United States General Accounting Office

GAO Report to Congressional Committees

April 1995 FINANCIAL

MANAGEMENT

Theater Missile

Defense Cooperation

Account

GAO/NSIAD-95-93

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-260350 

April 3, 1995

Congressional Committees

Section 242 of the National Defense Authorization Act for Fiscal Year 1994

established a Theater Missile Defense Cooperation Account in the U.S.

Treasury. Specifically, the account was created for contributions for the

Department of Defense’s (DOD) use in theater missile defense programs.

Contributions the Secretary of Defense accepts from any allied foreign

government or any international organization for theater missile defense

programs are to be deposited in the account.

We are required to annually audit the money accepted by the Secretary of

Defense under section 242 and submit the results of the audit to the

Congress.1

 This report summarizes the results of that audit.

Our specific objectives were to determine (1) whether the Theater Missile

Defense Cooperation Account was established, (2) how much money has

been contributed, (3) what actions the Secretary of Defense has taken to

obtain contributions in support of theater missile defense, (4) whether

adequate regulations to carry out the requirements of the law have been

established, and (5) whether financial transactions were carried out in

accordance with the law.

Results in Brief In response to the law, DOD established a Theater Missile Defense

Cooperation Account in the U.S. Treasury. DOD notified U.S. allies about

the account, but has not received any contributions as of the end of

February 1995. Thus, there were no financial transactions for us to assess.

Beyond informing allies about the account, DOD has made no further

efforts to obtain contributions. Instead of seeking cash contributions, DOD

has pursued the cooperative development of several theater missile

defense systems with U.S. allies. According to DOD officials, the allies have

an incentive to participate in joint development programs where a portion

of the work will be performed in their countries.

The Theater Missile Defense Cooperation Account had a $0.00 balance as

of the end of February 1995. DOD does not expect any cash contributions.

Therefore, it has not issued applicable regulations governing the Theater

1

Title 10 U.S.C. section 2609(f).

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B-260350 

Missile Defense Cooperation Account because it believes they are a low

priority.

Cooperative Theater

Missile Defense

Funding and

Development

Programs

Responding to the law, in March 1994, DOD established a Theater Missile

Defense Cooperation Account in the U.S. Treasury. In meetings on the

coordination of U.S. and allied missile development programs, DOD notified

the allies about the account. However, there have not been any

contributions. At this time, DOD officials do not anticipate any

contributions to the Theater Missile Defense Cooperation Account.

Instead, DOD and U.S. allies continue to pursue long-standing cooperative

missile development programs.

In 1985, the United States began to encourage the cooperation of U.S.

allies in missile defense research and development programs related to the

Strategic Defense Initiative. In the National Defense Authorization Act for

Fiscal Year 1994, the Congress mandated cooperation with our allies in

planning theater missile defenses.

Facing an imminent threat, Israel, with the cooperation of the United

States, has pursued a ballistic missile defense program centered around

the Arrow missile. Iraq’s actions in the 1991 Persian Gulf War heightened

concerns about ballistic missile threats. In Asia, the proliferation of

ballistic missiles has prompted the Japanese government to enter into

bilateral discussions with the United States on missile defense. The United

Kingdom, France, and Germany are also currently evaluating their ballistic

missile defense requirements.

The National Defense Authorization Act for Fiscal Year 1994 directed the

Secretary of Defense to develop a plan to coordinate U.S. and allied

theater missile defense program development and implementation, with

the goal of increasing interoperability and reducing costs. On May 5, 1994,

the Secretary of Defense provided the Congress with a report on the plan,

as required by the law.

A working group of eight nations (the United States, the United Kingdom,

Germany, Norway, France, Canada, the Netherlands, and Italy) has been

established under the North Atlantic Treaty Organization (NATO)

Conference of National Armaments Directors. This group has been

chartered to deal exclusively with finding ways to cooperate in theater

missile defense programs.

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B-260350 

The National Defense Authorization Act for Fiscal Year 1994, section 242,

required the President to certify in writing to the Congress that U.S.

representatives have formally submitted to each of the member nations of

NATO and to Japan, Israel, and South Korea a proposal regarding

cooperation on development of theater missile defenses. Until the

certification was delivered, DOD’s Ballistic Missile Defense Organization

(BMDO) was restricted to obligating no more than 80 percent of its

appropriated funds for theater ballistic missile defense.

On April 4, 1994, the Director of BMDO and his staff presented briefings to

representatives from 13 of 19 invited nations concerning current programs

and future plans for theater missile defense cooperation. The

representatives also received a letter from the BMDO Director emphasizing

the desire of the U.S. government to conduct cooperative theater missile

defense development. The nations that were invited but did not attend the

presentation were each sent a similar letter and a copy of the briefing

materials. On May 16, 1994, the President issued a determination that DOD

had complied with the law and could so notify the Congress. In May 1994,

BMDO notified the Congress of its compliance with the law, and the

restricted funds were subsequently obligated.

Regulations Not

Issued

DOD did not establish regulations to carry out the law. DOD officials told us

that they had advised U.S. allies about the Theater Missile Defense

Cooperation Account. However, DOD did not establish procedures for

soliciting contributions. In addition, procedures on operating the Theater

Missile Defense Cooperation Account were not established. According to

DOD officials, they had not expected contributions, so establishing

operating procedures and issuing regulations was a low priority.

Matters for

Consideration by the

Congress

Since there are no funds for us to audit, we believe the Congress may wish

to amend the law and eliminate the requirement that we perform an

annual audit of the Theater Missile Defense Cooperation Account.

Scope and

Methodology

We reviewed DOD information and reports on the Theater Missile Defense

Cooperation Account and theater missile defense programs. We reviewed

DOD’s financial reports on the Theater Missile Defense Cooperation

Account. We discussed these matters with officials from the Comptroller’s

Office in the Office of the Secretary of Defense, the BMDO, and the Defense

Page 3 GAO/NSIAD-95-93 Financial Management
B-260350 

Finance and Accounting Service. Our work was performed in Washington,

D.C.

We conducted our review in December 1994 and January 1995 in

accordance with generally accepted government auditing standards. We

obtained oral comments of DOD officials on a draft of this report and have

included their comments where appropriate.

We are sending copies of this report to interested congressional

committees; the Secretary of Defense; and the Director, Office of

Management and Budget. Copies will be made available to others on

request.

If you or your staff have any questions, I can be reached on (202) 512-4128.

Major contributors to this report were Charles A. Schuler and 

John A. Butcher.

Joseph E. Kelley

Director-in-Charge

International Affairs Issues

Page 4 GAO/NSIAD-95-93 Financial Management
B-260350 

List of Committees

The Honorable Strom Thurmond

Chairman

The Honorable Sam Nunn

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Ted Stevens

Chairman

The Honorable Daniel K. Inouye

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Floyd D. Spence

Chairman

The Honorable Ronald V. Dellums

Ranking Minority Member

Committee on National Security

House of Representatives

The Honorable C.W. Bill Young

Chairman

The Honorable John P. Murtha

Ranking Minority Member

Subcommittee on National Security

Committee on Appropriations

House of Representatives

(711111) Page 5 GAO/NSIAD-95-93 Financial Management
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