National Defense:

Problems With the U.S. Management of Foreign Currency Transactions for NATO Programs

ID-82-10: Published: Dec 16, 1981. Publicly Released: Dec 16, 1981.

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GAO examined allegations concerning the management and adequacy of internal auditing of foreign currency transactions in support of U.S. participation in the North Atlantic Treaty Organization (NATO) infrastructure and international military programs. GAO also reviewed actions taken by Army officials in Europe to correct foreign currency purchasing and timing of payments deficiencies.

The NATO/SHAPE(Supreme Headquarters Allied Powers Europe) Support Group which is responsible for financial administration of U.S. participation in NATO international programs greatly reduced the scope of its internal review program over the past 4 years. Since 1977, actions taken by support group management have left it with inadequate and ineffective internal review capability. The effectiveness of the internal review program was undermined by the Support Group management efforts to reduce staff, divert them to other offices, and assign them to operational duties. The current line of authority and command problem among the applicable support groups is a complex one which has an impact on the overall U.S. administration and management of the NATO infrastructure and international military programs. Some corrective actions have been taken on earlier GAO recommendations, but a problem persists with the timing of payments to NATO because adequate procedures have not been developed and followed. The prior report noted that the Support Group was accelerating or delaying NATO payments in an attempt to obtain favorable exchange rates. Speculative efforts such as this are contrary to the intent of Treasury regulations. Army and Support Group officials have agreed that the problems exist and have begun to correct them. In addition, GAO found considerable confusion among the major participants in the process over specific responsibilities, timing, information to be provided one another, and the definition and use of key financial dates.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Support Group Commander should ensure that the size, staff composition, and scope of audit activities of the internal review are sufficient to meet its current mission. The Commander should develop written procedures describing the roles and responsibilities of the Director for Resource Management and the Chief, Internal Review Division, to assist in defining and clarifying the relationship between the two. These procedures should be written to ensure that: (1) all functional areas within the purview of the Support Group's current mission receive adequate consideration in planning audit coverage by internal review; (2) the Chief of the Internal Review Division receives an appropriate level of access to and guidance from the Commander concerning the conduct of the internal review program; and (3) a working relationship is maintained between the Chief of the Internal Review Division and the Director for Resource Management.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army, Europe

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Support Group Commander should develop a well-defined policy on NATO call payments to delineate the procedures to be followed by all the participants in the process. These procedures should: (1) clearly delineate the intent of the Treasury regulations; (2) define responsibilities and actions to be taken by each participant; (3) specify the payment due date on the payment vouchers; (4) record the date a recipient account is credited; (5) establish a cycle for the NATO calls for all the participants to ensure that adequate time is provided; and (6) provide for sufficient documentation to make certain that the results of the NATO calls process are adequately recorded.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army, Europe

 

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