Defense 1 Pentagon

Defense: Foreign Military Sales Administrative Account (2019-19)

Congress could enhance federal revenue by at least tens of millions of dollars annually through expanding the definition of allowable expenses authorized to be covered by the Foreign Military Sales administrative account, thereby likely reducing the need to cover these expenses with other appropriated funds.

Year Identified: 2019
Area Number: 19
Area Type: Cost Savings & Revenue Enhancement

1 Total Action(s)

Action 1
Partially Addressed

Congress should consider redefining what can be considered an allowable expense to be charged from the administrative account.

Last Updated
August 31, 2021

While some legislative action has been taken toward redefining what can be charged from the Foreign Military Sales (FMS) administrative account, as GAO recommended in May 2018, no related legislation has yet been enacted as of July 2021. In July 2019, the House passed the National Defense Authorization Act for Fiscal Year 2020 (H.R. 2500), which in Sections 1282(e) and 1283(a)-(b) included provisions responsive to this recommendation. Specifically, Section 1282(e) would have amended the Arms Export Control Act to remove an exclusion from the definition of administrative expenses related to military pay and unfunded civilian retirement and other benefits. Sections 1283(a) and (b) would have required the Department of Defense (DOD) to review and report to Congress on options for expanding the use of FMS administrative fees. However, the Senate version of this legislation was enacted without these provisions included.

Two additional bills that would have addressed this recommendation were referred to committee during the 116th Congress and did not pass before the end of the session. The Return Expenses Paid and Yielded Act, which was introduced in the House in February 2019, included the same provisions as H.R. 2500. Also, in July 2019, the Acting on the Annual Duplication Report Act of 2019 was introduced in the Senate, which would have required DOD to assess and report on (1) any expenses incurred by the U.S. government in operating the FMS program that are not paid for by the administrative fee, (2) their estimated annual cost, (3) the costs and benefits of funding such expenses, and (4) any legislative changes needed to allow the FMS administrative fee to pay for such expenses.

GAO cannot predict the exact value of the additional expenses that would be covered through any such provisions because it is unclear how Congress may redefine what is considered an administrative expense. However, GAO estimates redefining such expenses could enhance federal revenue by at least tens of millions of dollars annually.

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