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Millions in Losses Continue on Defense Stock Fund Sales to Foreign Customers

AFMD-81-62 Published: Sep 10, 1981. Publicly Released: Oct 02, 1981.
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Highlights

In response to a congressional request, GAO reviewed the Department of Defense's (DOD) actions on previous GAO recommendations for improving the accounting and financial management of the foreign military sales program. The review focused on the actions taken by DOD to revise and implement the policies, procedures, and accounting systems used to price sales of stock fund items to foreign customers. Specifically, the review discussed whether prices billed to foreign customers for stock fund items were adequate to replace the items in DOD inventories and thus avoid DOD subsidization of the foreign military sales program.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense The Secretary of Defense should require that a more adequate method of estimating replacement cost be used, including adopting a more realistic inflation index.
Closed – Implemented
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Department of Defense The Secretary of Defense should require that a more adequate method of estimating replacement cost be used, including compounding inflation factors when computing estimated replacement cost for those items purchased more than 1 year prior to their sale.
Closed – Not Implemented
DOD has increased the replacement factors to an extent that the recommendation is no longer valid.
Department of Defense The Secretary of Defense should require that a more adequate method of estimating replacement cost be used, including updating foreign sales prices more frequently.
Closed – Not Implemented
DOD has increased the replacement factors to an extent that the recommendation is no longer necessary.
Department of Defense The Secretary of Defense should direct the quality control unit recently established at the Security Assistance and Accounting Center to make sure that DOD components adequately and uniformly implement revised estimating procedures.
Closed – Implemented
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Department of Defense The Secretary of Defense should direct the military services to make a reasonable attempt to recover from foreign governments the undercharges in sales from the stock fund resulting from the failure to charge a reasonable cost as required by law.
Closed – Not Implemented
DOD has increased replacement factors for stock fund sales. DOD did not agree to recover past undercharges. Therefore, the recommendation is no longer valid.
See All 5 Recommendations

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Topics

National Defense
Budget cutsDefense budgetsDefense cost controlFederal agency accounting systemsFinancial managementForeign military sales costsInventory controlMilitary inventoriesProgram managementMilitary forces