Leasing of Defense Property to Foreign Governments

GAO was requested to review the implementation of the defense property leasing authority contained in 10 U.S.C. 2667. Over the years, military equipment has been transferred to foreign countries primarily on a grant basis. In recent years, sales have increased as Congress has reduced the number of countries to which military equipment could be granted. The value of the property included in leases initiated during the period from 1960 through January 1981 amounted to about $168 million and consisted of such items as aircraft, ships, and weapons production equipment. The property value thresholds contained in legislation for reporting transfers of property valued at over $1 million to Congress have been avoided when property is leased using 10 U.S.C. 2667. Most often, the value of leased property is based on an acquisition cost that is several years old and not equivalent to the cost for replacing the property or similar property should it not be returned. Property values based on acquisition costs much lower than values based on replacement costs could result in some leased property not being reported to Congress. To comply with the recent requirement to report the lease of property valued over established dollar thresholds, the leased property value should be based on the estimated replacement costs. There is no procedure or instruction that has been established by the Department of Defense which requires leases to be managed to ensure that the lessee country complies with the terms and conditions contained in the lease agreements. Thus the use, care, and maintenance of the property is not routinely verified during the time it is leased. As a consequence of not having had an established standard policy for billing and collecting lease-associated payments, officials cannot always determine the status of lease payments.