Foreign Military Sales

GAO provided information on the Department of Defense's efforts to recover the nonrecurring research, development, and production costs from its Foreign Military Sales (FMS) Program trust fund for items that were delivered to FMS customers.

GAO noted that: (1) in GAO's previous report, GAO noted that the Air Force and Navy were not promptly collecting nonrecurring research, development, and production costs from the FMS trust fund as major defense equipment items were delivered to FMS customers; (2) specifically, GAO identified over $183 million of nonrecurring costs related to items that were delivered to FMS customers--some as long ago as 1989--that had not been charged to the foreign customers' trust fund accounts; (3) to address these issues, GAO recommended that the Air Force and Navy: (a) recover the amount identified in GAO's report that had not yet been charged to FMS customers' trust fund accounts; and (b) review all other open FMS cases that require foreign customers to pay a proportionate amount of nonrecurring research, development, and production costs for major defense equipment and recoup nonrecurring costs that have not yet been recovered for items that have already been delivered to FMS customers; (4) the Air Force and Navy have now collected the over $183 million identified in GAO's report; (5) while the collection of this amount is a positive first step, GAO's recent visit to the Air Force Materiel Command's headquarters, as part of another audit, disclosed that the Air Force has not collected nonrecurring costs owed for items related to other open FMS cases; (6) specifically, GAO found that $152,101,014 of nonrecurring research, development, and production costs had not been collected from Saudi Arabia's trust fund account for 26 F-15 aircraft that were delivered to the country between December 1997 and March 1999; (7) Volume 15 of the Department of Defense's Financial Management Regulation 7000.14-R states that charges for nonrecurring costs are earned as items are physically delivered to the FMS customer; (8) as GAO noted in its October 1998 report, not recovering nonrecurring costs promptly represents poor financial management practices; and (9) it also raises the risk that amounts will never be recouped and that these funds, deposited in advance to the FMS trust fund for this purpose, will be erroneously returned to FMS customers.

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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