Israel:

U.S. Military Aid Spent In-Country

NSIAD-91-169: Published: May 23, 1991. Publicly Released: May 23, 1991.

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Pursuant to a congressional request, GAO reviewed Israel's expenditures for U.S. military aid offshore procurements to determine: (1) whether the Defense Security Assistance Agency (DSAA) observed the legislative requirements governing those procurements; and (2) the effects of those procurements on Israel's military budget and domestic economy.

GAO found that: (1) Israel paid its contractors in local currency, and DSAA reimbursed it for eligible costs in hard currency; (2) DSAA did not observe the legislative requirement that Israel use offshore procurement funds only for the development and production of advanced weapon systems, since it reimbursed Israel for fuel, maintenance, and ammunition costs; (3) DSAA did not require Israel to account for the hard currency provided for offshore procurements; (4) Israel was spending an increasing amount of U.S. military aid outside the United States on offshore procurements; (5) legislation did not define advanced weapon systems and DSAA permitted Israel to determine what procurements were covered; and (6) DSAA lack of oversight on Israel's use of hard currency provided from offshore procurements appeared inconsistent with other administration oversight efforts.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress dropped the restriction on funding advanced weapon systems only. The change gives DSAA greater latitude in approving Israeli projects for U.S. financing. If legislation is passed, the recommendation will no longer apply due to alternative action.

    Matter: Congress may wish to reexamine the primary purpose of offshore procurements. If the purpose of offshore procurements is to aid Israel in researching, developing, and procuring advanced weapons, the language in future appropriations need not change.

  2. Status: Closed - Not Implemented

    Comments: DOD supports the GAO recommendation, but it appears that Congress does not intend to take alternative action.

    Matter: Congress may wish to reexamine the primary purpose of offshore procurements. If the purpose of offshore procurements is to support Israel's economy, the funds should be appropriated as part of the Economic Support Fund, eliminating the Department of Defense's (DOD) involvement in a cash transfer. Under this option, the Foreign Military Financing portion of Israel's assistance would decline while the Economic Support Fund level would increase by the transferred amount.

  3. Status: Closed - Not Implemented

    Comments: DOD supports the GAO recommendation, but it appears that Congress does not intend to take alternative action.

    Matter: Congress may wish to reexamine the primary purpose of offshore procurements. If the purpose of military aid in general is to maximize Israel's defense budget, offshore procurements should be eliminated or phased out, and Israel should be required to spend all Foreign Military Financing in the United States. Offshore procurements could still be allowed for specific projects either by DSAA, through the Arms Export Control Act, or by specific congressional action. Congress could designate only certain offshore defense projects for full or partial funding, as it did with the Lavi aircraft. Under this option, no change would take place in the mix of assistance Israel currently receives.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: This recommendation will no longer be applicable if the Senate-proposed amendment to the fiscal year (FY) 1992 DOD authorization legislation is enacted. Congress changed applicable law.

    Recommendation: Unless Congress changes the law governing offshore procurements for Israel, the Secretary of Defense should direct DSAA to define advanced weapon systems and limit funding to these systems.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: This recommendation will no longer be applicable if the Senate-proposed amendment to the FY 1992 DOD authorization legislation is enacted. GAO is planning a future follow-up review.

    Recommendation: Unless Congress changes the law governing offshore procurements for Israel, the Secretary of Defense should direct DSAA to take a more active role in reviewing and approving projects for U.S. financing.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: This recommendation will no longer be applicable if the Senate-proposed amendment to the FY 1992 DOD authorization legislation is enacted. GAO is planning a future follow-up review.

    Recommendation: Unless Congress changes the law governing offshore procurements for Israel, the Secretary of Defense should direct DSAA to require Israel to account for the hard currency provided by offshore procurement.

    Agency Affected: Department of Defense

 

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