Inadequate Methods Used to Account for and Recover Personnel Costs of the Foreign Military Sales Program

The Foreign Military Sales Act, as amended, requires that the government be reimbursed by other countries for full costs of administrative personnel used in the Foreign Military Sales program. The Defense Department (DOD) presents its recommendations to the Congress on the strengths of the military services and civilian employees in its Manpower Requirements Reports.

The Manpower Requirements Report for fiscal year (FY) was misleading, and the three military services used inconsistent criteria in reporting on estimates of personnel needed for the program. A one-time estimate of personnel requirements for FY 1977 prepared for the Senate Armed Services Committee was incomplete, inaccurate, and inconsistent. DOD usually charges a 2-percent surcharge on foreign military sales cases to recover administrative costs, but there was no assurance that this was adequate because the system of accounting for personnel was inadequate and factors included in the surcharge to recover retirement costs were not high enough. Reliable estimates of personnel requirements are needed to: (1) give Congress a basis to authorize personnel ceilings; (2) develop a budget for administering the program; establish a basis for administrative surcharges; and (3) provide a basis for reimbursement for costs from receipts generated by the program.