El Salvador:

Transfers of Military Assistance Fuels

NSIAD-89-186: Published: Aug 29, 1989. Publicly Released: Aug 29, 1989.

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Pursuant to a congressional request, GAO reviewed the Department of State's efforts to investigate: (1) the propriety of fuel purchases with U.S. military assistance program (MAP) funds for El Salvador and fuel transfers to aircrews involved in a supply operation supporting the Nicaraguan Contras; and (2) whether any U.S. personnel approved or were aware of the transfers.

GAO found that: (1) El Salvador transferred MAP-funded fuel to third parties without U.S. government consent; (2) the transfers involved 61,107 gallons of aviation gas and commercial jet fuel sold to aircrews and pilots involved in the Nicaraguan supply operation and an unknown quantity of fuel provided to private and foreign government parties; (3) the transfers violated sales agreements between the United States and El Salvador and required reporting to Congress under the Arms Export Control Act; (4) the State investigation focused only on aviation gas because there were no allegations of any other type of fuel transfers; (5) although State did not question anyone with direct knowledge of the refuelling activities and concluded that no substantial diversion had occurred, it could have determined that the transfers had occurred if it had expanded its inquiry; (6) penalties for third-party transfers were not applicable to the unauthorized MAP-funded fuel transfers, since the Salvadoran government received MAP grant funds, rather than credits; (7) from 1985 to 1988, El Salvador transferred about 942,509 gallons of MAP-funded commercial jet fuel to the U.S government for refuelling U.S. military aircraft and received about $691,732 in direct payments; and (8) due to concern about the propriety of direct payments to El Salvador and lack of U.S. control over the use of the funds, implementation of a new credit system resulted in the return of sales proceeds to a holding account for El Salvador in the Foreign Military Sales (FMS) trust fund.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress has not taken action to amend the act and GAO discussions with the requestor and various staff indicated that no action will be taken.

    Matter: If Congress wishes to include the revocation of eligibility for MAP grant funds among the specific penalties that may be triggered under the Arms Export Control Act by a substantial violation involving an unauthorized third-party transfer, it will need to amend the act.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Secretary reported the transfers to Congress on June 30, 1989, and also arranged for the Salvadoran Air Force to reimburse the U.S. government in-kind by providing about $100,000 of aviation gas without charge to U.S. military planes.

    Recommendation: The Secretary of State should report MAP-funded fuel transfers in 1986 as a violation of the 1986 and 1988 sales agreements under section 3(e) of the Arms Export Control Act.

    Agency Affected: Department of State

  2. Status: Closed - Implemented

    Comments: DOD established an account for proceeds from sales of MAP-funded items, but a subsequent GAO review found that El Salvador used the account for commercial purchases without U.S. oversight. On December 11, 1989, DOD established another account for these proceeds to be used for FMS purchases, and transferred remaining funds into the second account.

    Recommendation: The Secretary of Defense should take steps to ensure that proceeds from the sale of MAP-funded items will normally be returned to the FMS trust fund account of the recipient country.

    Agency Affected: Department of Defense


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