a review and found that reconciliation was not feasible. Accordingly, the recommendation is being dropped.

    Recommendation: The Secretary of Defense should direct the military departments and the Security Assistance Accounting Center to establish adequate control over customer trust funds by enforcing Defense policies requiring reconciliation of key accounting records so that unexplained differences will not arise in the future.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: The House Appropriations Committee, Subcommittee on Defense, has directed DOD to pursue separate, as opposed to centralized, systems for foreign military sales. Accordingly, the recommendation is being dropped.

    Recommendation: The Secretary of Defense should centralize foreign military sales accounting and disbursing as the most viable alternative to finally resolve Defense's foreign military sales accounting and financial management problems.

    Agency Affected: Department of Defense

 

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