Design and Operation of Special Defense Acquisition Fund Can Be Improved

NSIAD-85-18: Published: Jan 15, 1985. Publicly Released: Jan 15, 1985.

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In response to a congressional request, GAO reviewed the management of Special Defense Acquisition Fund (SDAF) resources to: (1) determine whether SDAF has been meeting its objective of decreasing the delivery time needed to provide defense articles to foreign recipients under the Foreign Military Sales program; and (2) identify management and legislative policy issues that need to be addressed.

GAO found that, after the first 2 years of operation, the SDAF sales experience was quite limited and, by placing SDAF purchase orders 1 to 2 years before signing sales agreements, SDAF reduced the delivery time for these sales. The effectiveness of SDAF depends on the Defense Security Assistance Agency's (DSAA) ability to predict foreign demand, because SDAF appropriations are made available for obligation on a 1-year basis and can only be obligated in the year they are appropriated. GAO found that many problems could be eliminated by making appropriations available for 3 years. When SDAF sales are made its inventory declines; however, DSAA must wait until a subsequent appropriation act is passed to use these sales proceeds and, currently, the size of the SDAF annual appropriation is limited to the difference between SDAF equity and the authorization ceiling. When an item is withdrawn from the inventory, military readiness is often degraded while the services wait for inventories to be replenished. While SDAF can only purchase equipment that is releasable to foreign countries at the time the contract is awarded, GAO believes that the releasability predictions are speculative because decisions on releasability take place subsequent to the procurement and require the approval of several different departments. There are also risks that, in using SDAF to purchase older generations of equipment, SDAF may have to sell the unused equipment to U.S. services, even though it is out-of-date for U.S. use.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Agency requested a 3-year obligation authority consistent with this recommendation; however, Congress declined to provide the authority.

    Matter: Congress should consider allowing 3-year obligation authority for amounts made available to SDAF through appropriation accounts.

  2. Status: Closed - Implemented

    Comments: P.L. 99-83, August 8, 1985, authorized the use of sales revenues by the agency for additional program procurements.

    Matter: Congress should consider allowing SDAF to obligate the proceeds of a sale in the year in which the sale is made, stipulating the amount to be made available in an annual appropriation act.

  3. Status: Closed - Not Implemented

    Comments: In fiscal year 1986, Congress rejected the Administration's proposal to amend the Arms Export Control Act to allow DSAA to purchase advanced systems not releasable to foreign countries.

    Matter: Congress should consider amending the Arms Export Control Act to allow DSAA to purchase advanced systems not releasable to foreign countries.


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