Foreign Military Sales

Pursuant to a congressional request, GAO evaluated the Foreign Military Sales (FMS) Program's accounting problems, focusing on the Department of Defense's (DOD): (1) efforts to enhance the current FMS accounting and billing system; (2) progress in resolving the differences between billing and disbursement records and the current FMS trust fund; and (3) planned implementation of a second FMS trust fund to isolate the errors in existing sales.

GAO found that: (1) DOD implemented two system enhancements as part of its efforts to implement a second trust fund, rather than waiting for development and implementation of the new FMS accounting system; (2) one of the enhancements, recording disbursement data at the case level, would enable DOD to have comparable data on each sales case, while the other enhancement, positive transaction control, would edit and validate data transmitted prior to central accounting system processing; (3) the services maintained data at different levels, which precluded accurate accounting to foreign countries and hindered the reconciliation process; (4) the Security Assistance Accounting Center (SAAC) and military services concentrated on reconciliation of $67 million in differences between billing and disbursement records; (5) instead of creating a separate trust fund, DOD planned to process all FMS transactions through the existing trust fund and only record error-free transactions in the second trust fund; and (6) because new case transactions with errors would remain in the current trust fund, they would result in additional discrepancies in the existing fund, rather than segregating all new activity in the second trust fund.