DOCUMENT RESUME 02188 - [A'133--3151 (]it S d) [DODis Reexami.nation of Its Fiscal Year 1978 Budget as It Relates to Reimbursements of Foreign Military Training]. FGMSD-77-40; B-159835. May 6, 1977. 3 pp. + 1 appendix (1 pp.). Report to Rep. George H. Mahon, Chairman, rouse Committee on Appropriations; by Paul G. Dembling, Acting Comptrrller General. Issue Area: Accounting and Financial Reporting (2800). Contact: Financial and General Management Studies Div. Budget Function: Miscellaneous: Financial Management and Information Systems (1002). Organization Concerned: Department of Defense; Department of the Navy; Department of the Air Force; Department of the Armv. Congressional Relevance: House Committee on Appropriations. The Department of Defense (DOD) reexamined its fiscal year 1979 budget as it related to reimbursements of foreign military training. DOD reevaluated its pricing policy for foreign military training, which includes the International nilitary Education and Training Program as well as foreign military sales training. Findings/Conclusions: In general, the Department's revisions are a major step in providing for the recovery of the full cost of training foreign students. DOD's actions indicated an intention to comply with the intent of the Congress and GAO recommendations concerning the recovery of these costs. However, under the revi-td pricing guidelines, prescribed factors for computing military retirement pay and the cost of other civilian benefits were too low. The revised pri=ing guidelines also still provide for the use of a 4% asset use charge for aircraft training in lieu of hourly aircraft use and attrition rates which would generally res ilt in higher charges to foreign governments. It is imperatlive that DOD complete planned evaluations in these areas as soon as possible and revise training tuition rates as warranted. DOD's estimates of the amount of increased reimbursements resulting from the revised pricing policy appeared to be reasonable if ll assumptions and computations were correct. (SC) RESTRICTr3 "'/ i O--^o eo-. -- "n eneoat by the O o . COMIPTROLLER ONERAL OP THr UNITED STATES WASHIIGOTON., D.C. o " B-159835 May 6, 1977 The Honorable George H. Mahon Chairman, Committee on Appropriations House of Representatives Dear Mr. Chairman: Your letter of March 2, 1977, asked that we review the Department of Defense's effort to reexamine its fiscal year 1978 budget request as it relates to reimbursements for activities which support foreign military sales. You also asked the Defense Department to identify those areas in the fiscal year 1978 budget where direct funding could be reduced through offsetting reimubursements from foreign military sales. In discussions with Defense Department officials your office agreed that the reexamination was to be limited to reimbursements for foreign military training and transportation services. This report covers our review of Defense's reexamination of reim- bursements f-r foreign military trainiag. As agreed with your office, we have ,apaiately reported on cur reviaw of reimbursements for trans- portatioa services. (LCD-77-2Z5, May 4, 1977.) We previously reported (FGMSD-76-91, December 14, 1976; and FGMSD-77-17, March 17, 1977) that the Defense Department's pricing roli-y for foreign military training resulted in the loss of millions of dollars and made several recommendations for improvement of pricing and billing systems. The Defense Department's reexamination of its fiscal year 1978 budget for training centered around a reevaluation of its pricing policy. On April 25, 1977, the Defense Department briefed your office concerning its plans to revise its pricing policy for foreign military training which includes training under the International Military Education and Training Program as well as foreign military sales train- ing. On May 4, 1977, the Department informed your office that, as a result of these revisions which were finalized on May 3, 1977, reim- bursements to the military services Appropriations for foreign military training would be increased by about $24. 3 million during fiscal year 1978 permitting a reduction in direct funding of this amount. In addition the Air Force determined for its foreign military training alone that as a result of the revised guidelines an estimated additional FGMSD-77-40 B-159835 $11.8 million in reimbursements that would be credited to the Miscellan- eous Receipts of the Treasury. As discussed in our December 14, 1976, report to Congress, Defense regulations require that costs recovered for military retirement pay and depreciation of assets be deposited in Miscellaneous Receipts. Appendix I shows a breakout of the $24.3 mil- lion by financing appropriation and military servi:e. PLANNED REVISIONS TO PRICING POLICY In general the Department's revisions are a major step in provid- ing for the recovery of the full cost of training foreign students. The Department's actions indicate an intention to comply with the intent of the Congress and our recommendations concerning the recovery of the cost of training foreign military students. There are issues, however, which remain to be resolved. Under the revised pricing guidelines, prescribed factors for computing (1) mili- tary retirement pay and (2) the cost of other civilian benefits, such as retirement and health benefits, are too low. The same issue is add. ssed on pages 23 and 24 of our December 14, 1976, report. Defense officials advised us that the Department plans to reevaluate the retirement and benefit factors and will revise them based on the results of tnt reevaluation. We also noted that the revised pricing guidelines still provide for the use of a 4 percent asset use charge for aircraft training in lieu of hourly aircraft use and attrition rates wtich would generally result in higher charges to foreign governments. Defense officials advised us that although they do not plan to use hourly use and attrition rates, they will evaluate the validity of the 4 percent charges and will revise them if warranted. It is imperative that the Department complete these evaluation:s as soon as possible and revise training tuition rates as warranted. As agreed with your office, we will monitor the Department's progress in making these evaluations and will review the results. IMPACT OF THE REVISIONS ON FISCAL YEAR 1978 REIMBURSEMENTS We received Defense's estimates of the amount of increased reim- bursements resulting from the revised pricing policy on May 4, 1977. Our work was, therefore, limited to determining how the estimates were computed and reviewing their reasonableness considering the results of our prior audits. We believe that the methods used by the military services to make the estimates were adequate. if all assumptions (for example, the 2 B-159835 number of students to be trained) and computations were correct the estimate of $24.3 million of additional reimbursements for fiscal year 1978 Defense appropriations would appear to sereasonable. It should be noted that the Defense Department has not identified the total amount of reimbursements included in the fiscal year 1978 budget for foreign military training. We could not determine, there- fore, whether adequate amounts of estimated reimbursements were offset against direct appropriations in the budget. Defense officials advised us that the Department is develoir.n budgeting and accounting cystems which will enable them to identify estimated reimbrursen.ents for foreign military training aud to accumulate reimburs man-t for training. Thus, information should be available in future years to track budget estimates and related Reimbursements. As your offics asked, we did not request formal written comments from the Department of Defense. We did informally show and discuss the contents of this report with Defense officials. Where appropriate their comments are included. Also, as requested by your offic we are sending the report to the Senate Committee nn Appropriations, Subcom- mittee on Defense. Sincerely yours, Acting Comptroller General of the United States 3 APPENDIX I APPENDIX I ESTIMATED AMOUNT OF INCREASES IN REIMBURSEMENTS BY MILITARY SERVICE APPROPRIATION APPLICABLE TO i EIGN MILITARY TRAINING TO BE PROVIDED BY DEFENSE DURING FISCAL YEAR i978 Appropriation Operation and Military Military service maintenance personnel Total Air Force $ 6,600,000 $ 8,100,000 $14,700,000 Army 4,425,000 2,294,000 6,719,000 Navy 1,562,000 1,300,000 2,862,000 Marine Corps 3,000 38,00041,000 Total 12,590,000 $ $2 732000 4,322,000 Total~~~~~~~~~~~
DOD's Reexamination of Its Fiscal Year 1978 Budget as It Relates to Reimbursements of Foreign Military Training
Published by the Government Accountability Office on 1977-05-06.
Below is a raw (and likely hideous) rendition of the original report. (PDF)