Security Assistance:

State and DOD Need to Assess How the Foreign Military Financing Program for Egypt Achieves U.S. Foreign Policy and Security Goals

GAO-06-437: Published: Apr 11, 2006. Publicly Released: May 12, 2006.

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Since 1979, Egypt has received about $60 billion in military and economic assistance with about $34 billion in the form of foreign military financing (FMF) grants that enable Egypt to purchase U.S.-manufactured military goods and services. In this report, GAO (1) describes the types and amounts of FMF assistance provided to Egypt; (2) assesses the financing arrangements used to provide FMF assistance to Egypt; and (3) evaluates how the U.S. assesses the program's contribution to U.S. foreign policy and security goals.

Egypt is currently among the largest recipients of U.S. foreign assistance, along with Israel, Afghanistan, and Iraq. Egypt has received about $1.3 billion annually in U.S. foreign military financing (FMF) assistance and has purchased a variety of U.S.-manufactured military goods and services such as Apache helicopters, F-16 aircraft, and M1A1 tanks, as well as the training and maintenance to support these systems. The United States has provided Egypt with FMF assistance through a statutory cash flow financing arrangement that permits flexibility in how Egypt acquires defense goods and services from the United States. In the past, the Defense Security Cooperation Agency (DSCA) accumulated large undisbursed balances in this program. Because the flexibilities of cash flow financing permit Egypt to pay for its purchases over time, Egypt currently has agreements for U.S. defense articles and services worth over $2 billion--some of which are not due for full payment until 2011. The Departments of State (State) and Defense (DOD) have not conducted an assessment to identify the risks and impacts of a potential shift in FMF funding. Officials and many experts assert that the FMF program to Egypt supports U.S. foreign policy and security goals; however, State and DOD do not assess how the program specifically contributes to these goals. U.S. and Egyptian officials cited examples of Egypt's support for U.S. interests, such as maintaining Egyptian-Israeli peace and providing access to the Suez Canal and Egyptian airspace. DOD has not determined how it will measure progress in achieving key goals such as interoperability and modernizing Egypt's military. For example, the U.S. Central Command, the responsible military authority, defines modernization as the ratio of U.S.-to-Soviet equipment in Egypt's inventory and does not include other potentially relevant factors, such as readiness or military capabilities. Achieving interoperability in Egypt is complicated by the lack of a common definition of interoperability and limitations on some types of sensitive equipment transfers. Given the longevity and magnitude of FMF assistance to Egypt, evaluating the degree to which the program meets its goals would be important information for congressional oversight, particularly as Congress assesses the balance between economic and military assistance to Egypt as well as the impact on U.S. foreign policy interests.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: Given the longevity of the FMF program, its relatively high appropriation levels, the strategic importance of Egypt in the Middle East, and congressional interest in assessing the balance between economic and military assistance provided to Egypt, the Secretaries of State and Defense should conduct periodic program-level evaluations of the FMF program to Egypt. The United States should define specific objectives for the goals, and identify appropriate indicators that would demonstrate progress toward achieving those objectives. Specifically, the agencies should define the current and desired levels of modernization and interoperability the United States would like to achieve. This should include establishing benchmarks and targets for these and other goals.

    Agency Affected: Department of State

    Status: Closed - Implemented

    Comments: According to a State official, State set up the Office of the Director of U.S. Foreign Assistance (F) in 2006. Since then, the agency has implemented a process to 1) establish goals and objectives for all foreign assistance and 2) evaluate progress toward those goals. State undertakes these initiatives through operational plans and performance plans. GAO review of the 2008 Performance Plan, 2009 Operational Plan, 2009 Performance Plan, and 2010 Operational Plan indicates that State has developed some measurable "indicators", goals for those indicators for the next two years, and performance on the indicators for the current year.

    Recommendation: Given the longevity of the FMF program, its relatively high appropriation levels, the strategic importance of Egypt in the Middle East, and congressional interest in assessing the balance between economic and military assistance provided to Egypt, the Secretaries of State and Defense should conduct an assessment of the impact of potential shifts in future appropriations on the Egypt FMF program. This would include identifying risks, planning a course of action for mitigating those risks, and developing mechanisms to anticipate, identify, and react to change.

    Agency Affected: Department of State

    Status: Closed - Not Implemented

    Comments: In response to our draft, State did not indicate whether it concurred with this recommendation. State is not aware of any plans to request lower funding levels in the future and, therefore, appears to consider it unnecessary to assess the impact of potential shifts in future appropriation on the Egypt FMF program.

    Recommendation: Given the longevity of the FMF program, its relatively high appropriation levels, the strategic importance of Egypt in the Middle East, and congressional interest in assessing the balance between economic and military assistance provided to Egypt, the Secretaries of State and Defense should conduct an assessment of the impact of potential shifts in future appropriations on the Egypt FMF program. This would include identifying risks, planning a course of action for mitigating those risks, and developing mechanisms to anticipate, identify, and react to change.

    Agency Affected: Department of Defense

    Status: Closed - Not Implemented

    Comments: DOD concurred with our recommendations but stated that GAO should direct them primarily to the Secretary of State. Furthermore, DOD has noted that decreases in future appropriations for the Egyptian FMF program could significantly affect the US ability to further national security interests, and, therefore, DoD consistently advocates full appropriation of the $1.3B annual FMF request for Egypt.

    Recommendation: Given the longevity of the FMF program, its relatively high appropriation levels, the strategic importance of Egypt in the Middle East, and congressional interest in assessing the balance between economic and military assistance provided to Egypt, the Secretaries of State and Defense should conduct periodic program-level evaluations of the FMF program to Egypt. The United States should define specific objectives for the goals, and identify appropriate indicators that would demonstrate progress toward achieving those objectives. Specifically, the agencies should define the current and desired levels of modernization and interoperability the United States would like to achieve. This should include establishing benchmarks and targets for these and other goals.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD concurred with our recommendations but stated that GAO should direct them primarily to the Secretary of State. The agency planned to assist and work with the Department of State in implementing this recommendation. In February 2007, DOD noted that State had developed the Foreign Assistance Coordination and Tracking System and is collecting performance and budget data from Embassy operational plans. The plans noted in the Department of State's agency action above were generated using this (FACTS) system. USCENTCOM has developed a spreadsheet showing how U.S. and Egyptian strategies and objectives are met through Egyptian FMF-funded programs, including monitoring of programs that further goals for both interoperability and modernization.

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