Foreign Military Sales

The Air Force lacked adequate management controls over its foreign military sales (FMS) program to ensure that foreign customers' accounts were properly charged for goods and services. GAO's analysis of data maintained by the Defense Finance and Accounting Service indicates that the Air Force may not have charged foreign military sales customers for as much as $540 million worth of delivered goods and services. The Air Force recognizes that it must improve its controls over the program and develop the data needed to identify instances in which foreign customers' accounts have not been charged for goods and services received. However, according to Air Force officials, the data are going to be made available only on an ad hoc basis, meaning that they will not be routinely available to the appropriate personnel for review, including managers, with the requirement that they use the information to ensure that customers' accounts are being properly charged.

GAO noted that: (1) the Air Force did not have adequate management controls over its foreign military sales program to ensure that foreign customer accounts were properly charged for goods and services; (2) specifically, the Air Force was not generating reports that would identify instances where customer accounts were not charged for goods and services received or where there were discrepancies between the recorded value of delivered goods and services and the corresponding value of charges to customer accounts; (3) without such reports, the Air Force could not readily ensure that FMS accounting records were accurate and that customer accounts were properly charged; (4) GAO's analysis of data contained in the Defense Finance and Accounting Service's Defense Integrated Financial System as of July 1999, indicated that the Air Force might not have charged FMS customer trust fund accounts for $540 million of delivered goods and services; (5) in performing a detailed review of $96.5 million of these transactions, GAO found that the Air Force was able to reconcile about $20.9 million; (6) however, of the remaining $75.6 million, the Air Force had either: (a) failed to charge customer accounts ($5.1 million, 22 transactions); (b) made errors, such as incorrectly estimating delivery prices ($44 million, 11 transactions); or (c) could not explain differences between the recorded value of delivered goods and services and corresponding value of charges to customer accounts ($26.5 million or 19 transactions); (7) the Air Force has since recognized that it must improve its controls over the FMS program and developed the capability to generate data necessary to help identify those instances where foreign customers' accounts have not been charged for goods and services received; (8) however, according to responsible Air Force officials, the data are going to be made available only on an ad hoc basis, meaning that they will not be routinely available to the appropriate personnel for review, including managers, with the requirement that they use the information to ensure that customer accounts are being properly charged; and (9) such steps are integral to ensuring the accuracy of FMS accounting and the prompt collection of funds owed.

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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