Foreign Military Sales:

Redirection of Accounting Improvement Efforts Is Appropriate

AFMD-88-75: Published: Sep 15, 1988. Publicly Released: Sep 15, 1988.

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Jeffrey C. Steinhoff
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Pursuant to a congressional request, GAO reviewed Department of Defense (DOD) efforts to correct long-standing accounting problems in its Foreign Military Sales (FMS) Program.

GAO found that, since March 1988, DOD has: (1) terminated the current central FMS accounting system development effort, citing its excessive costs, schedule delays, and unsatisfactory testing results; (2) transferred responsibility for central FMS accounting from the Defense Security Assistance Agency (DSAA) to the Air Force for development, implementation, and operation of a new system; (3) directed the establishment of a new FMS trust fund by October 1989; (4) directed DSAA to reconcile balances in both the existing and new FMS trust funds; and (5) not clarified the role of the Reconciliation and Case Closure Board in this reorganized effort. GAO believes that, to improve FMS accounting controls and effectively implement its latest initiatives, DOD needs to implement accounting controls to ensure that: (1) the old and new trust funds do not become commingled; (2) military departments transmit and record accurate and complete data in the central FMS system; and (3) central records contain sufficient information to facilitate precise identification and timely resolution of imbalances.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The Air Force has been assigned responsibility for developing and implementing a new accounting system. The reconciliation of the accounting records is an ongoing process involving the Army, Navy, and Air Force, the Security Assistance Advisory Council, and DSAA. Also, DOD clarified the role of the Reconciliation and Case Closures Board.

    Recommendation: To ensure that reconciliations are an integral part of routine FMS accounting activities and to ensure that both routine and nonroutine reconciliation responsibilities are clearly defined, the Secretary of Defense should: (1) assign full FMS accounting responsibility, including reconciliation, to the Air Force; and (2) clarify the role of the Reconciliation and Case Closure Board in the reconciliation process.

    Agency Affected: Department of Defense


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