National Defense:

Budget Authority for Foreign Military Sales Is Substantially Understated

PAD-78-72: Published: Jul 27, 1978. Publicly Released: Jul 27, 1978.

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The Office of Management and Budget (OMB) and the Department of Defense (DOD) recently changed the method of recording budget authority within the foreign military sales (FMS) trust fund. Before fiscal year (FY) 1977, each year's FMS trust fund budget authority corresponded to the dollar total of FMS new acceptances. Under the new procedure, the budget authority for a given year is made to match the portion of acceptances, old and new, which result in FMS trust fund implementing obligations during the year.

The budget authority for FMS for FY 1977 was understated by $2.6 billion. The change introduced a significant element of inconsistency into FMS trust fund procedures and reporting without achieving offsetting improvements, and it is contrary to the usual meaning of budget authority. The change eliminates from the budget totals and schedules reporting on the maximum potential FMS obligations which the executive agencies may incur as a result of the new authority that new acceptances create. It also eliminates standard reporting on FMS unobligated acceptances which is important for evaluating budget and program execution. The budget authority change is contrary to sound budgetary policy and dilutes appropriate congressional budgetary control.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: When we determine what steps the Congress has taken, we will provide updated information.

    Matter: The congressional committees on the budget should require that the calculation of FMS trust fund budget authority be based on total, new acceptances. Congress should adopt additional budgetary controls over the FMS trust fund activities. It should reconsider the degree of control it has delegated and enact legislation to limit total, new FMS acceptances for a FY to the amounts specified in annual authorizing and/or appropriation acts.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

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

    Recommendation: The Director, OMB, should require that the calculation of FMS trust fund budget authority be based on total, new acceptances.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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