Foreign Military Sales

The Navy did not always charge customer trust fund accounts when goods and services were delivered under the foreign military sales program. Moreover, the Navy did not always maintain accurate and reliable information on trust fund charges. The Navy's accounting records indicate that, as of October 1998, it had not charged FMS customers' trust fund accounts for $582 million of delivered goods and services. According to GAO's review of $75 million of this amount, FMS customers' accounts had not been charged for $11.3 million for goods and services provided between April 1987 and December 1997. Without ensuring that accounts are promptly charged and that the Management Information System International Logistics System accurately reflects changes, the Navy cannot be certain that FMS customers are paying the full cost of goods and services. Moreover, because GAO's review focused on only 13 percent of the $582 million reported as not charged to FMS customer trust fund accounts, it is important that the remaining balances be reviewed and that amounts still owed be promptly collected.

GAO noted that: (1) the Navy did not always: (a) charge FMS customer trust fund accounts when goods and services were delivered under the FMS program; or (b) maintain accurate and reliable information on trust fund charges; (2) as of October 1998, Navy's FMS accounting records indicated that it had not charged FMS customer trust fund accounts for $582 million of delivered goods and services; (3) according to GAO's review of $75 million of this amount, FMS customer accounts had not been charged for $11.3 million for goods and services provided between April 1987 and December 1997; (4) for example, in 1996, the Navy provided support services valued at $1.1 million for Canada's Navy Patrol Harpoon Shipboard Command and Launch System; (5) instead of charging Canada's trust fund account for the $1.1 million, the Navy incorrectly charged: (a) $636,123 to its appropriations; and (b) $450,882 to the trust fund accounts of Greece and Japan; (6) further, although the remaining $18,507 was charged to Canada's account, it was recorded incorrectly in the Navy's system; (7) Navy officials agreed with GAO's findings and told GAO that they plan to correct the erroneous charges to the Greece and Japan accounts and will also charge Canada's account in order to reimburse the Navy appropriation for the $636,123; (8) for the remaining $62 million of balances in GAO's sample, GAO found that the Navy's accounting records included inaccurate data on the status of charges to FMS customer trust fund accounts, making it difficult for Navy managers to accurately account for and report on the FMS program; (9) for example, Navy's accounting records showed that Kuwait's trust fund account had not been charged $54 million for three F-18 aircraft it received in 1993; and (10) however, GAO found that Kuwait's trust fund account had been charged for the full amount and that the Navy's accounting system did not reflect the charges because erroneous data had been entered in the 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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