The Department Of Defense Can Improve Its Free-Asset Management

LCD-76-414: Published: Mar 3, 1976. Publicly Released: Mar 3, 1976.

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Pursuant to a congressional request, GAO provided information on the free-asset amounts available to the Department of Defense (DOD).

GAO noted that: (1) free assets accrue to DOD as receipts from sales of equipment not requiring in-kind inventory replacement; (2) the majority of free assets accrue from foreign military sales; (3) DOD gives to Congress estimates of free-asset funds which are used in the budget process to partially fund defense programs; (4) under this procedure: (a) free assets realized (as estimated) are used as directed in the budget; (b) failure of the military departments to realize the estimated free assets reduces the amounts available for procurement of equipment; and (c) the services can, with congressional oversight, apply amounts realized in excess of the estimates to other defense programs; (5) historically, the free-asset estimates given to Congress have been low; (6) if initial estimates were closer to the actual amounts of the free assets realized, funds initially appropriated for defense programs could be further reduced; (7) almost $1.1 billion in free assets were generated in DOD's procurement accounts during fiscal years 1972-1975; $66 million additional in free assets were generated in research and development appropriations during fiscal years 1974-1975; (8) because DOD has not provided the military departments with a standard definition of free assets, the services have developed their own definitions; (9) the Army has only limited control over its free-asset generations, because of problems concerning management of its customer-order program in general; and (10) some of these problems have impaired congressional oversight regarding the application of free assets.

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