Foreign Military Sales: Defense Efforts Are Improving Program Accounting

Published by the Government Accountability Office on 1990-01-17.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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General Accounting Office
Washington, D.C. 20648

Accounting and Financial
Management Division

January 17,199O

The Honorable Nicholas Mavroules
Chairman, Subcommitteeon Investigations
Committee on Armed Services
Houseof Representatives
Dear Mr. Chairman:
Our previous report entitled, Foreign Military Sales:Redirection of
Accounting hprOVeIYN?nt Efforts Is Appropriate (GAOjAFMD-88-76, Sep-
tember 15, 1988), concurred with the Department of Defense’s(DO?)
proposed efforts to addresslong-standing foreign military sales(FMS)
accounting problems. Theseefforts included the development and imple-
mentation of a new central FMS accounting and billing system and the
establishment of a secondFMStrust fund. In responseto that report, the
former SubcommitteeChairman requested that we evaluate DOD'S prog-
ress in implementing these improvements.

After meeting with your office, we agreed to take a three-step approach
in responding to this request. First, we agreedto evaluate (1) DOD'S
efforts to enhancethe current FMS accounting and billing system,
(2) DOD'S progress in resolving the differences between billing and dis-
bursement records in the current trust fund, and (3) DOD'S planned
implementation of a secondFMStrust fund to isolate the errors associ-
ated with existing salesand provide a “clean slate” for newly initiated
sales.Second,we agreedto evaluate the Department of the Air Force’s
progress in developing a new FMS accounting and billing system. Third,
we agreed to monitor this system development effort and periodically
brief the Subcommittee staff. This report discussesthe first of these
efforts. Subsequentreports will be issued to respond to the other seg-
ments of your request.
We found that DOD has implemented two system enhancements,referred
to as caselevel disbursements and positive transaction control, to
(1) facilitate the identification and timely resolution of differences
between the disbursement and billing records associatedwith FMScases
and (2) help ensure the accurate and complete recording of FMSdata.
The Air Force Audit Agency is currently testing these system enhance-
ments. The Air Force will need to correct any system weaknessesidenti-
fied through the testing.

Page 1                                   GAO/AFMD-90-18Foreign bfilitary Sales
-              We also found that DOD has made progress in reconciling the differences
               between disbursement and billing records. The reconciliation efforts
               have reduced the net differences from $229 million in December1987 to
               $67 million as of August 1989. In June 1989, the Deputy Secretary of
               Defensepostponed the implementation of the secondFMS trust fund
               becausethe planned implementation would not have segregatedactivity
               associatedwith new FMS casesfrom those in the existing trust fund. The
               Air Force was directed to develop a plan to establish a secondtrust fund
               independent of the existing trust fund. The Air Force submitted its plan
               to the Deputy Secretary of Defenseon November 17,1989.

               The Arms Export Control Act (22 USC. section 2751 et seq.) gives the
    ckground   President authority to sell defensearticles and servicesto eligible for-
               eign countries and international organizations, generally at no profit or
               loss to the US, government. The act generally requires foreign custom-
               ers to pay, in advance,amounts sufficient to cover costs associatedwith
               their sales agreements.DOD then usesthe funds, held in trust by the
               Department of the Treasury, to pay private contractors and to reim-
               burse DOD activities for the cost of executing and administering FMS
               As of September30,1989, there were over 17,000 open FMS sales agree-
               ments-commonly referred to as salescases-valued at about $156 bil-
               lion.’ This included undelivered goodsand servicesvalued at around
               $62 billion, For fiscal year 1989, new orders totaled approximately
               $10.6 billion.
               The DefenseSecurity AssistanceAgency (DsAA) has overall responsibil-
               ity for administering the FMSprogram. Generally, the Army, Navy, and
               Air Force execute salescases.The military servicesreport detailed dis-
               bursing and accounting data to a central activity-the Security Assis-
               tance Accounting Center (w)-which       maintains the records of each
               country’s trust fund balance and issuesperiodic statements to foreign
               customers summarizing amounts charged to their salescases.
               For more than 10 years, GAO and DOD auditors have reported major
               accounting and internal control weaknessesimpairing DOD'S ability to
               properly managethe FMS trust fund and provide accurate statements to

               ‘These 17,000FMScasesare designatedopenbecauseportions of their transactionsare incomplete;
               that is, delivery of materiel,performanceof services,completionof financial transactions,or render-
               ing of the final statementof accountshas not occurred

               Page 2                                                  GAO/AFMD-90-18Foreign Military Sales
/       B-204400

        customers, These weaknessesincluded (1) inadequate internal controls
        over the accuracy of data the military departments submit to the central
        accounting system maintained by WACand (2) an inability to reconcile
        country level trust fund balanceswith the detailed balance of each
        country’s salescases.As a result, old discrepanciesremain unresolved
        while new errors continue to occur, and complete reconciliations are dif-
        ficult, if not impossible, without an extraordinary amount of research.
        Our June 198’7and March 1988 testimonies2describe these weaknesses
        in detail and provide specific examples of their effects on the accuracy
        of FMS accounting records.

        Furthermore, OMB recently identified the foreign military salesprogram
        on its list of “high risk” areas in the federal government. OMB stated that
        FMS’ long-standing problems are primarily related to financial systems
        and unreconciled balancesbetween disbursement from the FMS trust
        fund and deliveries made to FMS customers.Thus, there is no assurance
        that all applicable costs are charged to the customers.

        In 1982, after 6 years of unsuccessfulefforts to improve central MS
        accounting, DOD established the FMSFinancial ManagementImprovement
        Program under the DefenseComptroller. Under the program office’s
        direction, DOD initiated a comprehensiveplan to correct past deficien-
        cies. A new central accounting system, which also included the develop-
        ment of interfacing systems in each military service, was the centerpiece
        of this plan.

        In July 1988, the former Deputy Secretary of Defenseredirected DOD’S
        efforts to improve the financial managementof the foreign military
        sales program. The Deputy Secretary mandated the immediate termina-
        tion of the central accounting system development effort becausethe
        project had substantially exceededcost and scheduleestimates without
        achieving systemwide capability. As a result, the Deputy Secretary of
        Defenseappointed the Air Force as the executive agent to design,
        develop, implement, and operate a new central FMSaccounting and bill-
        ing system. The Deputy Secretary also directed the establishment of a
        secondFMS trust fund by October 1989.


        “DOD’sFinancial Managementof the ForeignMilitary SalesProgram(GAO/T-AFMD-87-12,June 4,
        1087)and Statusof DODEfforts to ImproveAccountingfor ForeignMilitary Sales(GAO/
        T-AFMD-88-9,March 31, 1988).

        Page 3                                           GAO/AFMLMO-18Foreign Militnry Sales
                        The objectives of our review were to evaluate DOD'S efforts since July
Objectives, Scope,and   1988 to (1) enhancethe current FMSaccounting and billing system,
  thodology             (2) resolve differences between billing and disbursement records in the
                        current FM$ trust fund, and (3) establish a secondFMStrust fund.
                        To addressour objectives, we interviewed representatives of the Depart-
                        ments of the Navy and the Air Force, the DefenseSecurity Assistance
                        Agency, and the DOD Office of the Comptroller in Washington, D.C.; the
                        Department of the Army in Indianapolis, Indiana; and the Security
                        Assistance Accounting Center in Denver, Colorado.
                        We obtained a copy of the November 1988 plan outlining DOD'S method-
                        ology for implementing the secondtrust fund and the system enhance-
                        ments neededto facilitate this implementation. We discussedthe actions
                        taken by LHAA,MAC,and the military departments to test and implement
                        the planned system enhancements.‘Wedid not evaluate the system
                        enhancementefforts becausethe Air Force Audit Agency is in the pro-
                        cessof conducting comprehensivetests of them. They anticipate com-
                        pleting this system testing by January 1990,
                        We also reviewed the SAACquarterly reconciliation reports to document
                        the reported differences between the disbursement and billing records
                        for the FMS program. Further, we obtained and reviewed the reconcilia-
                        tion progress reports prepared by SAACand the military departments to
                        ascertain the specific actions they had taken or planned to initiate in
                        order to resolve the differences between the disbursement and billing
                        We also reviewed reports prepared by GAO, the WD Inspector General,
                        and congressionalcommittees to ascertain which specific internal con-
                        trol and accounting system problems had been previously identified and
                        whether corrective actions initiated by DOD adequately addressedthe
                        problems. We conducted our review between December1988 and August
                        1989 in accordancewith generally acceptedgovernment auditing stan-
                        dards. We discussedthe results of our review with Defenseofficials and
                        incorporated their commentswhere appropriate.

                        Page 4                                   GAO/AFMDWlS Foreign Military Sales

                               To more accurately account for and control the FMSprogram, DOD imple-
System Enhancements            mented two system enhancements:caselevel disbursements and positive
Address F’undamental           transaction control. As we stated in our September 1988 report3 , incom-
                               plete and inaccurate data was transmitted from the military depart-
                               ments and recorded in the central FMSsystem. This adversely affected
     I,                        the reliability of FMS accounting data and the reconciliation of discrepan-
                               ties in customer accounts.Recognizingthe need to improve the integrity
    I                          of the FMS data, DOD decided to implement these controls as part of its
                               efforts to implement the secondtrust fund rather than waiting for the
                               new FMS accounting system to be developed and implemented. The Air
   /                           Force Audit Agency anticipates completing its testing of these enhance-
   ,                           ments by January 1990.

Cask                           Prior to the implementation of caselevel disbursements,the central
   I Level Disbursements       accounting system maintained billing and disbursement records at dif-
                               ferent levels of detail. The billing records were recorded on a country
                               and caselevel, while disbursementswere recorded only on a country
                               level. Therefore, when a discrepancy between the two sets of records
                               occurred, SAACcould not readily reconcile the disbursing and accounting
                               transaction that causedthe difference. As of March 1989, disbursement
                               data are recorded at the caselevel, which enablesthe military services
                               and ~AACto have comparable data on each sales case.This control is
                               expected to assist ~AACand the military servicesin identifying and rec-
                               onciling differences in individual caserecords.

Positive Transaction           Prior to the implementation of positive transaction control, the central
Coytrol                        accounting system operated by SAACdid not include adequate internal
                               controls to identify or prevent errors and ensure that rejected data
                               transactions were promptly corrected and reentered into the system. We
                               previously identified4 the following system weaknesses:
                           l System checkson the quality of data were nonexistent or inadequate.
                             Data were not subjected to standard checksor edits before they were
                             submitted to ~AAC,and edits within &IA&I system were designedto speed
                             processingrather than ensure accuracy.
                           . SAACdid not control transactions rejected by the accounting system to
                             ensure that they were promptly corrected and resubmitted.
                               4DOD’sFinancial Managementof the ForeignMilitary SalesProgram(GAO/T-AFMD-87-12,June 4;

                               Page 5                                           GAO/AFMD-90.16Fore&~ Military Sake
                            Positive transaction control, which was implemented in October 1988,
                            edits and validates data transmitted by the military departments prior
                            to processingthe data into the central accounting system. Positive trans-
                            action control will reject transactions failing the edit criteria and post
                            them to a suspensefile for correction by the appropriate service. The
                            implementation of positive transaction control is expected to give SAAC
                            more accurate and timely information on FMS cases.

                            The military’departments and SAACare making progress in resolving the
   jgress Is Being          differences between the billing and disbursement records. Under the
   de in Recorkiling        direction of DSAA,DOD organized a working group to coordinate this rec-
   ling and                 onciliation. This working group is comprised of DSAA, SAAC,and the mili-
                            tary departments. The group’s efforts have concentrated on the
   ibursement Records       reconciliations of
                            cash deposits, by country, since the establishment of the centralized
                            accounting system in 1980 and
                            the disbursementsand related billing for specific out-of-balance cases.
                            According to SAACrecords, as of August 1989, the total unreconciled dif-
                            ference between billing and disbursement records was $247 million with
                            a net unreconciled difference of $67 million; by contrast, the total differ-
                            ence as of December1987 was over $1 billion with a net difference of
                            $229 million.

Cash Deposits Reviewed      The working group’s initial effort was to review cash deposit data for
                            each country. As of June 1989,SAAC had reviewed all cash transactions
                            posted since the current accounting system was implemented in 1980.
                            ~AACreviewed all deposits from customer countries to ensure that they
                            were accurately recorded and that each service had an accurate cash
                            balance for each country. Thus, each service had the baseline informa-
                            tion neededto trace the amount of disbursementsmade for each foreign
                            country. When a service identifies a correcting entry for its own FMS
                            records, SAACis to make a corresponding adjustment to its records.
                            According to SAAC, cash transactions for earlier FMS caseswill be
                            reviewed by March 1990.

Qut-Of-Balance Conditions   The military services are currently reconciling differences between dol-
&e Being Reduced            lar amounts that have been spent from the FMS trust fund with the cost
                            of deliveries reported to the customers.MAC’S verification of cash

                            Page6                                      GAO/AFMD-90.18ForeignMilitarySales

t       deposit data has assistedthe military servicesin their review of individ-
        ual caserecords and the resolution of out-of-balance conditions.
        Each military service managesthe individual sales casesand reports
        transactions, such as performance (delivery of goods and services) and
        the disbursement of cash, to MAC.In addition, resolving the differences
        between billings and disbursements for an individual caseand preparing
        the resulting adjustments are ongoing functions of each service’s FMS
        casemanagement.Reconciliation efforts of the servicesinclude the
    .   Army officials stated that they compared billing and disbursement
        information transmitted from the Army to SAAC.      This effort involved
        matching the reported disbursements from status reports to actual case
        files. An Army Finance Center representative stated that for specific
        Saudi Arabia casesthey identified about $8.3 million that should have
        been reported as a DSAAdisbursement for Saudi Arabia but was errone-
        ously reported as an Army disbursement. By correcting the accounting
        records, the overall effect of the DOD out-of-balance condition for Saudi
        Arabia was reduced by about $8,3 million. This effort also identified
        another $29 million that should have been reported as an Army dis-
        bursement rather than a D~AA disbursement.
    l   In October 1987, the Air Force assumedthe accounting and reconcilia-
        tion responsibility for all Air Force FMS cases.Prior to this time, these
        responsibilities were split between SAACand the Air Force. An Air Force
        representative stated that centralizing the accounting for Air Force
        caseshas consolidated controls for accounting and reporting, which
        facilitates reconciliation of FMScases.As part of this reconciliation
        effort, Air Force identified a total of $562 million of disbursements and
        adjustments erroneously recorded in its accounting system. The Air
        Force corrected these disbursements and made the appropriate adjust-
        ments after it researchedthese casesand found the necessarysupport-
        ing documentation. According to an Air Force official, these accounting
        adjustments most likely would not affect the total cash balance; how-
        ever, they resulted in correcting individual country and caseaccounting
    l   The Navy’s reconciliation efforts included comparing the disbursements
        reported to SAACwith Navy source documents.One comparison identi-
        fied 100 valid casedisbursementsvalued at about $26 million that did
        not identify the specific country and casethe disbursement should have
        been applied to, due to a system interface problem. According to Navy

officials, this problem has been corrected. At the January 1989 reconcil-
iation meeting, the Navy reported that its reconciliation of disburse-
ments had identified $60 million of disbursementspreviously not
reported and corrected $47 million of erroneously reported disburse-
ments. The Navy has also initiated other reconciliation activities. It is in
the processof having FMSaccounting data currently stored on
microfiche transferred to computer diskettes. This transfer of archived
data will assist in comparing actual disbursements for FMScasesto
reported disbursements.
DSAA,MAC,and the military servicesface a difficult challenge in recon-
ciling the remaining $67 million in differences between billing and dis-
bursement records. To date, the reconciliation efforts have centered on
activity that occurred since the establishment of SAACin 1980. The
remaining reconciliation efforts, however, must addresserrors that pre-
date 1980 and may well have occurred 10 to 15 years ago. Supporting
documentation may no longer be available.
If SAACand the military service are not able to completely reconcile spe-
cific differences, the related casesare to be forwarded to the Reconcilia-
tion and CaseClosure Board. According to its charter, the Board’s
primary purpose is to examine unreconcilable imbalances in individual
casesand determine what action-such as additional billings to cus-
tomer countries-should be taken. The Board members consist of the
DSAAComptroller, DOD’S    Director of Accounting Policy, and a representa-
tive of the military service involved in the caseunder review.

The Board’s decisionsmust be completely documented becausethey
could result in the expenditure of government money to cover any dis-
bursement of customer funds that cannot be supported by billing
records. In these cases,DODmay have to request additional funding from
the Congress.Conversely, if the Board’s decisionsresult in additional
billings to the foreign countries, the Board must be able to fully support
those billings,

Page 8                                     GAO/~9048      Foreign Miliw   salea


                         Reconciling the differences between DOD’S foreign customer billing
FIL$Reports and OMB      records and trust fund disbursements has been a long-standing problem
Idebtified FMS           and has precluded DOD from providing an accurate accounting for FNS
Webknesses               customer funds. In their fiscal year 1988 I?ederalManagers’ Financial
   I                     Integrity Act” (FI@ report, the military departments identified the fol-
  1I                     lowing FMS accounting weaknesses:
                      . The Army attributed its problem to the lack of positive transaction con-
                         trol. As a result, its logistical and financial records are not in agreement
                         and &UC’s and the Army’srecords are not in balance. An Army Finance
                         Center official stated that, to help alleviate this problem, the Director of
                         Finance and Accounting issued a policy letter in June 1988 requiring
                        that each casemanager be responsible for (1) the accuracy of the
                         accounting and logistical data for the assignedcaseand (2) initiating the
                         necessaryactions to ensure that all errors receive prompt clearance.
                         Prior to this, the casemanager was only responsible for the accounting
                      . The Air Force recognized&at, as a result of its inability to resolve the
                        differences between its billing and disbursement records, the Congress
                        might have to supplement the FMS trust fund. The Air Force’s corrective
                        action plan centers on the implementation of the caselevel disbursement
                        and positive transaction control system enhancementspreviously
                      . The Navy identified weaknessesin the timeliness and usefulness of
                        information produced by the system; inadequate system interfaces,
                        hardware and software, and reporting; and overall systems control
                        problems. To correct these problems, the Navy implemented a new FMS
                        system in October 1989. A Navy official stated that the DOD Office of
                        Accounting Policy has identified somesystem weaknesses.As a result,
                        the Navy Finance Center internal auditors are planning an audit of the
                        system in early 1990.
                        Becauseof the significant dollars involved and the long-standing nature
                        of the problems in the FMS program, we believe it is appropriate for the
                        respective military departments to continue to report this problem in
                        their annual Financial Integrity Act reports.

          Y             “The FederalManagers‘Financial Integrity Act of 1982(31 USC, section3612(b)and (c)) gives
                        agencymanagementthe primary responsibility for maintaining adequatesystemsof internal control
                        and accounting..Theact requiresagencyheadsto report annually to the Presidentand the Congress
                        on the status of thesesystems,and it holds managersresponsiblefor correctingidentified

                        Page 9                                               GAO/AFMD-90-18Foreign Military Sake

                         OMB has also recognizedFMS weaknesses.As mentioned previously, OMB
                         has recently included FMSon its list of “high risk” areas in the federal
                         government. Becauseof this action, the Deputy Secretary of Defense
                         will be required to pay special attention to the FMS area. For example,
                         the Deputy Secretary is to receive reports at least quarterly that high-
                         light and explain the progress or delays in correcting FMS' problems. Fur-
                         thermore, OMB requires that the Department of Defense’sbudget identify
                         efforts being made to correct the problems so that adequate resources
                         can be allocated for those efforts.

                         In June 1989, the current Deputy Secretary of Defensepostponed the
h/nplementation of the   establishment of the secondtrust fund. He took this action becausethe
second Trust Fund        fund could not be implemented as originally intended by the October
                         1989 deadline that the former Deputy Secretary of Defenseset in his
                         July 1988 memorandum.
                         DOD'S Director  of Accounting Policy stated that the purpose of the sec-
                         ond trust fund was to segregateactivity associatedwith new FMS cases
                         from those in the existing trust fund. In this way, the unresolved dis-
                         crepanciesin casesin the current trust fund would be isolated from the
                         balancesrelated to new cases.As a result, DOD would be better able to
                         (1) research and resolve discrepanciesin the current trust fund,
                         (2) avoid the creation of discrepanciesfor new cases,and (3) reconcile
                         country level trust fund balances.However, instead of creating a sepa-
                         rate trust fund, DOD planned to use the current trust fund as a “carrier
                         account.” That is, DOD was planning to processall FMS transactions
                         through the existing trust fund and only record in the secondtrust fund
                         those transactions that were free from error. Becausenew casetransac-
                         tions with errors would remain in the current trust fund until corrected,
                         the plan to use the secondtrust fund to segregateall new caseactivity
                         for additional control purposes would not be met. As a result, any dis-
                         crepanciesfrom new caseswould be added to those already in the
                         existing trust fund.

                         According to Air Force officials who participated in planning the imple-
                         mentation of the secondtrust fund, the carrier account approach was
                         selecteddue to the limited time allowed for this implementation. DOD had
                         about 15 months from the time of the Deputy Secretary’s memorandum
                         in July 1988 until October 1989. During the initial 4 months, DOD
                         examined alternative approaches.In November 1988, it was estimated
                         that implementing the secondtrust fund as intended would require
                         about 14 months, which exceededthe October 1989 time frame by

                         Page10                                   GAO/AFMD-gO-l8ForeignMilitary8ales

              3 months. These extra months were deemednecessarydue to the com-
              plexity involved in changing DOD'S multiple financial and logistical sys-
              tems to adequately account for a secondtrust fund. Therefore, Air Force
              officials told us that using the current trust fund as a carrier account
              was seenas the most feasible way to implement the secondtrust fund in
              the remaining 11 months. This plan also identified the previously dis-
              cussedsystem enhancementsthat would facilitate implementation of the
              secondtrust fund and addressfundamental weaknessesaffecting the
              reliability of FMS data.
              The DOD Inspector General’s examination of the secondtrust fund’s
              implementation plan concluded that the carrier account approach would
              not achieve the intent of the secondtrust fund. We agree with this
              assessment.In June 1989, the Deputy Secretary of Defenseissued a
              memorandum postponing the implementation of the secondtrust fund.
              This memorandum specified that the Air Force, as executive agent, had
              120 days to develop a viable plan to establish a secondtrust fund inde-
              pendent of the existing trust fund. The plan was submitted on’Novem-
              ber 17, 1989.

              Someservice representatives believe that the newly implemented sys-
              tem enhancements-case level disbursements and positive transaction
              control-may preclude the need for a secondtrust fund. They believe
              these enhancementswill reduce the potential for the types of errors that
              created unreconciled discrepanciesand that it will enable reconciliation
              of country level trust fund balances.
              The results of the Air Force Audit Agency’s comprehensivetest of these
              enhancementsshould indicate if caselevel disbursements and positive
              transaction control are working as intended and are addressingthe sys-
              tem weaknessespreviously identified and reported upon by GAOand the
              DOD Inspector General. The testing results may also identify issuesthat
              DOD will need to addressin order to improve the accounting and billing
              for the foreign military salesprogram.

              DOD has implemented enhancementsto the central FMSaccounting sys-
Conclusions   tern that are intended to improve FMS accounting. Until now, the services
              and SAACwere maintaining data at different levels of detail, which has
         Y    precluded an accurate accounting to the foreign countries and hindered
              the reconciliation process.The caselevel disbursement and positive
              transaction control enhancementsto the central accounting system

              Page 11                                  GAO/AFMD-90.18Foreign Military Salea
    should help ensure that central FMSrecords are accurate and that dis-
    crepanciesbetween disbursement and billing records are promptly iden-
    tified and corrected, To do so, DOD needsto ensure that the reconciliation
    efforts remain an integral part of improving the FMS accounting data.
    DOD's decision to postpone the implementation of the secondtrust fund
    was appropriate becausethe planned implementation of the secondtrust
    fund would not have segregatedactivity associatedwith newly initiated
    FMScasesfrom the cumulative balancesassociatedwith casesin the
    existing trus’t fund. The Air Force was directed to develop a plan to
    establish a secondtrust fund, in accordancewith the intent of the July
    1988 memorandum. As part of this process,the Air Force was also to
    determine the need for a secondtrust fund.
    The Air Force Audit Agency is in the processof evaluating the caselevel
    disbursements and positive transaction control enhancements.The sys-
    tem testing may identify issuesthat need to be corrected. To improve
    the overall accounting for the Foreign Military Salesprogram, we
    believe the Secretary of the Air Force will need to correct any system
    weaknessesidentified by the Air Force Audit Agency’s current system

    We are not making any recommendationsat this time. However, as part
    of our ongoing work for the Subcommittee,we will continue to monitor
    DOD'S efforts to improve FMS accounting. Specifically, we will monitor
    DOD'S top managementcontinues to focus attention on the reconciliation
    DOD takes action to correct the system weaknessesidentified by the Air
    Force Audit Agency’s current testing of the FMS system, and
    the decisionsof the Reconciliation and CaseClosure Board are sup-
    ported by adequate documentation.
    As requested by your Subcommittee,we did not obtain written agency
    comments on a draft of this report. However, the results of our review
    were discussedwith responsible agency officials and their comments
    were incorporated where appropriate. We are sending copies of this
Y   report to the Secretary of Defense;the Secretariesof the Air Force,
    Army, and Navy; the Director of the DefenseSecurity Assistance
    Agency; and the Director of the Security AssistanceAccounting Center.
    Copies will also be made available to others upon request.

    Page12                                   GAO/AFMD-IW)-18Forei~plMilltarySales

         This report was prepared under the direction of Jeffrey C. Steinhoff,
         Director, Financial ManagementSystemsIssues,who may be reached at
         (202) 275-9454 if you or your staff have any questions. Other major
         contributors to this report are listed in appendix I.
         Sincerely yours,

         Donald H. Chapin
         Assistant Comptroller General

         Page 13                                 GAO/AFMD-9@18   Foreign Military Sale6

M ‘or Contributors to This Report


                        Darby W. Smith, Assistant Director, (202) 275-9482
Ac4ounting and
Fi&ncial Management
   ision, Washington,

                        David E. Flores, Evaluator-in-Charge
Debver Regional         Diane L. Sanelli, Reports Analyst

(001478)                Page 14                                GAO/AFMD-90-M Foreign Military Sales



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