Lease Refinancing

Pursuant to a congressional request, GAO evaluated the feasibility of implementing the Army's equipment lease refinancing program throughout the Department of Defense (DOD), focusing on: (1) the type of information needed for a lease refinancing program; and (2) whether such information was readily available to DOD and its components.

GAO found that: (1) between fiscal years 1985 and 1988, DOD equipment lease obligations declined from $868 million to $515 million; (2) at the completion of its lease refinancing program, the Army found that the leases it had previously thought to be viable candidates for pooling and refinancing were ineligible; (3) the Army's lease refinancing contractor found that most of the Army's leases did not include assignable purchase options and could not be refinanced; (4) the contractor also identified several problems with the reliability and availability of the Army's lease data; (5) it could be difficult to implement a lease financing program similar to the Army's across DOD, since the declining number and value of DOD leases reduced the likelihood of creating pools of eligible leases, and the DOD lease reporting system did not provide adequate financial management; (6) the DOD Corporate Information Management initiative, aimed at strengthening financial management by consolidating accounting and finance operations and systems, provided an opportunity to develop procedures that would support effective financial management of leases; and (7) DOD could use the Air Force's contract management systems as a starting point for designing its consolidated lease management system.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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