Defense Department's Management of Property Leased to Foreign Governments Is Still Inadequate | U.S. GAO

Highlights

GAO reviewed leases of defense property to foreign governments, in conjunction with a 1981 report, to determine whether the leases complied with the provisions of the Arms Export Control Act (AECA).

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Department of Defense	The Secretary of Defense should require action to be taken to resolve the deficiencies found in leasing procedures.	Closed – Implemented The Military Assistance and Sales Manual (MASM) has been revised to improve management and fiscal controls, and program accountability has been placed within DSAA.
Department of Defense	The Secretary of Defense should require that the Defense Security Assistance Agency (DSAA) ensure that lease notification documents sent to Congress contain all the information required by chapter 6.	Closed – Implemented DSAA officials stated that they would carefully review lease notifications to ensure that all required information is included.
Department of Defense	The Secretary of Defense should require that the Security Assistance Accounting Center (SAAC) program the automated accounting system used to process leases to ensure that rent payments are credited to the proper Treasury account, to provide for easy identification of all leases, and to automatically generate data for periodic financial reports on leases to DSAA.	Closed – Implemented SAAC has published standard operating instructions for financial management of leases. The instructions include a requirement for quarterly reports to DSAA on the financial status of all leases.
Department of Defense	The Secretary of Defense should require that transportation cost estimates be provided to DSAA and billed at the beginning of the lease.	Closed – Implemented SAAC instructions include procedures for ensuring that transportation cost be billed and collected.
Department of Defense	The Secretary of Defense should require that rent payment schedules conform to the automated quarterly billing cycle used by SAAC.	Closed – Implemented SAAC integrated lease billings with its system for billing foreign military sales customers.
Department of Defense	The Secretary of Defense should require that DSAA review all current leases to ensure that appropriate rents have been collected and credited to the Treasury Miscellaneous Receipts Account.	Closed – Implemented DOD Inspector General officials report that, based on the review of leases, $266,142 was transferred to the Treasury Miscellaneous Receipts Account and that $266,000 in lease undercharges were collected.
Department of Defense	The Secretary of Defense should require that DSAA instruct SAAC to add all packaging, crating, handling, and transportation costs to the amounts due to all current leases during the next billing cycle. Costs which have not been reported should be obtained by DSAA and reported to SAAC.	Closed – Implemented The new SAAC procedures include instructions for collecting these charges. A review of current leases resulted in billing for $21,475 in previously unreported charges.
Department of Defense	The Secretary of Defense should require that DSAA instruct the military advisory groups to perform periodic reviews of lessee country use of leased property and report the review results to DSAA at least annually.	Closed – Implemented The new MASM instructions include the requirement that military advisory groups report annually on the condition and use of leased property.
Department of Defense	The Secretary of Defense should require that DSAA ensure that control, management, accountability, and overall oversight for all leases to foreign governments is established, whether they were implemented under the authority of 10 U.S.C. 2667, separate legislation, or under chapter 6 of the AECA.	Closed – Implemented DSAA has been assigned oversight responsibility for all leases.
Department of Defense	The Secretary of Defense should require that DSAA amend the Military Assistance and Sales Manual to require that all ship leases be made under the authority of chapter 6.	Closed – Implemented Based on GAO recommendations, Congress enacted the International Security and Development Cooperation Act of 1985, which required that any lease or loan of a ship shall be made only in accordance with provisions of AECA chapter 6.
Department of Defense	The Secretary of Defense should require that DSAA work with the military departments, military advisory groups, the State Department, U.S. Embassies overseas, and Congress to resolve the problem of unreturned property.	Closed – Implemented The DOD Inspector General has been following this issue for over 2 years with little success but plans to continue monitoring efforts to resolve the problem. Since the problem has little current impact, it would not be beneficial for GAO to also monitor efforts to resolve the issue.

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Auditing and Financial Management

Congressional oversightDefense cost controlFederal property managementForeign governmentsInternational relationsLand leasesLease terminationLeasing policiesMonitoringReporting requirements