DOD's Financial Management of the Foreign Military Sales Program

T-AFMD-87-12: Published: Jun 4, 1987. Publicly Released: Jun 4, 1987.

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GAO discussed the Department of Defense's (DOD) current efforts to improve Foreign Military Sales (FMS) program accounting. GAO found that: (1) DOD lacks control over trust fund cash; (2) the Security Assistance Accounting Center (SAAC) spent hundreds of millions of dollars more than it reportedly delivered and billed to customer countries; (3) DOD is unable to reconcile imbalances between trust fund cash and billing records, or to precisely identify discrepancies; and (4) DOD is unable to ensure that FMS cases are financed with advance customer deposits, as the Arms Export Control Act requires. GAO noted that primary causes of DOD problems with control over trust fund cash are: (1) accounting and internal control deficiencies at both SAAC and the military services; (2) the SAAC accounting system's lack of internal controls to identify or prevent errors and ensure that data is submitted properly; and (3) case managers' failure to adjust customer payment schedules to reflect actual case progress. GAO believes that DOD: (1) failure to gain control over trust fund cash could eventually result in expenditures of federal government funds to cover DOD disbursements of customer funds; and (2) delays in sales case closures have led to customer dissatisfaction with DOD financial management of the FMS program. GAO supports DOD efforts to: (1) implement a comprehensive revision of FMS accounting methods, which involves the development of a new centralized system and the operation of interfacing systems by the military services; and (2) establish a board to address discrepancies in existing records.

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