GAO

United States General Accounting Office

Report to the Chairman, Committee on

International Relations, House of

Representatives

August 2000 FOREIGN MILITARY

SALES

Changes Needed to

Correct Weaknesses in

End-Use Monitoring

Program

GAO/NSIAD-00-208

Page 1 GAO/NSIAD-00-208 Foreign Military Sales

Contents

Letter 3

Appendixes Appendix I: List of Countries Included in Our Survey of End-Use

Monitoring 20

Appendix II: Comments From the Department of Defense 21

Appendix III: Comments From the Department of State 24

Appendix IV: GAO Contacts and Staff Acknowledgments 25

Abbreviations

AMRAAM Advanced Medium Range Air-to-Air Missile

DOD Department of Defense

DSCA Defense Security Cooperation Agency

FMS Foreign Military Sales
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United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-285781 Leter

August 24, 2000

The Honorable Benjamin A. Gilman

Chairman, Committee on

International Relations

House of Representatives

Dear Mr. Chairman:

In July 1996, the Arms Export Control Act was amended to require an enduse monitoring1 program for defense articles and services transferred

through the U.S. government’s Foreign Military Sales program.2 The

amendment also requires an annual report from the Department of Defense

to Congress on the program’s implementation. In response, in December

1996 the Department expanded its monitoring program by requiring field

personnel to initiate end-use checks of U.S. defense articles and services

sold to foreign governments when specific circumstances develop, such as

unusual political or military upheaval in the recipient country. At the time,

the monitoring program included requirements that field personnel observe

and report on foreign governments’ use of U.S. defense items and perform

periodic physical inspections of selected weapon systems. These

requirements are still in effect today.

This is the second in a series of reports that respond to your request that

we review the Foreign Military Sales program. Our first report addressed

the process for approving technology and arms transfers.3 This report

focuses on the Department of Defense’s implementation of end-use

monitoring requirements. Specifically, we assessed (1) the implementation

1 End-use monitoring refers to the procedures used to verify that foreign governments are

using and controlling U.S. defense articles and services in accordance with U.S. terms and

conditions of the transfer. Verification measures, referred to as end-use checks, range from

contacting the appropriate foreign government representative for information to physical

inspection by U.S. personnel.

2 A security assistance program to transfer U.S. defense articles or services to foreign

governments and international organizations from Department of Defense stocks or through

Defense-managed contracts.

3 Foreign Military Sales: Review Process for Controlled Missile Technology Needs

Improvement (GAO/NSIAD-99-231, Sept. 29, 1999).
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of the Department of Defense’s requirement to observe and report on

defense articles and services transferred under the Foreign Military Sales

program, (2) the Department’s implementation of requirements to perform

end-use checks, and (3) the extent to which the Department has satisfied

the reporting requirements of the end-use monitoring amendment to the

Arms Export Control Act.

Results in Brief The Department of Defense has not effectively implemented the

requirement that its field personnel observe and report on foreign

governments’ use of U.S. defense articles and services transferred through

the Foreign Military Sales program. Because the extent of observation

needed to verify that defense articles and services are being used

appropriately will vary from country to country, the Department has not

issued guidance specifying what monitoring is required. As a result, field

personnel interpret the requirements and the activities that they should

perform differently. Field personnel in 40 of the 68 countries we surveyed

reported that they did not carry out this requirement.4 Several field

personnel told us that they are unsure when to perform this function and

do not have sufficient resources to perform it.

The Department has not effectively implemented requirements for its field

personnel to perform end-use checks in response to specific standards or

for selected weapon systems. For example, while the Department

identified five circumstances, referred to as standards, under which field

personnel should initiate end-use checks of defense articles and services, it

did not establish procedures to ensure field personnel received the

information needed to initiate end-use checks or provide guidance on how

to apply the standards. Department officials assumed that the information

needed to initiate end-use checks on the basis of the standards would be

available to field personnel through State Department officials located at

overseas embassies. However, field personnel responsible for performing

such checks are not receiving the needed information from Defense or

State Department officials. As a result, we identified 16 countries where

end-use checks were not performed in fiscal years 1997-99, even though

4 Using an Internet survey, we obtained end-use monitoring information from military field

personnel assigned to 68 countries. These countries represented all of the countries that had

purchased sensitive or significant defense equipment through the Foreign Military Sales

program, according to Defense and State Department officials and our evaluation of

program data.
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one of the standards was met. In addition, specific requirements have been

established to conduct end-use checks for selected weapon systems such

as Stinger missiles. For some other weapon systems, such as Advanced

Medium Range Air-to-Air Missiles, sales agreements allow U.S. personnel to

conduct end-use checks. For both of these weapon systems, the U.S. relies

on host country records to maintain accountability. However, the reliability

of such records varies from country to country. For example, after

performing a worldwide inventory of Stinger missiles, the Department of

Defense identified discrepancies in some countries’ records, which left

some missiles unaccounted for. Further, according to our survey and field

visits, no end-use checks of Advanced Medium Range Air-to-Air Missiles

have ever been performed by U.S. personnel.

The Department of Defense has not complied with the reporting

requirements of the end-use monitoring amendment to the Arms Export

Control Act because it does not collect the information needed to do so.

The amendment requires the Department to report annually to Congress on

actions taken to implement the end-use monitoring program. This report is

to include a detailed accounting of the cost and number of personnel

associated with its program. However, field personnel are currently not

required to track the resources they use in performing end-use monitoring

activities and only routinely report on the number of Stinger missile

inspections conducted. In its 1997 report to Congress, the President

reported only on the steps that the Department was taking to implement

the end-use monitoring program and did not report on the cost and number

of personnel associated with the program. Until the Department of Defense

tracks resources used, it will not be able to provide Congress with specific

end-use monitoring cost and personnel information.

We have included recommendations in this report to correct weaknesses in

the implementation and reporting of end-use monitoring activities under

the Foreign Military Sales program. In written comments on a draft of this

report, the Department of Defense generally agreed with the findings and

recommendations and stated that it will take steps to improve the

implementation of the Foreign Military Sales end-use monitoring program.

The State Department, in its written comments, expressed concern that the

report may suggest that it is responsible for the lack of an effective end-use

monitoring program for Foreign Military Sales, because it has not shared

end-use violation reports with the Department of Defense. Although we

agree that the State Department is not responsible for the lack of an

effective program, we believe that a mechanism to provide the information

contained in the violation reports to field personnel is needed for the
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Department of Defense to efficiently implement its end-use check

standards.

Background In 1996, the Arms Export Control Act5 was amended to require the

establishment of an end-use monitoring program for defense articles sold,

leased, or exported under the act and the Foreign Assistance Act of 1961,

including articles transferred through the Foreign Military Sales (FMS)

program. The amendment requires that, to the extent practicable, the

end-use monitoring program provide reasonable assurance that the

recipient is complying with U.S. government requirements on the use,

transfer, and security of defense articles and services. The act prescribes

specific purposes for which U.S. defense articles and services may be used,

such as for internal security or legitimate self-defense, and also requires the

recipient to obtain U.S. consent before transferring U.S. defense articles

and services to other parties.6

The amendment also requires that, to the extent practicable, the

monitoring program provide for the end-use monitoring of defense articles

and services in accordance with the State Department’s “Blue Lantern”

standards. The State Department developed and published these standards

to identify high-risk defense articles and services exported directly by U.S.

defense companies for regular end-use monitoring.7 In addition, the

amendment requires an annual report to Congress on the actions taken to

implement the end-use monitoring program. The report is to include

detailed accounting of costs and number of personnel associated with the

program.

The Secretary of Defense is responsible for implementing end-use

monitoring under the FMS program. Within the Department of Defense

(DOD), the Defense Security Cooperation Agency (DSCA) is the principal

5 22 U.S.C. 2785.

6 22 U.S.C. 2753-2754.

7 The State Department uses the Blue Lantern standards to conduct checks of selected

export license applications prior to approval to determine the legitimacy of the transaction

and the end-user. The State Department also conducts checks after defense articles or

services have been shipped to determine whether they have been received by the authorized

foreign entity and, in some instances, whether they are being used in accordance with the

terms and conditions of the license.
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agency for carrying out DOD’s security assistance responsibilities,

including FMS end-use monitoring. In 1996, in response to the amendment,

DSCA reviewed its policies and procedures for the accountability of

defense articles and services transferred through the FMS program. At the

time, the end-use monitoring program included—and still includes today—

a requirement that field personnel overseas observe and report, while

performing other duties, on the foreign country’s use of U.S. defense

articles, defense services, and training. In addition, DSCA still requires field

personnel to physically inspect and account for Stinger missiles transferred

to foreign governments and includes, on a case-by-case basis, other

monitoring provisions in FMS agreements8 when certain sensitive weapon

systems are sold.

DSCA also developed a new requirement for field personnel to initiate

end-use checks of U.S. defense articles and services transferred through

the FMS program when one of five specific circumstances occurs. In

December 1996, DSCA incorporated these circumstances, which it refers to

as standards, into a pamphlet on the end-use monitoring program.

Beginning in 1997, a 30-minute presentation on new and existing end-use

monitoring requirements was included in training provided by the Defense

Institute of Security Assistance Management to security assistance

personnel.

In most cases, U.S. military personnel assigned to overseas security

assistance offices are responsible for managing and implementing the FMS

program in their country of responsibility. They report through two chains

of command, the ambassador and the Unified Combatant Command.9 The

ambassador is responsible for directing, coordinating, and supervising all

U.S. government personnel within the overseas diplomatic mission. The

Unified Combatant Commands evaluate the performance of security

assistance personnel and approve staffing levels for all overseas security

assistance offices. The number of U.S. military field personnel assigned to

overseas offices varies considerably among countries. The law limits most

overseas offices to six or fewer military personnel with security assistance

8 FMS agreements are signed by the U.S. government and a recipient foreign government or

international organization and are used by DOD to sell U.S. defense articles and services

through the FMS program.

9 A Unified Combatant Command has operational control of U.S. combat forces from two or

more military departments and is normally organized on a geographical basis.
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management responsibilities. However, Congress authorized, and DOD

assigned, more than six military personnel to offices in nine countries.

DSCA Has Not

Developed Procedures

for the Requirement to

Observe and Report

The Security Assistance Management Manual requires that field personnel

observe and report, during the course of their other duties, on foreign

governments’ use of U.S. defense articles and services transferred through

the FMS program. The manual does not prescribe standard end-use

monitoring procedures because the extent of observation will vary

considerably from country to country. As a result, the level of observation

of U.S.-supplied defense equipment varies greatly. Because DSCA has not

issued specific guidance on when to perform the function, field personnel

interpret the requirement to observe and report differently and have

different interpretations of the activities they should perform. Field

personnel in 40 of the 68 countries we surveyed told us that they did not

carry out day-to-day observation and reporting on host country use of U.S.

defense articles and services, while field personnel in 28 countries said

they did. For example, field personnel in one country we visited, where

nine military personnel are assigned to security assistance, told us that they

had many opportunities to visit foreign military facilities where

U.S.-supplied weapons were stored and to observe the use of such

equipment. However, field personnel in another country, where only four

military personnel are assigned to security assistance, told us that they

spend most of their time in their office or meeting foreign military officials,

only occasionally visiting military facilities, so they do not observe the use

of U.S.-supplied weapons. Both countries purchased substantial amounts

of U.S. defense articles and services through the FMS program.

In 1991, we reported that U.S. military officials in seven countries we

visited interpreted the requirement to observe and report on host country

utilization of U.S. defense articles and services differently and told us that

they did not have structured programs to perform this function.10 At the

time, we recommended that DSCA develop accountability standards for the

types and amount of control that a recipient country should apply to U.S.

defense items. We also recommended that DSCA revise the Security

Assistance Management Manual to specify the monitoring required to

provide reasonable assurance that recipient countries are meeting

conditions pertaining to use, security, and transfer of U.S. defense articles

10 Military Aid: Stronger Oversight Can Improve Accountability (GAO/NSIAD-92-41, Dec.16,

1991).
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and services. As a result of our recommendations, DSCA sent a message to

field security assistance offices in October 1991 reiterating monitoring

guidance in the Security Assistance Management Manual. However, it did

not develop accountability standards or specify the extent of monitoring

needed.

According to several of them, field personnel are limited in carrying out

day-to-day observations because DSCA has not issued specific guidance on

when to perform this function or provided sufficient resources to perform

the function on a regular basis. Field personnel contrasted the lack of

guidance for end-use monitoring under the FMS program with the specific

guidance they are provided on how to monitor equipment granted to

foreign countries under the Military Assistance Program,11 which requires

field personnel to track equipment transferred under the program through

detailed inventories. Unified Command officials told us that they do not

hold field personnel accountable for not performing the observation

function for equipment transferred though the FMS program because of the

lack of guidance from DSCA. The officials also told us that they want field

personnel to spend their time on their primary duty, which is to work with

foreign governments on planning the acquisition of defense equipment.

DSCA Has Not

Effectively

Implemented End-Use

Check Requirements

DSCA has not effectively implemented requirements for its field personnel

to conduct checks that verify the end-use of U.S. defense articles and

services transferred under the FMS program. While DSCA identified five

standards for when field personnel should conduct end-use checks, it has

not established procedures to notify field staff of events that should trigger

checks or provided the guidance needed on when action is required. In

addition, certain weapon systems have specific requirements or provisions

for end-use checks that rely on host country records to maintain

accountability.

11 Since the 1950s, the United States has provided military equipment to foreign countries on

a grant basis under the Military Assistance Program. Beginning in 1982, funds from that

program were merged into the FMS program for recipients to purchase defense items

through FMS credits. Equipment transferred under the prior program is still subject to

monitoring requirements.
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DSCA Has Not Established

Procedures or Guidance for

End-Use Check Standards

DSCA identified five circumstances that it refers to as standards, under

which field personnel are to perform end-use checks of defense articles

and services transferred through the FMS program. Field personnel are to

perform end-use checks when

• there is any indication that an Arms Export Control Act violation has

occurred,

• substantial problems or weaknesses are found when DOD reviews a

foreign government’s adherence to U.S. requirements for protecting

classified military information,12

• significant and unusual political or military upheaval in the host country

is impending or has occurred,

• substantial defense interaction or other ties are developing between the

end user and another country whose interests are not compatible with

those of the United States, or

• countries unfriendly to the United States in the region are illicitly

seeking U.S. equipment of types held by the end user.

On the basis of information we obtained from the State Department and

from our survey of 68 overseas posts, we identified 20 countries where

end-use checks were required under one or more of these five standards in

fiscal years 1997-99. However, field personnel in only four of these

countries reported performing end-use checks during that time.13 In some

of these cases, field personnel did not receive information that one of the

end-use check standards applied. In other cases, field staff did not have

sufficient guidance to know when specific circumstances required end-use

checks under the standards.

For example, under the first standard, field personnel are required to

conduct an end-use check within 60 days of the State Department’s

notification to Congress that an end-use violation has occurred. The main

purpose of these checks is to verify that the host country is committed to

proper control and use of U.S.-origin items. The State Department reported

12 countries to Congress for end-use violations in fiscal years 1997-99. Field

personnel in only one of these countries, however, responded in our survey

12 These reviews are conducted by DOD’s Office of International Security Programs in

accordance with General Security of Military Information Agreements in which the United

States and another country agree to mutually protect classified military information.

13 We did not ask field personnel to indicate which of the five standards had been met.
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that they had carried out an end-use check. A DSCA official told us that

because the State Department is responsible for reporting end-use

violations to Congress, DSCA assumed that State Department personnel at

the embassy were notifying military field personnel of violations in their

country. However, DSCA officials did not actually determine whether a

mechanism was in place to notify field personnel. Field personnel in the

countries we visited told us that they sometimes learn about alleged

violations through their embassy but do not know whether the violations

have been reported to Congress, thereby requiring an end-use check.

From the establishment of the standard in 1996 through March 2000, the

State Department did not provide any information on end-use violations to

DSCA. State Department officials told us that due to the political sensitivity

of the violation reports, they only provide the reports to select Members of

Congress and are not required to provide them to DSCA.14 According to

these officials, the information contained in these violation reports could

seriously harm U.S. relations with the country involved if it was

inadvertently released. In March 2000, DSCA and State officials developed

a procedure for State to provide DSCA with a summary of the information

contained in the violation reports. However, the State Department does not

plan to provide DSCA with the reports themselves. DSCA advised that

without the violation reports, field personnel would not have sufficient

information to determine when to conduct end-use checks on the basis of a

specific violation. Field personnel could benefit from such information by

using it to determine which countries have weaknesses in their ability or

willingness to protect U.S. technology. Field personnel could then more

carefully monitor sensitive or vulnerable defense equipment transferred to

these countries through the FMS program. In addition, information on a

country’s ability or willingness to protect U.S. technology is one of the

factors used in the process of approving the transfer of U.S. defense

equipment.

End-use checks are also required when weaknesses are identified as a

result of a DOD security survey. DOD’s Office of International Security

Programs has a goal of performing these security surveys every 5 years to

determine a foreign government’s adherence to U.S. requirements for

protecting classified military information. An interagency forum comprised

14 The Arms Export Control Act requires that violations be reported to the Speaker of the

House of Representatives and the Committee on Foreign Relations of the Senate (22 U.S.C.

2753 (c), (e)).
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of State, DOD, and other agency officials uses the results of these surveys

to evaluate current export policies. While DSCA has access to summaries

that discuss these surveys, it does not get the detailed results of the

surveys, and it has not established a procedure to ensure that field

personnel receive them. Furthermore, DSCA has not provided guidance to

field personnel on when negative information in a security survey report

should be considered a weakness that requires an end-use check to be

performed. Field personnel in the countries we visited told us that there is

no process in place to provide them with results of the security surveys.

They may learn of the results through contacts with other personnel at the

embassy, or if they happen to be involved in coordinating the visit of the

security survey team, but they still do not have a consistent basis for

initiating an end-use check. Further, field personnel told us that because of

the lack of guidance, they are not sure when negative information in a

security survey would be considered a weakness requiring an end-use

check.

The other three standards that require end-use checks are based on the

political or military environments of individual countries. While field

personnel may be aware of adverse conditions in their countries, DSCA has

not established guidance or procedures for field personnel to use in

determining when such conditions require an end-use check. For example,

significant military upheaval occurred in both Indonesia and Pakistan

within the last several years. As a result, the State Department determined

that both countries are no longer eligible to purchase U.S. defense articles

and services. However, end-use checks of U.S. defense items already

provided were not performed in either country in response to the standard.

DSCA officials believed that the State Department was responsible for

notifying field personnel that the criteria had been met for an end-use

check to be conducted. However, DSCA and State have never established a

procedure for providing notification to field personnel.

Currently, the end-use monitoring training that DSCA provides to field

personnel consists of a 30-minute presentation during the security

assistance management course at the Defense Institute of Security

Assistance Management. This training is intended to familiarize students

with end-use monitoring requirements. However, this training does not

provide any guidance or procedures on how to execute an end-use

monitoring program at overseas posts or when to initiate end-use checks in

response to one of the five standards.
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Weaknesses Exist in

Implementation of WeaponSpecific End-Use Checks

DSCA relies primarily on host country records to maintain accountability

of weapon systems, such as the Stinger missile, that have specific end-use

check requirements. However, reliability of host country records varies.

Other weapon systems, such as the Advanced Medium Range Air-to-Air

Missile (AMRAAM), may have special monitoring provisions included in

the terms of the sale, but these provisions are not being implemented.

The Security Assistance Management Manual requires mandatory physical

inventory checks by U.S. personnel of Stinger man-portable air defense

missiles after delivery to foreign governments. These requirements are

included in FMS agreements for the missiles as a special condition of sale.

In 1998, DSCA revised the manual and reduced the scope of annual

physical checks by U.S. personnel. Prior to the change, U.S. personnel were

required to perform a 100-percent physical inventory of Stinger missiles

each year. U.S. personnel are now only required to physically inspect

5 percent of missile inventories each year, but the purchasing country is

required to perform 100-percent inventories and allow U.S. personnel to

review its accountability records. DSCA eliminated the 100-percent annual

inventories after determining that having U.S. personnel perform

inventories duplicated the efforts of foreign government personnel. DSCA

determined that these duplicative efforts did not improve accountability to

a degree that justified the resource expenditures and were detracting from

the overall functions of field personnel. Field officials from the 13 countries

in our survey required to perform annual Stinger missile inventories

reported that they did so.

Because U.S. personnel physically inspect only 5 percent of Stinger

missiles each year, DSCA relies on foreign governments to account for the

missiles in their possession. According to one official with Stinger missile

inventory experience, the revised procedure relies on the foreign

government to perform an all-inclusive annual inventory, including an

accounting of expended items, and to provide this information to U.S.

personnel. However, relying on the foreign government’s records may pose

a risk to achieving 100-percent accounting of the missiles because the

reliability of accountability systems varies from country to country. For

example, in one country, the government prohibits U.S. field personnel

from gaining access to Stinger missiles located in certain parts of the

country, limiting their ability to check the adequacy of the host country’s

inventory. DOD has discovered problems in the past with this country’s

accountability procedures. Furthermore, DSCA completed a worldwide

baseline inventory in December 1999 that accounted for most, but not all,

Stinger missiles and identified security concerns in some countries. DSCA
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is investigating these discrepancies by asking for more information from

these foreign governments on the disposition of the missiles.

While FMS agreements for the AMRAAM include provisions permitting U.S.

personnel to verify that purchasing countries have met security

requirements, including the verification of inventory numbers, end-use

checks have not been performed on the basis of these provisions. Although

this policy was formalized in 1999, the provisions were included in FMS

agreements for AMRAAM as early as 1994. According to Air Force officials,

11 AMRAAM agreements with 9 countries, out of a total of 29 agreements

with 18 countries, contain provisions permitting end-use checks. However,

none of the field personnel in the nine countries that have these provisions

responded in our survey that they conducted any end-use checks on the

basis of these provisions. Field personnel that we visited told us that they

would need specific direction from DSCA or the military departments

before they would initiate end-use checks of AMRAAMs, and no specific

direction has been provided. Senior State Department and Air Force

officials told us that the purpose of these provisions is to provide authority

for U.S. government personnel to perform end-use checks if problems are

suspected or identified with the host country’s accountability for the

missiles. Because end-use checks have not been performed under these

provisions, information is not available to evaluate the adequacy of the host

countries’ accountability for these missiles.

According to information obtained from the 68 posts we surveyed, end-use

checks were required for only 1 other weapon system besides Stinger

missiles in fiscal years 1997-99. In one country, U.S. personnel annually

audit the effectiveness of the security measures taken to safeguard the

classified components and technology of the M1A1 tank, and particularly

its armor. Another country reported that the U.S. government is asking for

special end-use monitoring of the Patriot Advanced Capability-3 missile.

The monitoring may include unannounced inspections of sensitive missile

components.

DSCA Is Not Meeting

End-Use Monitoring

Reporting

Requirements

The end-use monitoring amendment requires an annual report to Congress

on the actions taken to implement the end-use monitoring program that is

to include detailed accounting of costs and number of personnel associated

with the program. However, DSCA does not collect information on the

activities and resources expended for end-use monitoring and has not

reported annually to Congress as required.
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DSCA does not require field personnel to track the allocation of time they

spend on specific FMS responsibilities, so it cannot track the personnel

costs of end-use monitoring activities. We previously reported that DSCA

does not have sufficient information to determine the actual costs of

administering the FMS program.15 Furthermore, officials at both Unified

Commands we visited do not use hours spent by field personnel on end-use

monitoring to justify manning requirements. The total authorized number

of military field personnel that may perform FMS responsibilities was 378

in fiscal year 1999.

While field personnel submit periodic activity reports to security assistance

managers in the Unified Commands, officials told us that the reports do not

include end-use monitoring activities because they are not being

performed. The reports we reviewed did not include information on

end-use monitoring activities, except for Stinger missile inspections. Field

personnel advised us that they would report end-use monitoring

information only if they observed evidence of misuse of U.S. equipment.

In 1997, the President reported to Congress on end-use monitoring

activities performed under the Arms Export Control Act and the Foreign

Assistance Act. This report contained information on DOD’s

implementation of end-use monitoring under the FMS program. In 1998,

DOD reported to Congress through the annual congressional presentation

document16 on the level of end-use monitoring training it provided to field

personnel in fiscal year 1997. The report did not include any information on

DOD’s end-use monitoring activities or the resources that it expended on

these activities. In 1999, DSCA did not provide input to the congressional

presentation document on end-use monitoring during fiscal year 1998.

DSCA officials attributed this omission to staff changes. Although the most

recent congressional presentation document, issued in May 2000,

contained supporting information justifying the State Department’s end-use

monitoring program, it did not contain any information about DSCA’s

end-use monitoring of government-to-government transfers. A DSCA

official advised us that he prepared input on the agency’s end-use

monitoring program and did not know why the State Department omitted

it.

15 Foreign Military Sales: Efforts to Improve Administration Hampered by Insufficient

Information (GAO/NSIAD-00-37, Nov. 22, 1999).

16 This document supports the State Department’s request for resources to carry out foreign

operations, including DOD’s security assistance programs.
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Conclusions In response to the 1996 end-use monitoring amendment to the Arms Export

Control Act, DOD issued standards for end-use checks and established

training for overseas field personnel, but it did not issue implementing

guidance or procedures. Without them, DOD’s end-use monitoring program

cannot provide assurances that foreign governments are adhering to

conditions placed on U.S. arms transfers. Because adherence to such

conditions is one of the components in the decision-making process of

approving arms transfers, information obtained from the end-use

monitoring program could also be used in the approval process. Further,

because DOD has not collected required information, Congress may be

limited in its ability to evaluate the implementation of the end-use

monitoring program or to determine if additional resources are needed.

Recommendations To improve the implementation of the end-use monitoring program, we

recommend that the Secretary of Defense, with concurrence from the

Secretary of State,

• issue specific guidance to field personnel on what activities need to be

performed for the routine observation of U.S. defense equipment and

additional guidance for the monitoring of specific weapon systems;

• develop procedures to provide field personnel with the information

necessary to apply the five end-use check standards, including the

information contained in Arms Export Control Act violation reports, and

provide guidance on when to apply the standards;

• reconcile discrepancies in foreign governments’ Stinger missile

inventories, where discrepancies exist; and

• comply with the 1996 end-use monitoring amendment by reporting

required information to Congress.

Agency Comments In written comments on a draft of this report, DOD generally agreed with

our findings and recommendations and stated that it plans to take steps to

improve the implementation of the Foreign Military Sales end-use

monitoring program. In response to our first recommendation on routine

observation and specific weapon monitoring, DOD stated that it has

drafted an enhanced end-use monitoring program that it will coordinate

with the State Department. The program would specifically target high-risk

defense articles for random annual end-use checks. In response to our

other three recommendations, DOD plans to (1) develop standardized

information necessary for field personnel to apply the five end-use check
B-285781

Page 17 GAO/NSIAD-00-208 Foreign Military Sales

standards and provide them with guidance on when to apply the standards,

(2) task field personnel to ensure that an action plan is in place to rectify

any discrepancies in Stinger missile inventories, and (3) require field

personnel to report work-years and dollars associated with Foreign

Military Sales end-use monitoring activities in order to comply with the

Arms Export Control Act reporting requirements. DOD’s comments are

reprinted in appendix II.

In written comments on a draft of this report, the State Department

expressed concern that the report may suggest that it is responsible for the

lack of an effective end-use monitoring program for Foreign Military Sales

because it has not shared end-use violation reports with DOD. State said

that the violation reports it prepares for Congress are based on information

that is frequently available to both State and DOD simultaneously and that

the violation reports are not an effective driver for initiating end-use

checks.

We agree that the State Department is not responsible for the lack of an

effective end-use monitoring program for Foreign Military Sales, but as we

state in our report, DOD needs the information contained in the end-use

violation reports to implement its end-use check standards. According to

DOD, the purpose of conducting end-use checks under this specific

standard is to verify, after the identification of a violation, that the foreign

government is committed to the proper control and use of U.S.-origin

items. In 1996, when DOD proposed this end-use check standard, it

coordinated with the State Department. On the basis of our discussions

with both Defense and State officials, there is no indication that the State

Department raised objections to the standards at that time. While the initial

intelligence may be available to both agencies, the State Department

investigates allegations to confirm the existence of a violation before it

reports to Congress. A separate investigation by DOD officials of the same

allegations would duplicate the State Department’s efforts. In order to

allow flexibility, we did not recommend that the State Department provide

the end-use violation reports to DOD. We have modified our

recommendation that the Secretary of Defense develop procedures to

provide field personnel with the actual violation reports, and instead

recommend that the Secretary provide the information contained in the

violation reports. We continue to believe that sharing the information

contained in the State Department’s violation reports is the most efficient

means for field personnel to implement DOD’s current end-use check

standards. The State Department’s comments are reprinted in appendix III.
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Page 18 GAO/NSIAD-00-208 Foreign Military Sales

Scope and

Methodology

To assess implementation of DOD’s end-use monitoring requirements for

defense articles and services transferred under the FMS program, we

interviewed DOD and State officials at headquarters and field locations. We

obtained documentation on roles and responsibilities of organizations

involved in end-use monitoring. We obtained and reviewed laws,

regulations, policies, and procedures for end-use monitoring of defense

articles and services transferred through the FMS program in

government-to-government transfers and directly, under export licenses, by

U.S. defense contractors to foreign purchasers. To become familiar with

the roles and responsibilities of field personnel, we attended a training

course for security assistance officials assigned to overseas posts at the

Defense Institute of Security Assistance Management.

We also used the Internet to survey personnel assigned to 68 overseas posts

to determine the extent of end-use monitoring activities conducted in fiscal

years 1997-99. We visited two Unified Command headquarters offices and

field offices responsible for security assistance programs in five countries.

Most of the survey countries had purchased sensitive or significant defense

equipment. We selected countries by (1) reviewing a cumulative list of FMS

equipment purchased, as of August 1999, for all participating FMS entities

and (2) consulting with officials at DOD and State to obtain their input for

additions or deletions. Countries included in our survey are listed in

appendix I. After reviewing initial responses to our survey, we obtained

clarifications and additional information from 34 posts through e-mail

exchanges, telephone contacts, and field visits to five countries. To

evaluate end-use monitoring activities, procedures, resources, and

limitations, we visited the U.S. European Command, the U.S. Pacific

Command, and five countries in the areas of responsibility of these two

commands: Germany, Greece, Korea, Spain, and Thailand.

To determine the extent to which DOD has satisfied the reporting

requirements of the end-use monitoring amendment to the Arms Export

Control Act, we obtained copies of the initial report on the implementation

status sent by the President to Congress in August 1997 and of the annual

congressional presentation documents for fiscal years 1998-2001. We

discussed reporting requirements and the Department’s compliance with

the requirements with officials responsible for input on end-use monitoring

of government-to-government transfers.

We performed our review from November 1999 through August 2000 in

accordance with generally accepted government auditing standards.
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Page 19 GAO/NSIAD-00-208 Foreign Military Sales

We are sending copies of this report to the Honorable Sam Gejdenson,

Ranking Minority Member, Committee on International Relations, U.S.

House of Representatives, and the Honorable Jesse Helms and the

Honorable Joseph Biden in their capacities as Chairman and Ranking

Minority Member, Committee on Foreign Relations, U.S. Senate. We are

also sending copies to the Honorable Madeleine K. Albright, Secretary of

State; the Honorable William S. Cohen, Secretary of Defense; and the

Honorable Jacob J. Lew, Director, Office of Management and Budget. We

will also make copies available to others on request.

Please contact me at (202) 512-4841 if you have any questions concerning

this report. Contacts and key contributors to this assignment are listed in

appendix IV.

Sincerely yours,

Katherine V. Schinasi

Associate Director

Defense Acquisitions Issues
Page 20 GAO/NSIAD-00-208 Foreign Military Sales

Appendix I

List of Countries Included in Our Survey of Apendxies

End-Use Monitoring ApendixI

Argentina Korea

Australia Kuwait

Austria Latvia

Bahrain Lebanon

Belgium Lithuania

Bolivia Luxembourg

Botswana Malaysia

Brazil Mexico

Cameroon Morocco

Canada New Zealand

Chad Nicaragua

Chile Norway

Colombia Oman

Costa Rica Panama

Czech Republic Paraguay

Denmark Peru

Dominican Republic Philippines

Ecuador Portugal

Egypt Saudi Arabia

El Salvador Singapore

Estonia South Africa

Ethiopia Spain

Finland Sweden

France Switzerland

Germany Taiwan

Greece Thailand

Guatemala The Netherlands

Honduras Tunisia

Indonesia Turkey

Israel United Arab Emirates

Italy United Kingdom

Japan Uruguay

Jordan Venezuela

Kenya Yemen
Page 21 GAO/NSIAD-00-208 Foreign Military Sales

Appendix II

Comments From the Department of Defense ApendixI
Appendix II

Comments From the Department of Defense

Page 22 GAO/NSIAD-00-208 Foreign Military Sales
Appendix II

Comments From the Department of Defense

Page 23 GAO/NSIAD-00-208 Foreign Military Sales
Page 24 GAO/NSIAD-00-208 Foreign Military Sales

Appendix III

Comments From the Department of State ApendxiI
Page 25 GAO/NSIAD-00-208 Foreign Military Sales

Appendix IV

GAO Contacts and Staff Acknowledgments ApendixIV

GAO Contacts Katherine V. Schinasi (202) 512-4841

Thomas J. Denomme (202) 512-4287

Staff

Acknowledgments

In addition to those named above, John Neumann, Anne W. Howe,

Paula J. Haurilesko, Jack E. Edwards, David J. Henry, and Eric E. Petersen

made key contributions to this report.

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