GAO

United States General Accounting Office

Report to the Chairman, Committee on 

International Relations, House of 

Representatives

November 1999 FOREIGN MILITARY 

SALES

Efforts to Improve 

Administration 

Hampered by 

Insufficient 

Information

GAO/NSIAD-00-37

Page 1 GAO/NSIAD-00-37 Foreign Military Sales

Contents

Letter 3

Appendixes Appendix I: Breakdown of Foreign Military Sales 

Administrative Funding and Organizations 28

Appendix II: Comments From the Department of Defense 31

Tables Table 1: Fiscal Year 1998 Program Management Spending and FMS 

Administrative Budget Spending by Military Service 10

Table 2: Projections of Foreign Military Sales Versus Actual Sales 

Realized 13

Table 3: Fiscal Year 1998 FMS Administrative Budget Allocation 

and Roles of Primary FMS Organizations 29

Figures Figure 1: Trend in the Value of Foreign Military Sales, Fiscal Years 

1989-1998 7

Figure 2: Military Services’ FMS Administrative Budgets, 1990-2002 9

Figure 3: FMS Administrative Account Balance, Fiscal Years 1983-1998 14

Figure 4: Projected Administrative Account Balance With 2.5-Percent 

Administrative Charge at $7.5 Billion Sales and $10 Billion Sales, 

1999-2007 19

Figure 5: DOD Organizations That Receive FMS Funding 30

Abbreviations

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-283614 Letr

November 22, 1999

The Honorable Benjamin A. Gilman

Chairman, Committee on International Relations

House of Representatives

Dear Mr. Chairman:

Foreign military sales are an important component of the U.S. security 

assistance program and also represent a key Department of Defense 

acquisition strategy to help lower the unit costs of weapon systems.1

 The 

Arms Export Control Act provides a number of ways to price defense 

articles and services transferred under the Foreign Military Sales program, 

including actual value, replacement value, and full cost, and requires that 

the Department of Defense recover, with specified exceptions, the full 

estimated cost of administrating such sales.2

 As a result of budget pressure 

from declining sales and customer complaints about program 

inefficiencies, the Defense Security Cooperation Agency, which manages 

the program, and the military services have begun a number of reinvention 

efforts to improve the management and implementation of the Foreign 

Military Sales program.

In response to your concerns, we assessed the Foreign Military Sales 

program to determine the changes needed to improve the viability of the 

program. Specifically, we evaluated (1) whether the Foreign Military Sales 

program has achieved full recovery of its administrative costs, (2) the 

Defense Security Cooperation Agency’s basis for making administrative 

account adjustments, and (3) the effectiveness of various Foreign Military 

Sales reinvention efforts in terms of cost recovery.

Results in Brief The Department of Defense does not have sufficient information to 

determine the administrative costs associated with the Foreign Military 

Sales program. As a result, the Department is unable to use actual cost as a 

1

See Defense Trade: DOD Savings From Export Sales Are Difficult to Capture

(GAO/NSIAD-99-191, Sept. 17, 1999).

2

See sections 21 and 22 of the Arms Export Control Act (22 U.S.C. 2761 and 2762).
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basis to determine what charges should be applied to foreign military sales, 

and does not know if the percentage charged to the customer on the dollar 

value of individual sales is appropriately recovering Foreign Military Sales 

program costs. The allocation of administrative funds to activities 

responsible for implementing the Foreign Military Sales program is based 

on past administrative budget outlays and perceived needs. In addition, the 

military services directly charge customers for some administrative tasks 

on individual sales. These are referred to as program management charges. 

Under existing guidelines, the services have discretion concerning which 

administrative activities associated with the Foreign Military Sales program 

should be funded through the administrative budget and which should be 

directly funded through program management charges.

The Defense Security Cooperation Agency uses estimated sales projections 

and the balance of the administrative account to determine whether 

program adjustments must be made. Sales projections are judgmental 

estimates on the part of the agency’s country desk officers and are adjusted 

by the Defense Security Cooperation Agency’s management. When the 

administrative account balance fell below zero, the Defense Security 

Cooperation Agency increased fees, sought and obtained legislative relief 

that allowed program costs to be moved to Department of Defense 

appropriations accounts, and reduced administrative budgets provided to 

the military services. Conversely, a recent decision to reduce the 

administrative fee charged was justified, in part, by the large balance 

currently held in the account. Having a positive balance in the 

administrative account is important, since a certain level of funding is 

needed to carry out work that has already been paid for by customers; 

however, too large an account balance may represent a mismatch between 

fees and administrative account allocations to those activities 

implementing the Foreign Military Sales program.

Reinvention efforts by the Defense Security Cooperation Agency and 

military services include some initiatives that could enable Foreign Military 

Sales program managers to better identify costs. However, these initiatives 

lack a common approach and are managed as independent efforts. As a 

result, these initiatives as currently structured are unlikely to provide the 

Defense Security Cooperation Agency with complete and consistent 

information about the costs of administering foreign military sales, thus 

making it difficult for that agency to ensure that the program is fully 

recovering required administrative costs, allocating administrative budgets 

appropriately, or accurately assessing the impact of other reform 

initiatives. 
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We make recommendations in this report for the Department to improve 

program management for foreign military sales by directing that efforts to 

identify costs use a comprehensive and consistent definition of 

administrative tasks, by developing and communicating guidance that 

requires consistent application of program management charges, and by 

identifying alternative program uses for any excess administrative account 

balance.

Background Under the Foreign Military Sales (FMS) program, the Department of 

Defense (DOD) provides defense items, services, and military training 

through cash and credit sales, grant, lease, or loan from DOD inventories or 

through new procurements under DOD-managed contracts. Individual 

sales transactions between the U.S. government and a foreign government 

range from sales of major items (such as F-18 aircraft with associated 

parts, maintenance, and training) to military clothing or commercial 

vehicles. The value of individual sales—otherwise known as cases—ranges 

from billions of dollars to less than $100.

The Arms Export Control Act states that FMS sales should include 

appropriate charges for administrative services to recover the full 

estimated costs of administering sales—with some costs, for example, 

fixed base operation costs, specifically excluded—and that such charges 

should be calculated on an average percentage basis.3

 However, the law 

does not define the basis for determining if full cost recovery is achieved. 

Currently, the Defense Security Cooperation Agency (DSCA) applies a 

2.5-percent administrative charge on all foreign military sales and a 

3.1-percent logistics support charge on certain spare parts, supply, and 

maintenance items.4

 These charges are collected and held in an 

administrative cost clearing account within the FMS Trust Fund. Using this 

account, DSCA manages the FMS program by developing an annual 

administrative budget that allocates funding to the defense agencies for the 

execution of the program.

3

The Arms Export Control Act sets the requirement for recovery of FMS costs. Full 

accounting for the cost of federal programs is required by federal financial accounting 

standards.

4

In June 1999, DOD reduced the administrative charge from 3 to 2.5 percent. Also, instead of 

the 2.5-percent administrative charge, the FMS program applies a 5-percent administrative 

charge to sales of nonstandard articles and services.
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The FMS Trust Fund, which has an annual balance of approximately 

$5.9 billion, is a vehicle for processing foreign country funds required for 

FMS payments to U.S. contractors for new procurements and to DOD 

components for sales from DOD stock. This trust fund was established to 

facilitate purchases of U.S. defense articles and services by foreign 

countries. DSCA uses the administrative cost clearing account, with a 

current balance of approximately $500 million, to fund its annual FMS 

administrative budget, which supports the FMS infrastructure and the 

execution of foreign military sales. In fiscal year 1998, the administrative 

budget was $350 million. DSCA and the military services distribute this 

budget to over 60 DOD organizations to assist in the execution of the FMS 

program. Organizations, such as the military services, that conduct sales 

receive 64 percent of FMS administrative funding while 36 percent goes 

toward centralized administrative activities, such as DSCA and the Defense 

Finance and Accounting Service. (See app. I for details on FMS budget 

allocations and the organizations that receive FMS administrative funding.) 

Besides the administrative charges, the military services charge individual 

sales for administrative expenses that are not ordinarily supported by the 

administrative budget, such as salaries and expenses associated with 

program management efforts on weapon system sales.

In early 1998, press accounts drew attention to problems with the FMS 

program by highlighting declining FMS sales and growing customer 

dissatisfaction. In recent years, the level of foreign military sales has 

generally declined, as shown in figure 1. Competition from other countries’ 

exports as well as from direct commercial sales from U.S. suppliers to 

foreign governments is pressuring the program to perform more efficiently. 

Although generally supportive of the FMS program, both foreign customers 

and U.S. industry are complaining about the costs and inefficiencies of the 

program. The use of cost-based rather than fixed-price contracts and a lack 

of transparency in the costs are major irritants. Lack of transparency is 

illustrated by the uncertainty regarding what services are paid for through 

the administrative charge as compared to direct charges on individual 

sales. In May 1998, the Deputy Secretary of Defense called for an effort to 

examine ways to streamline the FMS process, stating that there are major 

opportunities for re-engineering FMS business practices. DSCA’s Director 

explained that savings could be achieved through consolidating activities 

that administer sales.
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Figure 1: Trend in the Value of Foreign Military Sales, Fiscal Years 1989-1998

Note: In the early 1990s sales increased as a result of the Persian Gulf War.

Source: DSCA. 

Information on Cost of 

Administering FMS Is 

Not Sufficient to 

Determine Cost 

Recovery 

In 1997, the DOD Office of the Inspector General reported that DSCA did 

not have reliable information on either the full cost of the FMS program or 

the cost of integral tasks that must be performed regardless of the size of 

the sale or service being purchased.5

 The Inspector General further 

reported that DSCA and the military services did not have sufficient 

information to determine administrative budget needs to plan for 

unexpected requirements or to evaluate the efficiencies and effectiveness 

of the FMS program. According to DSCA budgeting officials, the 

administrative budget that is used to pay for the administrative costs of 

foreign military sales is developed and allocated based on past 

administrative budget outlays, the perceived needs of the military services, 

and overall sales projections rather than on the actual costs.

5

Foreign Military Sales Administrative Surcharge Fund, DOD Office of Inspector General, 

Report No. 97-227, Sept. 30, 1997. In response to the report, DOD activities commented that 

such information was not necessary.
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Our analysis of sales from 1989 through 1998 found that sales valued over 

$100 million (equaling less than 1 percent of all foreign military sales) 

generated 61 percent of the program’s total dollar value of sales, and sales 

valued over $14 million (4 percent of FMS sales) generated 82 percent of 

the dollar value of all sales, but the remaining 96 percent of foreign military 

sales generated only 18 percent of the dollar value of all sales. Because the 

administrative charges are applied on a percentage basis to individual 

sales, administrative revenue collected is a function of the dollar value of 

individual sales, with larger sales accounting for more of the administrative 

charges collected than smaller sales. While these smaller sales generate 

less total revenue, they constitute a sizable portion of the FMS workload. In 

1987, DOD created a 3.1-percent logistic support charge on certain spare 

parts, supply, and maintenance items. This charge was intended to increase 

administrative revenue from logistics support sales and offset the 

program’s reliance on the largest sales. However, in fiscal year 1998 the 

logistics support charge equaled only 11 percent of total administrative 

revenue.

Effect of Budget Reductions 

on Military Services

Over the last 5 years, DSCA has reduced budget allocations to the military 

services for funding administrative costs associated with foreign military 

sales in an effort to reflect declining sales and anticipated reductions in 

administrative revenues. DSCA also reduced budgets to encourage 

organizations conducting foreign military sales to become more efficient. 

The agency reduced the military services’ administrative budgets for fiscal 

year 1995 to reflect defense planning guidance that required a 4 percent 

reduction in civilian manpower as well as presidential guidance that 

mandated a 6-percent reduction in overhead costs. Figure 2 shows the 

individual military services’ actual FMS administrative budgets for fiscal 

years 1990 through 1999 as well as budget levels set by the DSCA through 

fiscal year 2002. After adjusting for inflation, Air Force, Army, and Navy 

administrative budgets have decreased by 18 percent, 23 percent, and 

28 percent, respectively, since fiscal year 1995; current budget plans call for 

total reductions of 33 percent, 32 percent, and 38 percent, respectively by 

2002.
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Figure 2: Military Services’ FMS Administrative Budgets, 1990-2002

Source: DSCA.

While reducing FMS administrative budgets, DSCA directed the military 

services to “restructure organizations, processes and work year levels, as 

necessary, so that the essential security assistance mission is conducted 

within the prescribed funding levels.” Consequently, each military service is 

undergoing streamlining efforts to accommodate DSCA budget reductions. 

However, even with streamlining initiatives, the military services have 

indicated they will not be able to absorb further budget reductions. For 

example, the Air Force’s fiscal year 1999 budget plan submitted to DSCA 

stated that although the administrative budget estimates were developed 

based on projected sales, the number of new sales anticipated indicates 

that their workload is not decreasing commensurate with budget 

reductions. In the transmittal letter accompanying the plan, the Air Force 

cautioned that it would not be able to execute its FMS administrative 

program if administrative funding continues to decline. Air Force officials 
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stated that, under current budgets, they “cannot afford to make a new sale” 

unless additional funding is provided. Moreover, Navy officials explained 

that decreases in efficiencies are a result of inadequate funding. According 

to the Navy, the decreases in administrative budgets are resulting in an 

increase in the time it takes to process new sales and a decline in the 

number of sales the Navy is able to close. Slow case closures have been the 

subject of FMS customer complaints.

Using Program Management 

Charges

DOD guidance allows the military services to recover certain costs of 

administering FMS sales by applying program management charges 

directly to individual sales. These charges are intended for nonroutine 

levels of management effort needed to administer a sale. Table 1 shows for 

fiscal year 1998 the extent to which these program management charges 

were used by each of the services to administer foreign military sales. 

When program management charges and administrative budgets are 

combined, 37 percent of the military services’ funding for FMS 

administrative costs comes from program management charges versus 

63 percent from the administrative budget.

Table 1: Fiscal Year 1998 Program Management Spending and FMS Administrative 

Budget Spending by Military Service

Source: DSCA and the Departments of the Air Force, Army, and Navy.

Dollars in millions

Program management 

charges

FMS administrative 

budget Total

Dollars Percentage Dollars Percentage Dollars Percentage

Air Force $63.4 42 $87.4 58 $150.8 100

Army 20.9 21 80.5 79 101.4 100

Navy 47.8 48 52.7 52 100.5 100

Total $132.1 37 $220.6 63 $352.7 100
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Program Management 

Guidance Permits 

Discretion

The Security Assistance Management Manual permits discretion 

concerning when program management charges may be used and which 

administrative tasks should be charged to them.6

 According to DSCA and 

military service officials, the manual does not clearly indicate which tasks 

should be funded through program management charges and which tasks 

should be funded through the administrative budget. DSCA does not 

closely monitor the military services’ use of program management charges 

and has not addressed the need to consistently apply program management 

charges on all FMS sales. For example, in a Navy sale of Commando 

helicopter depot-level maintenance valued at $32.8 million, the 

administrative charge was $897,000 and the sale had a program 

management charge of $2.1 million. According to this sale’s letter of offer 

and acceptance, additional program management efforts were required to 

successfully deliver the material and services ordered. These efforts 

include program planning, direction, monitoring, control and coordination, 

and related travel. However, in an Army Tank Automotive and Armaments 

Command sale of 300 refurbished M60 tanks valued at $204 million, the 

administrative charge was $5.9 million. This sale had no program 

management charges. The Army’s case manager explained that the effort to 

implement this sale was extraordinary, required intensive management, 

and in hindsight probably should have had a program management charge. 

Tank Automotive and Armaments Command officials explained that they 

used their discretion and funded this effort through the administrative 

budget.

The military services differ in their reliance on program management 

charges. While program management charges represent 48 percent of the 

Navy’s total administratively related funding, they represent only 

21 percent of such funding for the Army. At key commands that implement 

FMS sales, the difference is even more significant. In fiscal year 1998, the 

Naval Air Systems Command’s program management charges represented 

71 percent of the command’s total administrative funding as opposed to 

36 percent at the Army Tank Automotive and Armaments Command. Both 

of these organizations conduct sales of major weapon systems.

These differences may be related, in part, to the differing abilities of 

commands to determine the actual cost of individual sales. The Naval Air 

6

The Security Assistance Management Manual is maintained by DSCA and establishes 

policies and procedures required to manage the FMS program and other security assistance 

programs. 
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Systems Command has a time and attendance system that is able to capture 

personnel costs for work on individual foreign military sales. As a result, it 

is easier for the Command to document program management costs on 

sales and transfer these costs to the customer. Other commands, such as 

the Tank Automotive and Armaments Command, do not have the systems 

in place to capture these costs, and officials there told us that they have 

only six ongoing sales with program management charges.

Basis for Adjusting the 

Administrative Budget

Since DSCA is not able to manage based on the cost of conducting foreign 

military sales, the agency estimates future sales and uses the administrative 

account balance to plan future budgets and adjust administrative charges. 

DSCA uses the FMS administrative account to fund administrative budgets 

in order to support the FMS infrastructure, including work required to 

execute sales and generate new sales. The administrative account balance 

is maintained through the 2.5-percent administrative charge on all sales and 

the 3.1-percent logistics support charge on certain items. A positive balance 

in the administrative account is desired since funding is needed to support 

work that has already been paid for by the customers.

To determine future administrative account balances, DSCA makes sales 

projections to anticipate future administrative revenues. DSCA’s process 

for estimating sales projections is based on subjective analysis and 

discretionary adjustments. Sales projections tend to reflect incremental 

changes from year to year, even though prior to 1995 wide variations in 

actual sales occurred. For example, sales from 1989 through 1990 jumped 

from $8.8 billion to $16.6 billion, from 1992 through 1993 jumped from 

$13.9 billion to $31.1 billion, and then from 1994 through 1995 declined 

from $13.3 billion to $9.0 billion. Table 2 contains DSCA’s sales projections 

and actual sales from 1991 through 1999.
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Table 2: Projections of Foreign Military Sales Versus Actual Sales Realized

Source: DSCA.

DSCA projects foreign military sales for the current and the next 5 fiscal 

years. DSCA country managers or desk officers draft country estimates of 

projected sales based on their knowledge and experience as well as 

through consultation with other knowledgeable sources. DSCA offers little 

guidance or criteria and no systematic tools to its staff concerning how to 

develop these estimates. DSCA’s Director and Deputy Director are provided 

summaries of country estimates and have wide latitude in adjusting the 

estimates. For example, in May 1999, sales projections were revised after 

DSCA had requested a decrease in the administrative charge from 3 to 

2.5 percent. In January 1999, DSCA had projected sales of $8.3 billion in 

fiscal year 2001 to $7.5 billion for fiscal year 2004. Two weeks after DSCA 

proposed lowering the administrative charge, the DSCA Comptroller 

submitted $10 billion sales projections for the same fiscal years. The 

change was based on October 1995 projections, and according to DSCA 

managers, the projections did not include any new analysis. The basis for 

the upward adjustment, according to DSCA officials, was essentially 

judgment. Using the higher sales projections, DSCA estimated higher future 

balances for the FMS administrative account, which provided additional 

support for the administrative charge reduction.

From 1984 to 1991, when the administrative account consistently had a 

negative balance (ranging between $49 million and $389 million as shown 

Dollars in billions

Sales projection by fiscal year

Date of 

projection 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Sept. 1991 $12.0 $11.0

Sept. 1992 17.0 $12.0 $12.0 $11.0 $11.0 $10.0

Oct. 1993 11.5 10.0 10.0 10.0 9.0 $9.0

Oct. 1994 9.0 9.5 10.5 9.0 8.5 $12.0

Oct. 1995 9.8 9.5 9.0 8.5 12.0 $10.0

Oct. 1996 10.6 10.5 12.4 12.7 11.3 $11.8

Jan. 1998 8.9 9.3 8.2 8.3 7.3 $7.5

Jan. 1999 10.8 9.0 8.3 7.3 7.5 $7.5

May 1999 10.8 9.0 10.0 10.0 10.0 10.0

Actual sales $13.9 $31.1 $13.3 $9.0 $10.3 $8.8 $8.2
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in fig. 3), DSCA initiated various actions to improve the balance. These 

included reducing administrative budget allocations, increasing 

administrative charges and moving FMS administrative costs to other DOD 

appropriated accounts. More recently, in June 1999, DOD decreased the 

administrative charge from 3 to 2.5 percent in part because the balance in 

the administrative account had grown to $500 million.

Figure 3: FMS Administrative Account Balance, Fiscal Years 1983-1998

Source: DSCA.
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The following shows the actions taken to adjust the FMS account balance:

• In 1985, the Arms Export Control Act was amended so that the FMS pro 

rata share of fixed base operation costs were eliminated as an expense 

to the FMS administrative account.7

 Until then, the program was 

required to pay a pro rata share of fixed base operation costs.

• In 1985, timing of payments was revised to collect 50 percent of the 

administrative charge when a foreign military sale commences and the 

remaining 50 percent when equipment or services are delivered. Prior to 

this time, the entire administrative charge was collected as equipment 

and services were delivered.

• In 1987, military staff years associated with administering the program 

were reduced by 20 percent. This reduction equated to $60 million in 

reduced program costs for the first year implemented.

• In 1987, DOD created the 3.1-percent logistic support charge on certain 

spare parts, supply, and maintenance items. This charge was intended to 

increase administrative revenue from smaller sales and offset the 

program’s reliance on the largest sales. In fiscal year 1998, the logistics 

support charge was about $37 million, or 11 percent of total 

administrative revenue.

• In 1989, the Arms Export Control Act was amended to allow the FMS 

program to avoid paying for certain costs associated with military 

personnel who worked on the FMS program as well as unfunded civilian 

retirement.8

 This action was taken in lieu of a proposal to increase the 

FMS administrative charge from 3 to 5 percent. During fiscal year 1990, 

the cost avoidance for the program was about $80 million. Currently, 

DSCA data shows that this cost avoidance for 1999 would also be about 

$80 million.

• In 1999, the FMS administrative charge was reduced from 3 to 

2.5 percent in part because the account balance was perceived as too 

high, and DOD wanted to send a message to its foreign customers that it 

was committed to making the FMS program more effective and efficient.

In addition, although DSCA uses the administrative account balance as a 

basis for decisions relating to administrative charges and budgets, agency 

officials acknowledge that there is no guidance on what constitutes a 

prudent balance for the administrative account. DSCA officials explained 

7

P.L. 99-83, Aug. 8, 1985.

8

P.L. 101-165, Nov. 21, 1989.
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that a positive account balance is needed to support future work that has 

already been paid for by customers. Estimating an appropriate account 

balance is difficult since DSCA does not manage based on cost and is not 

able to estimate the cost of the work it has committed to. Typically, DSCA 

has sought to maintain a level of about 1-1/2 times the yearly administrative 

budget, which is roughly equal to the current account balance of about 

$500 million.

Reinvention Efforts 

Lack a Common 

Approach to 

Administrative Costs

DSCA and the military services are conducting various separate 

reinvention initiatives to improve the management and implementation of 

the FMS program. Generally, these initiatives include activities to reduce 

budgets, streamline organizations, improve business processes, reduce 

cycle times, improve the FMS program for the customers, and team with 

U.S. industry to develop hybrid sales with direct commercial and foreign 

military program components. As knowledge of program costs is necessary 

to many of these initiatives, the military services and DSCA each have 

efforts specifically related to identifying costs. However, the separate 

efforts take different approaches to address cost issues, have different 

coverage, and have not been coordinated.

DSCA has identified cost recovery as a key issue in its reinvention efforts. 

In May 1998, DSCA initiated a study to measure the cost of those key tasks 

funded by the administrative budget at certain military service buying 

commands, such as the cost of pre-sale, customer support, sale execution, 

and sale or case closure efforts. The DSCA effort will not capture the total 

cost of administering the FMS program since it is attempting to capture 

costs charged to the administrative budget and not administrative costs 

associated with program management charges.

The Air Force has begun an initiative to outsource a large portion of its 

workload, which it hopes will improve efficiency. It will also add program 

charges for certain activities that had previously been funded through the 

administrative budget. The goal of the initiative is to increase 

responsiveness to foreign customers, decrease the time required to execute 

and close sales, provide timely sale reconciliation, reduce costs to the 

customer, and align fees with services. Under the Air Force initiative, all 

activities required to execute a sale will be considered for outsourcing 

except inherently governmental functions—such as exercising program 

decision authority, contracting officer authority, and financial authority 

requiring funds certification. The intent of the Air Force initiative is to 

consolidate all personnel and travel costs required for managing the 
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execution of sales and charge these costs directly on program management 

lines, whether those costs are incurred by government personnel or 

contractor personnel. As a result, the Air Force would charge personnel 

and travel costs previously funded through the administrative budget 

directly to sales. In an August 1998 memorandum to DSCA, the Air Force 

outlined its initiative and requested a waiver of the current guidance on 

program management charges in order to implement the proposal. DSCA 

did not respond to the Air Force’s request. In March 1999, the Air Force 

decided to proceed with implementing its initiative despite DSCA’s lack of 

response. The Air Force acknowledged in a June 1999 memorandum that 

the overall costs to customers may increase as they identify specific 

functions and associated costs that could be directly charged to foreign 

military sales.

Navy reinvention efforts call for centralized control of Navy administrative 

funding and program management funding. The Navy plans to document 

their costs of administering foreign military sales to ensure it is properly 

reimbursed for these costs. Although the Navy is not yet able to account for 

its actual costs in administering foreign military sales, it already pays for 

nearly half of its total administrative costs using program management 

charges. The Navy strives to charge all costs that can be associated with a 

sale directly to that sale. For example, the Naval Air Systems Command has 

implemented a time and attendance system that allows the Command to 

account for all personnel costs directly associated with particular sales.

The U.S. Army Security Assistance Command has developed a system that 

breaks down the costs of tasks related to administering sales. The Army 

plans to allocate its FMS administrative budget according to these tasks. 

Army officials believe that this will help them justify their administrative 

budget when DSCA is making budget decisions.

Administrative Charge 

Reduced Without Cost 

Information

The most significant action taken under DOD’s current reengineering 

efforts was the June 1999 decision to reduce the administrative charge 

from 3 to 2.5 percent. DSCA stated that this decision was based on planned 

streamlining initiatives, anticipated increases in sales as a result of the 

Balkan conflict, and a high balance in the FMS administrative account. 

According to DOD, the reduction was intended to show the customer that 

they were serious about making the process more efficient.
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Until mid-May 1999, DSCA’s estimates showed that with a 2.5-percent 

administrative charge the administrative account would reach a deficit by 

2007 (see fig. 4).9

 As noted previously, 2 weeks after DSCA’s proposal to cut 

the administrative charge, foreign military sales projections were adjusted, 

putting the future account balance on a more positive footing. However, 

DSCA estimates continued to show a downward slope in the account 

balance. DSCA’s estimate of the administrative account balance using 

higher sales estimates did not consider increases in resources needed to 

cover the additional administrative costs that would likely be incurred with 

additional sales. Increased resources and budgets could result in a steeper 

reduction in the administrative account than shown in figure 4.

9

Defense Trade: Decision to Lower FMS Administrative Fee is Premature

(GAO/NSIAD-99-161R, May 13, 1999).
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Figure 4: Projected Administrative Account Balance With 2.5-Percent Administrative Charge at $7.5 Billion Sales and $10 Billion

Sales, 1999-2007

Source: DSCA.

Conclusions The Foreign Military Sales program is generally required to recover the full 

estimated costs of administering sales. Although expected to operate on a 

cost recovery basis, DOD does not have the systems in place to identify the 

actual cost of administering foreign military sales. Limited visibility over 

costs hampers management of costs and affects DSCA’s ability to set fee 

structures and allocate budgets appropriately. It has also resulted in 

excessively wide ranges in the administrative account balance. In addition, 

FMS program management is hampered by the lack of a consistently 

applied definition of those administrative tasks associated with 
B-283614

Page 20 GAO/NSIAD-00-37 Foreign Military Sales

implementing sales that should be charged to the overall administrative 

account and those that should be charged to program management. As a 

result, DSCA’s attempts to force program efficiencies by reducing the 

funding it provides to the military services may not be successful. In fact, 

the services have efforts in place that may be working at odds with DSCA’s 

efforts. Although each of the services is attempting to better identify its 

costs in implementing the FMS program through various reform initiatives, 

the Navy is striving to charge cases directly for all known administrative 

costs, the Air Force is planning to charge cases for costs once covered by 

the administrative budget, and the Army is collecting cost data to more 

strongly justify its existing administrative budget allocation.

Lacking an adequate information base on the administrative costs of 

executing FMS sales, clear and consistently applied guidance on when to 

use program management funding, and a coordinated approach to reform 

efforts, the impact of future program management decisions—such as the 

need to change the fee level or structure, attempts to develop hybrid 

commercial/government sales, and other DOD initiatives for the program—

will not be understood.

Recommendations To make certain that future program decisions are made on the basis of 

adequate information, we recommend that the Secretary of Defense direct 

that current efforts to identify and collect cost information use a 

comprehensive and consistent definition of administrative tasks.

To enhance the value of the administrative budget as a management tool, 

we recommend that the Secretary of Defense develop and communicate to 

the military services guidance that requires consistent application of 

program management charges.

To assure that the current FMS administrative account balance is 

appropriate, we further recommend that the Under Secretary of Defense 

(Comptroller) assess the amount of funds needed to complete existing 

sales commitments. If the current administrative account balance exceeds 

the needed funds, we recommend that the Secretary of Defense identify 

alternative program uses for these funds.

Agency Comments In commenting on a draft of this report, DOD concurred with three of our 

four recommendations. DOD also stated that ongoing reinvention efforts 
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will address the majority of our recommendations. However, DOD’s 

comments do not describe how reinvention efforts will address these 

recommendations. In certain cases, it is not clear how DOD’s proposed 

implementation of our recommendations would resolve the problems 

described in this report. In addition, DOD stated that our report 

misrepresents important facts included in several areas. DOD also 

provided technical comments that we have incorporated as appropriate. 

DOD’s comments are included as appendix II.

In terms of cost information, DOD stated that our report overstates the 

position that DOD lacks adequate cost information to manage the FMS 

program and assure full cost recovery. However, DOD’s comments and 

technical remarks focus on cost recovery from a legal perspective. As we 

note in the report, the Arms Export Control Act excludes some cost 

associated with executing the FMS program from the act’s requirement to 

recover administrative costs. However, these excluded costs are associated 

with the program and should be recognized and considered in decisions 

made about managing the program and in any reengineering or reform 

efforts. Federal financial accounting standards state that cost information 

is essential to managing federal programs in the areas of budgeting and 

control, performance measurement, determination of reimbursements and 

setting of fees and prices, program evaluations and economic choice 

decisions.10 Further, the standards require agencies to accumulate the full 

cost of outputs regardless of funding sources using appropriate costing 

methodologies and cost finding techniques. Having sufficient information 

on the total costs of executing the FMS program might have alleviated 

DOD’s need to seek legislative relief from certain costs, such as military 

pay and unfunded civilian retirement benefits, that resulted in shifting the 

pay burden from the FMS program and the foreign customer to DOD’s 

appropriations accounts and ultimately the taxpayer.

Furthermore, DOD’s comments stated that our report infers a connection 

between the lack of cost information, the annual FMS administrative 

budgets provided to the military services, and the use of program 

management charges. While DOD concurred with our recommendations 

related to the lack of cost information and program management guidance, 

the Department disagrees with our treatment of these issues. We believe 

there is a connection between the lack of cost information, annual FMS 

10Statement of Federal Financial Accounting Standard, “Managerial Cost Accounting 

Concepts and Standards for the Federal Government.” (SFFAS No. 4, July 31, 1995).
B-283614

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administrative budgets, and the use of program management charges. DOD 

uses both FMS administrative charges and program management charges 

to pay for the cost of executing the FMS program. DOD’s criteria, as stated 

in its guidance, identify the level of effort expended in performing 

management functions as the primary determiner of whether a function or 

activity should be funded by the administrative budget or through program 

management charges. DOD allows the military services discretion in 

determining what level of effort warrants program management charges. 

As a result, either program management charges or the administrative 

budget can be used as the source of funding for the same activities by 

different military services on different foreign military sales. In an 

environment in which the services have that level of discretion along with 

insufficient cost information, DOD cannot effectively manage the program 

by using the FMS administrative budget.

DOD’s comment noted that our draft report incorrectly describes the 

nature of DSCA activities associated with preparing annual sales estimates. 

However, DOD did not explain what was incorrect. DOD explained that we 

call their process judgmental, stated that country desk officers lack 

guidance or criteria in formulating sales estimates, and said that estimates 

were adjusted at the discretion of DSCA management. However, DSCA’s 

Deputy Director described this process as judgmental in discussions with 

us and noted that he substantially changed country desk officers’ sales 

estimates. DSCA’s June 1998 sales estimate guidance offers a format for 

reporting sales estimates and includes inflation indexes for adjusting 

current year dollars, and suggests that factors such as foreign military 

financing credit levels and political and economic considerations should be 

considered. This guidance does not offer country desk officers a 

methodology to be consistently applied for developing sales estimates. 

Estimating sales is not an exact science, but DSCA does not have a system 

in place for assessing the probability of future sales, as do large 

commercial firms that depend on estimates for key business decisions. 

Credible estimates are important for DSCA to plan future budget 

allocations and to ensure, as DOD points out, that adjustments related to 

management decisions do not appear arbitrary.

DOD commented that our report unfairly suggests that DSCA’s only tool for 

managing the FMS program is the administrative fund balance. We disagree 

with this description of our report and agree that the administrative fund 

balance is not the only tool DSCA uses to manage the program. As our 

report explains, DSCA uses the administrative budget to allocate resources 

to the program and uses the administrative balance as a measure to 
B-283614

Page 23 GAO/NSIAD-00-37 Foreign Military Sales

determine if change is needed. When DSCA perceives that the balance is 

not appropriate, it has taken action to raise or decrease charges, and shift 

expenses from the FMS budget to other DOD accounts. An appropriate 

administrative balance is an outcome of appropriately aligning costs and 

fees. Lacking adequate information on the costs of administering sales, past 

efforts to stabilize the administrative account balance have proven 

unsuccessful. Moreover, DOD concurred with our recommendation to 

assess the funds needed to assure that the administrative account balance 

is appropriate.

The Department concurred with our recommendation to make certain that 

future program decisions are made on the basis of adequate information by 

directing current efforts to identify and collect cost information to use a 

comprehensive and consistent definition of administrative tasks. To 

implement this recommendation, DOD commented that an ongoing 

Institute for Defense Analyses study and detailed Army functional 

breakouts would provide information for alternative models. However, the 

Institute’s study and the Army’s work are looking only at tasks currently 

funded by the FMS administrative budget, and they are not collecting 

information on administrative tasks funded by program management and 

other administrative charges to the customer. As we point out in this 

report, the military services are performing administrative tasks that are 

charged to the administrative budget and to the program management 

elements of FMS sales. Our recommendation would require the 

Department to collect and analyze information on all FMS administrative 

tasks, regardless of the funding source. Without this information, the 

Department cannot develop a comprehensive understanding of 

administrative tasks and related costs or use this information to provide 

the basis for management decisions, including decisions on appropriate 

budgets and fees that are clearly based on the cost of executing sales.

The Department concurred with our recommendation to enhance the value 

of the administrative budget as a management tool by developing and 

communicating guidance to the military services on charges for program 

management services. The Department indicated it intends to include 

guidance in the next revision to DOD regulations.

The Department concurred with our recommendation to assess the amount 

of funds needed to complete existing sales commitments to assure an 

appropriate level of the administrative account balance by stating that the 

Department will determine an appropriate “safety level.” It is not the intent 

of our recommendation to set a “safety level” with the sole purpose of 
B-283614

Page 24 GAO/NSIAD-00-37 Foreign Military Sales

avoiding risk. An appropriate balance in the account should result from 

setting fees at a level to cover costs associated with implementing existing 

sales. The account balance should clearly be related to the cost of 

implementing sales and not some predetermined level.

DOD did not agree with our recommendation to identify alternative 

program uses for excess administrative account funds. DOD points out that 

administrative account balances are not appropriated funds and are only 

available for the purposes for which they were collected under the Arms 

Export Control Act. DOD also points out that Congress imposes annual 

limits on the amount of these funds that DOD may expend. DOD contends 

that it cannot legally implement this recommendation under the current 

law. We disagree. The law does not preclude the Secretary of Defense from 

identifying alternative program uses for excess administrative account 

funds. The Arms Export Control Act permits spending this administrative 

funding for FMS administrative functions. Although annual appropriations 

laws set a ceiling for FMS administrative spending, the Secretary of 

Defense can request a higher ceiling or notify Congress that the ceiling will 

be exceeded, as has been done in the past. In identifying alternative uses, 

we would expect the Secretary to assess, for example, the value of 

spending administrative funds on systems that would ensure proper cost 

accounting. In addition, the military services have stated that they have 

unfunded needs in their administration of the FMS program. For example, 

Navy officials told us that they do not have adequate resources to ensure 

that foreign military sales are closed in an expeditious manner, and that 

delayed case closure is a significant irritant to its customers. If the 

Secretary of Defense chooses to identify program uses outside the 

parameters of the Arms Export Control Act, he can request necessary 

legislative changes to Congress. For example, the Secretary could request 

congressional authority to use FMS administrative funds to reimburse 

military pay associated with security assistance.

Scope and 

Methodology

To evaluate whether the Foreign Military Sales program has achieved full 

recovery of its administrative costs, we interviewed and collected 

documents from DSCA; the departments of the Army, Navy, and Air Force; 

and U.S. industry representatives. However, we did not validate the 

accuracy of DSCA’s and the services’ cost information. To understand 

outside factors that could affect the condition of the FMS program, we also 

reviewed documents that describe foreign customer dissatisfaction with 

the program and interviewed foreign government representatives. We used 

budget data from the DSCA Comptroller’s Office to analyze total 
B-283614

Page 25 GAO/NSIAD-00-37 Foreign Military Sales

administrative budget trends and budget allocations for fiscal year 1998. 

We also analyzed trends in military services’ actual and planned 

administrative budgets. We studied data about budgets, workload, and 

performance metrics for at least one buying command in each military 

service that was allocated a substantial portion of the FMS administrative 

budget to evaluate the impact of reductions in military services’ 

administrative budgets. We analyzed the differences between the military 

services’ total administrative and program management spending. At the 

military service commands visited, we also judgmentally selected about 

50 foreign military sales of various types and dollar values to discuss the 

workload related to these sales relative to the administrative and program 

management funding of sales. We reviewed guidance on identifying 

administrative and program management charges as well as DOD Inspector 

General reports related to the FMS program.

To determine the basis for key decisions related to the FMS fee structure 

and budget management, we analyzed the rationale for and impact of past 

program decisions on the FMS administrative account. We also reviewed 

DSCA’s process for making sales projections, which is a key component of 

estimating future administrative account balances, as well as the model 

that DSCA uses to project future administrative account balances. We met 

with representatives from two U.S. defense companies to identify how 

others develop their foreign military sales projections. We sought to 

identify the criteria DSCA uses for determining the appropriate level of the 

administrative account balance, but found that no written guidance exists. 

We collected documents from and held discussions with officials from 

DSCA and the Office of the DOD Comptroller relating to the FMS 

administrative account balance, fee structure decisions, budget 

management decisions, and sales projections.

To evaluate how various FMS reinvention efforts address cost recovery 

issues, we reviewed DSCA’s and each individual military service’s 

reinvention initiatives to determine scope, status, and level of coordination 

of FMS reinvention efforts. We collected documents from and held 

discussions with officials at the DSCA, Under Secretary of Defense 

(Comptroller), the Deputy Under Secretary of the Army for International 

Affairs, the U.S. Army Security Assistance Command, the U.S. Army Tank 

Automotive and Armaments Command, the Navy International Programs 

Office, the Naval Air Systems Command, the Deputy Under Secretary of the 

Air Force for International Affairs, the Air Force Aeronautic Systems 

Center, the Air Force’s F-16 Systems Program Office, the Air Force Security 

Assistance Center, the Warner Robbins Air Logistics Center, and the 
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Page 26 GAO/NSIAD-00-37 Foreign Military Sales

Security Assistance Directorate of the Defense Finance and Accounting 

Service Center.

We conducted our work between October 1998 and August 1999 in 

accordance with generally accepted government auditing standards.

We are sending copies of this report to Representative Sam Gejdenson in 

his capacity as Ranking Minority Member of the House International 

Relations Committee and to Senator Jesse Helms and Senator Joseph 

Biden in their capacities as Chairman and Ranking Minority Member, 

respectively, of the Senate Foreign Relations Committee. We are also 

sending copies to 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 on (202) 512-4841 if you or your staff have any questions 

concerning this report. Major contributors to this report were Blake 

Ainsworth, Raymond H. Denmark, Jr., and Lillian I. Slodkowski.

Sincerely yours,

Katherine V. Schinasi

Associate Director

Defense Acquisitions Issues
Page 27 GAO/NSIAD-00-37 Foreign Military Sales
Page 28 GAO/NSIAD-00-37 Foreign Military Sales

Appendix I

Breakdown of Foreign Military Sales Apendxies

Administrative Funding and Organizations ApendxiI

Table 3 shows the fiscal year 1998 budget allocations that the Defense 

Security Cooperation Agency (DSCA) distributed among Department of 

Defense (DOD) organizations. Organizations with the primary 

responsibility of implementing foreign military sales (FMS) received 

64 percent of this allocation, while 36 percent went to centrally managed 

and implemented activities. As shown in figure 5, over 60 organizations 

received FMS funding. While the military services receive FMS funding 

from DSCA, they are responsible for managing this funding and distributing 

it among their subordinate commands.
Appendix I

Breakdown of Foreign Military Sales 

Administrative Funding and Organizations

Page 29 GAO/NSIAD-00-37 Foreign Military Sales

Table 3: Fiscal Year 1998 FMS Administrative Budget Allocation and Roles of Primary FMS Organizations

FY 1998 Administrative Budget 

$350 million

Organization

Dollars

(in millions)

Percent of

budget Description

Centrally managed and implemented activities

Defense Finance and 

Accounting Service

$38.39 11.0 Operates DOD’s centralized FMS billing, collecting, and trust fund 

accounting system. 

Defense Security Cooperation 

Agency

14.87 4.2 Manages the overall FMS program. Acts as the DOD focal point 

for tracking arms transfers, budgetary, legislative, and other 

security assistance issues.

Defense Security Assistance 

Management System

15.08 4.3 Contractor development cost of a single, centralized security 

assistance management system.

Defense Information Systems 

Agency

12.28 3.5 Hosts the FMS legacy system database with which the Defense 

Security Assistance Management System interfaces. 

Defense Security Assistance 

Development Center

8.05 2.3 DSCA organization tasked with developing the single, centralized 

security assistance management system—the Defense Security 

Assistance Management System. 

Defense Institute of Security 

Assistance Management

4.69 1.3 Centralized DOD school for security assistance management. 

Provides instruction for U.S. government, foreign government, and 

industry personnel.

Security assistance 

organizations—overseas

23.75 6.8 DOD elements, regardless of actual title, located in a foreign 

country with assigned responsibilities for carrying out security 

assistance management.

Management Reserve 10.65 3.0 Reserve held by DSCA.

Reimbursements -1.05 -0.30

American Institute in Taiwan 1.06 0.30 A nonprofit organization established to conduct FMS 

administrative functions.

Sale implementing activities

Air Force 87.39 25.0 The military services and defense agencies are responsible for the 

execution of military assistance programs. For the FMS program, 

the military service or defense agency is responsible for preparing 

a Letter of Offer and Acceptance and implementing foreign military 

sales. The implementing agency is responsible for the overall 

management of actions that will result in delivery of the materials 

or services set forth in the Letter of Offer and Acceptance that was 

accepted by a foreign country or international organization.

Army 80.50 23.0

Navy 52.73 15.1

National Security Agency 0.63 0.2

Defense Logistics Agency 0.59 0.2

National Imagery and 

Mapping Agency

0.40 0.1
Appendix I

Breakdown of Foreign Military Sales 

Administrative Funding and Organizations

Page 30 GAO/NSIAD-00-37 Foreign Military Sales

Figure 5: DOD Organizations That Receive FMS Funding
Page 31 GAO/NSIAD-00-37 Foreign Military Sales

Appendix II

Comments From the Department of Defense ApendxiI
Appendix II

Comments From the Department of Defense

Page 32 GAO/NSIAD-00-37 Foreign Military Sales

See comment 1.

Now on p. 3.

Now on pp. 4,12-13.

Now on p. 3.

Now on pp. 7-11.
Appendix II

Comments From the Department of Defense

Page 33 GAO/NSIAD-00-37 Foreign Military Sales

Now on p. 3.

Now on p. 3.

Now on pp. 3-4.

Now on pp. 3-4.

Now on p. 5.

Now on p. 4.

See comment 4.

See comment 5.

See comment 6.

Now on p. 4.

Now on p. 5.

Now on p. 5.

See comment 3.

See comment 2.
Appendix II

Comments From the Department of Defense

Page 34 GAO/NSIAD-00-37 Foreign Military Sales

Now on p. 8.

Now on pp. 16-17.

Now on p. 8.

See comment 7.

Now on p. 12.

Now on p. 15.

See comment 8.

Now on p. 29
Appendix II

Comments From the Department of Defense

Page 35 GAO/NSIAD-00-37 Foreign Military Sales

Now on p. 29.

Now on p. 29.
Appendix II

Comments From the Department of Defense

Page 36 GAO/NSIAD-00-37 Foreign Military Sales

Now on p. 20.

Now on p. 20.

Now on p. 20.
Appendix II

Comments From the Department of Defense

Page 37 GAO/NSIAD-00-37 Foreign Military Sales

Now on p. 20.
Appendix II

Comments From the Department of Defense

Page 38 GAO/NSIAD-00-37 Foreign Military Sales

GAO Comments The following are our comments on the Department of Defense’s letter 

dated October 25, 1999.

1. Our report does not state that the Arms Export Control Act requires the 

accumulation of actual full cost for defense articles and services 

transferred under the Foreign Military Sales program. This sentence that 

DOD refers to describes the Arms Export Control Act requirement that the 

United States government not sell items under the FMS program at a loss. 

This sentence also describes that the act generally requires the program to 

recover costs associated with the implementation of the FMS program. We 

have adjusted language in this report to more precisely characterize the 

act, and clearly state that there are exceptions to the requirement of full 

cost recovery.

2. DOD’s comment is referring to our report’s reference to customer 

complaints concerning program inefficiencies. We do not believe that FMS 

program inefficiencies are only perceived. The Deputy Secretary of 

Defense, in October 1998, stated that “One of the things we’ve noticed is 

that there’s been a definite trend of countries wanting to abandon foreign 

military sales as an approach and going to direct commercial sales as an 

alternative. In large measure, I think that’s being driven by the 

inefficiencies that come with foreign military sales. It’s cumbersome, it’s 

time consuming, it’s heavily rule bound.”

3. We agree with DOD’s characterization of the law and believe the 

sentence accurately reflects that characterization. Our statement notes that 

we evaluated “whether the foreign military sales program has achieved full 

recovery of its administrative costs” and explains the scope of our review 

by defining the objectives of our audit. These objectives were derived from 

the requester’s initial request letter and in consultation with committee 

staff. Based on the requester’s concern regarding the future viability of the 

program, we examined how the FMS program has recovered its costs, 

including certain costs such as military pay for which the program has 

sought and obtained legislative relief.

4. Our report did not state that DOD was required to fully recover all actual 

administrative costs. However, the Arms Export Control Act requires the 

FMS program to recover certain costs. Our report faults DOD for not 

having sufficient information to determine whether it is recovering these 

costs. Furthermore, the federal financial accounting standard for cost 

accounting concepts and standards explains that collecting cost 
Appendix II

Comments From the Department of Defense

Page 39 GAO/NSIAD-00-37 Foreign Military Sales

information is essential to managing federal government programs in the 

areas of budgeting and control, performance measurement, determination 

of reimbursements and setting of fees and prices, program evaluations, and 

economic choice decisions. These accounting standards require agencies 

to accumulate the full cost of outputs through appropriate costing 

methodologies or cost finding techniques. While DOD is not required by 

law to fully recover cost, identifying the full cost of administering the FMS 

program is a good business practice identified in federal financial 

accounting standards.

5. We have changed the context of this sentence to add clarity to our 

message. DOD’s comment noted that we should cite the Arms Export 

Control Act when stating that the Department lacks sufficient information 

to determine if it is fully recovering FMS administrative costs. The scope of 

our work was to assess the future viability of the program and not just to 

assess DOD’s compliance with the act. Our work demonstrates that DOD 

does not have sufficient information related to the costs of the FMS 

program, whether these costs are required to be recovered by the Arms 

Export Control Act or not.

6. We agree with DOD’s characterization of the law that there are 

exclusions to full cost recovery. As noted on page 3 of this report, “the 

Arms Export Control Act provides a number of ways to price defense 

articles and services transferred under the Foreign Military Sales program, 

including actual value, replacement value, and full cost, and requires that 

the Department of Defense recover, with specified exceptions, the full 

estimated cost of administrating such sales.”

7. The DOD comment reflects Air Force budget planning levels for fiscal 

year 1995. Our report uses actual fiscal year 1995 FMS administrative 

spending by the military services as provided by DSCA budgeting officials. 

The figures in our report remain accurate as of August 3, 1999.

8. We have updated the report to include this new information provided by 

DOD.

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