Foreign Military Sales: Improved Army Controls Could Prevent Unauthorized Shipments of Classified Spare Parts and Items Containing Military Technology to Foreign Countries
Published: 2004-04-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: From 1993 through 2002, the Department of Defense (DOD) delivered over $150 billion in services and defense articles--including classified spare parts and unclassified items containing military technology--to countries through foreign military sales programs. GAO was asked to review whether the Army's key internal controls adequately restricted blanket orders for (1) classified spare parts and (2) unclassified items containing military technology. GAO was also asked to determine if periodic tests were conducted to validate the Army's system and its logic.
section_title: What GAO Found
paragraphs: The Army's internal controls over foreign military sales are not adequate, placing classified spare parts and unclassified items containing military technology at risk of being shipped to foreign countries that may not be entitled to receive such items under blanket orders. Foreign countries may request items using blanket orders, which are for a specific dollar value and are used to simplify supply actions on certain categories of items. The Army lacked control edits in its system and allowed the substitution and release of classified spare parts under blanket orders for shipment to foreign countries. The Army and DOD policies prohibit the release of classified items, under blanket orders, to foreign countries. GAO identified 3 requisitions in its review, where the item manager released 11 classified digital processors to foreign countries under blanket orders. Because the Army's system did not have control edits in place to validate the substituted parts, classified items were released to foreign countries. Also, the Army has no written policy to determine the actions needed to recover classified items that have been shipped to countries not eligible to receive them. Army officials indicated that the countries were not entitled to receive these items under blanket orders but they could obtain them under a different process; so there is no need to retrieve them, and GAO agreed with their decision. Also, the Army has modified the system to validate substituted parts selected by item managers. The Army lacks control edits in its system to prevent the release of some unclassified items containing military technology requisitioned under blanket orders. Within the 21,663 requisitions that were shipped without a review, GAO found that 387 requisitions were for 2,267 restricted items that foreign countries are prohibited from requesting using blanket orders because the parts require release authority from inventory control points. Also, the Army has no written policies to recover items that have been shipped to countries not eligible to receive them. Army officials said the countries were entitled to request these items, so there is no need to recover the items. The Army has not conducted periodic tests, as required, to validate that its system is accurately reviewing and approving blanket order requisitions. GAO's and the Office of Management and Budget's internal control standards require that a system such as the Army's be periodically tested to ensure that it is working as intended. According to DOD and Army officials, they have not tested the system's logic for restricting requisitions since 1999. Also, the officials stated that the Defense Security Cooperation Agency, in October 1998, directed that no additional funds be used to expand the current system. However, according to the agency, the Army is not prohibited from periodically testing the system.

section_title: Letter
paragraphs: From 1993 through 2002, the Department of Defense (DOD) delivered over  $150 billion in services and defense articles—including classified spare  parts and unclassified items containing military technology—to foreign  countries through foreign military sales programs administered by the  military services. Some sales occurred using blanket orders, which are  requisitions for a specific dollar value and are designed to simplify supply  actions on certain categories of items for which foreign military sales  customers will have a recurring need, such as unclassified spare parts,  repair parts, minor components, training films, and publications.  According to DOD policy, the management of classified spare parts and  unclassified items containing military technology is particularly important  given their potential to be released to foreign countries that may use them  against U.S. interests. Under blanket orders, the Army’s policy is intended  to restrict the categories of items including classified materials.
This report focuses on whether the Army has adequate key internal  controls in place to prevent foreign countries from requisitioning and  receiving, under blanket orders, classified and unclassified items  containing military technology that they are not eligible to receive. Internal  control activities include policies, procedures, and processes that are  essential for the proper stewardship of and accountability for government  resources and for achieving effective and efficient program results. Our  overall objective was to determine the adequacy of the Army’s internal  controls for foreign military sales under blanket orders. Our specific  objectives were to assess and test whether key internal controls  adequately restricted blanket orders for classified spare parts sold to  foreign countries and restricted access to certain unclassified items  containing military technology. We also determined whether periodic tests  were conducted to validate that the Army’s Centralized Integrated System  for International Logistics was working as intended.
This report is one in a series on DOD’s foreign military sales program  administered by the military services. This particular report focuses on the  Army because it processed 21,703 blanket order requisitions for classified  spare parts and unclassified items containing military technology to  foreign countries, valued at about $138 million for the most recent 5-year  time period, October 1, 1997, through April 30, 2003. We plan to address  the Navy’s internal controls relating to foreign military sales in a separate  review. In July 2003, we reported on the adequacy of the Air Force’s  internal controls over shipments of classified and controlled spare parts to  foreign countries. Also, in September 2003, we reported on the adequacy  of the Air Force’s internal controls over shipments of spare parts  containing military technology to foreign countries.
To accomplish our review, we concentrated our efforts on classified spare  parts and unclassified items containing military technology that the Army  had shipped to foreign countries under blanket orders. We obtained data  on a total of 21,703 requisitions from the system on all classified spare  parts, as well as unclassified items containing military technology that  were purchased using blanket orders, and according to Army records,  were shipped to foreign countries from October 1, 1997, through April 30,  2003. In our sample, classified spare parts were shipped against  40 requisitions, and items containing military technology were shipped  against the balance of 21,663 requisitions. We conducted our review in  accordance with generally accepted government auditing standards.  Further details are in the scope and methodology section of this report.
subsections: section_title: Background
paragraphs: The sale or transfer of U.S. defense items to friendly nations and allies is  an integral component in both U.S. national security and foreign policy.  The U.S. government authorizes the sale or transfer of military equipment,  including spare parts, to foreign countries either through government-to­ government agreements or through direct sales from U.S. manufacturers.  The Arms Export Control Act and the Foreign Assistance Act of 1961, as  amended, authorize the DOD foreign military sales program.
The Department of State sets overall policy concerning which countries  are eligible to participate in the DOD foreign military sales program. DOD  identifies military technology that requires control when its transfer to  potential adversaries could significantly enhance a foreign country’s  military or war-making capability. The transfer or release of military  technology to foreign countries involves various agencies such as the  Department of State and DOD, which are responsible for controlling, in  part, the transfer of such technology.
The Defense Security Cooperation Agency, under the direction of the  Under Secretary of Defense for Policy, has overall responsibility for  administering the foreign military sales program, and the military services  generally execute the sales agreements with the individual countries. A  foreign country representative initiates a request by sending a letter to  DOD asking for such information as the price and availability of goods and  services, training, technical assistance, and follow-on support. Once the  foreign customer decides to proceed with the purchase, DOD prepares a  Letter of Offer and Acceptance stating the terms of the sale for the items  and services to be provided. After this letter has been accepted, the foreign  customer is generally required to pay, in advance, the amounts necessary  to cover costs associated with the services or items to be purchased from  DOD and then is allowed to request spare parts through DOD’s supply  system.
The foreign military sales policy and oversight for the Department of the  Army are the responsibility of the Deputy Assistant Secretary of the Army  for Defense Exports and Cooperation. The Commander, U.S. Army  Materiel Command, is the Army’s executive agent for implementing,  administrating, and managing the foreign military sales program. The U.S.  Army Security Assistance Command performs the executive agent’s  functions for the U.S. Army Materiel Command.
The United States Army Security Assistance Command’s responsibilities  start with the initial negotiation of a foreign military sale and end with the  transfer of items and completion of all financial aspects of the sales  agreement. The command uses an automated system called the  Centralized Integrated System for International Logistics to support the  U.S. Army’s management of the foreign military sales program. The  command originally developed the system in 1976, and in October 1997,  the Defense Security Cooperation Agency transferred the Army’s system  to the Defense Security Assistance Development Center. The command  retained responsibility for defining system-user requirements, designing  new processes, and directing programming modifications to the system’s  applications. However, the overall responsibility for providing system  information technology maintenance support, such as writing and testing  the programs and coordinating infrastructure support, was transferred to  the Defense Security Assistance Development Center.
Foreign military sales requisitions for Army spare parts and other items  initially are processed through the system. For blanket orders, the system  uses the security classification code to restrict the spare parts available  to foreign military sales customers. Once the system validates a  requisition, the requisition is sent to a supply center to be filled and  shipped. The Army’s requisition process for foreign military sales of parts  and other items is shown in figure 1.
section_title: Internal Controls over the Army’s Foreign Military Sales Are Not Adequate
paragraphs: The Army’s internal controls over foreign military sales using blanket  orders are not adequate, placing classified spare parts, as well as  unclassified items containing military technology, at risk of being shipped  to foreign countries, who are not eligible to receive them. We found that  the Army (1) lacked control edits in its system and allowed the  substitution and release of classified spare parts under blanket orders for  shipment to foreign countries, and that a written policy does not exist to  determine the actions needed to recover these items; (2) lacks adequate  control edits in its system to prevent the release of some unclassified  spare parts and other items containing military technology, and that a  written policy does not exist to determine the actions needed to recover  these items; and (3) has not conducted periodic tests to validate that its  system is accurately reviewing and approving blanket orders. As a result of  these inadequate internal controls, classified spare parts, as well as  unclassified items containing military technology, were shipped to foreign  countries that may not be eligible to receive them under blanket orders.
subsections: section_title: Army Lacked Control Edits in Its System and Allowed the Substitution and Release of Classified Spare Parts under Blanket Orders
paragraphs: The Army lacked control edits in its system and allowed the substitution  and release of classified spare parts under blanket orders for shipment to  foreign countries. The Army and DOD policies prohibit the release of  classified spare parts, under blanket orders, to foreign countries. We  identified 3 of the 40 requisitions in our review for the period between  October 1, 1997, and April 30, 2003, where the Army item manager had  released classified parts under 3 separate blanket orders. For these  3 requisitions, the original parts requested were unclassified but not in  stock. The item manager substituted 11 classified digital processors for the  unavailable parts and then released these parts under blanket orders for  shipment to a foreign country. According to Army officials, the foreign  countries were not entitled to receive these items under blanket orders.  However, according to Army officials, the foreign countries would be  entitled to these items because they have the equipment that these  classified spare parts support and that these countries could obtain the  parts under a different process such as a defined order. Therefore,  according to the officials, in this particular case there is no need to  retrieve the items. Based on the Army officials’ response, we agree with  their decision. Until we identified the problem, Army officials at the United  States Army Security Assistance Command, who are responsible for  implementing, administrating, and managing the Army’s foreign military  sales program, were not aware that these classified parts had been  substituted for the originally requisitioned unclassified parts. Based on our  review, the Army has modified the system to validate substituted parts  selected by item managers.
According to United States Army Security Assistance Command officials,  they have no written policy to determine the actions the Army needs to  take to recover classified spare parts or unclassified items containing  military technology that were shipped to foreign countries that are not  eligible to receive them. Army officials indicated that they have  procedures to recover items shipped in lieu of the items ordered; however,  the procedures do not address the recovery of items shipped that the  foreign country was not eligible to receive. During our review, the officials  did not agree with us that they should have written procedures in place to  recover these items indicating that this responsibility belongs in the  foreign military sales end-using monitoring program. They suggested we  contact the Department of State and the Defense Security Cooperation  Agency for additional information on recovering these items. While the  Army may not be responsible for recovering these items, the Army would  initially be aware that these items were shipped to foreign countries that  may not be eligible to receive them, and could initiate recovery of these  items. However, in discussions with officials on a draft of this report,  officials indicated their current policies and procedures to recover items  shipped in lieu of items ordered need to be modified to include items  shipped to foreign countries that may not be eligible to receive them.
section_title: Army Lacks Control Edits in Its System to Prevent the Release of Some Unclassified Items Containing Military Technology
paragraphs: The Army lacks control edits in its system to prevent the release of some  unclassified items containing military technology to foreign countries  under blanket orders. As a result, the Army has shipped some unclassified  items containing military technology to foreign countries that may not be  eligible to receive them. Officials from DOD’s Office of the Deputy Under  Secretary of Defense Technology Security Policy and Counterproliferation  indicated that the Army should have control over unclassified items  containing military technology. In addition, the Defense Security  Cooperation Agency indicated criteria for releasing these items should be  considered on a country-by-country basis prior to releasing any items to a  foreign country. The agency also stated that the military departments  should use the applicable codes available as a means to help identify spare  parts that contain military technology to ensure that the appropriate  means are taken and adequate controls are in place to prevent  unauthorized releases.
Within the 21,663 requisitions for unclassified items containing military  technology that were shipped, we found the following requisitions were  not identified and reviewed before they were released: (1) 17,175  requisitions were for 381,245 items such as circuit card assemblies, fire  control units, and electron tubes that require their inherent military  capability to be destroyed or demilitarized prior to their release to the  public; and (2) 387 requisitions were for 2,267 items that foreign countries  are prohibited from requesting using blanket orders because the spare  parts require release authority from inventory control points. Based on our  review, the Army had initiated action to modify its system to cancel  blanket orders for parts that require release authority from inventory  control points. With such a modification, these 387 requests would be  canceled. However, the action to modify the system is pending based on  the official interpretation of the Army regulation on spare parts that  requires release authority from inventory control points. In addition, as  previously mentioned, according to United States Army Security  Assistance Command officials, the Army has no written policy for  recovering classified spare parts and unclassified items containing military  technology that were shipped to foreign countries not eligible to receive  them. According to Army officials, the foreign countries were entitled to  receive these items. Therefore, according to the officials, in these  particular cases there is no need to retrieve the items. Based on the Army  officials’ response, we agree with their decision.
In 1991, the Army had a control edit installed in its system that identified  requisitions for parts containing military technology for manual review.  This control edit caused thousands of requisitions to be referred for  manual review. Army documents indicate that it removed the control edit  because according to guidance from the U.S. Army Defense Systems  Command and System Integration and Management Activity, the parts  containing military technology do not require protected storage. Army  documents also indicate that removing the control edit that identified  requisitions for unclassified items containing military technology would  eliminate an enormous number of labor hours required to research these  parts. The system does not refer for review those requisitions for items  containing military technology because Army officials stated that DOD has  determined that these items are not classified, sensitive, or pilferable;  consequently, the items should not be subjected to controlled physical  inventory requirements. In 1992, DOD changed selected stock numbers  from unclassified to a classification indicating unclassified stock  containing military technology to ensure that parts requiring  demilitarization could be researched if shortages were reported during  depot inventory reviews and do not require protected storage.
In our earlier review of the Air Force, we reported that the Air Force did  not use control edits to prevent spare parts containing sensitive military  technology from being released to foreign countries. The Air Force plans  to develop criteria for identifying spare parts containing sensitive military  technology and establish appropriate control edits in its automated system  so that requisitions for spare parts containing sensitive military technology  are identified and referred for review. Also, the Air Force uses criteria,  such as federal supply class, to restrict the parts available to foreign  military sales customers. For example, we reported that the Air Force  restricts countries from requisitioning parts belonging to the 1377 federal  supply class (cartridge and propellant actuated devices and components)  using blanket orders.
There are three codes the Army could use to identify spare parts that  contain military technology. These codes are (1) the controlled inventory  item code, which indicates the security classification and security risk for  storage and transportation of DOD assets; (2) the demilitarization codes  assigned by the item manager identifying how to dispose items; and (3) the  federal supply class code. Demilitarization codes are assigned to spare  parts for new aircraft, ships, weapons, supplies, and other equipment. The  demilitarization codes also determine whether the items contain military  technology and establish what must be done to the items before they are  sold.
section_title: Army Has Not Conducted Periodic Tests to Validate Its System
paragraphs: The Army has not conducted periodic tests to validate that its system is accurately reviewing and approving blanket order requisitions and  operating in accordance with the Army’s foreign military sales policies.  GAO’s and the Office of Management and Budget’s internal control  standards require that a system such as the Army’s be periodically  validated and tested to ensure that it is working as intended and the ability  to accurately review and approve requisitions is not compromised. In the  Federal Information Systems Controls Audit Manual, which lists  control activities for information systems, one of the control activities  listed involves the testing of new and revised software to ensure that it is  working correctly. Also, in the Management of Federal Information  Resources, the manual requires that each agency establish an information  system management oversight mechanism that provides for periodic  reviews to determine how mission requirements might have changed and  whether the information system continues to fulfill ongoing and  anticipated mission requirements. Furthermore, the Internal Control  Management and Evaluation Tool — a tool that assists managers and  evaluators in determining how well an agency’s internal control is  designed and functioning — lists monitoring as one of five standards of  internal controls. Internal control monitoring should assess the quality of  performance over time and ensure findings from reviews are promptly  resolved. Ongoing monitoring occurs during normal operations and  includes regular management and supervisory activities, comparisons,  reconciliations, and other actions people take in performing their duties.
In our review, we found that a foreign country had requested unclassified  parts using blanket orders for which the item manager substituted and  shipped classified spare parts. According to DOD officials, had the system  validated the substituted classified spare parts, the system would have  canceled the orders. United States Army Security Assistance Command  officials were unaware of this situation until we identified the problem.  Also, we found spare parts where the security classification had been  changed from unclassified to classified without Army officials being  notified of the change. Based on our review, the Army initiated actions to  add control edits to its system to (1) validate substituted spare parts  before they are released to foreign countries and (2) review monthly  supply catalog updates and cancel open blanket orders when spare parts’  security classification changes from unclassified to classified.
Defense Security Assistance Development Center officials indicated that  periodic tests of the Army’s system have not been conducted because, in  October 1998, the Defense Security Cooperation Agency directed that no  additional funds be used to expand the current system. However, Defense  Security Cooperation Agency officials stated that this directive does not  preclude the Army from periodically testing the system and its logic.  According to DOD and Army officials, they have not tested the system’s  logic for restricting requisitions since 1999 when they initially modified the  system to cancel requisitions for classified spare parts under blanket  orders. As part of our review, we tested the system by reviewing Army  restrictions applied to historical requisitions on classified spare parts and  unclassified items containing military technology and found that the  system did not always perform as intended.
According to Army officials, there have not been any reviews to assess  whether the foreign military sales requisition process for items ordered are  processed correctly. The Centralized Integrated System for International  Logistics system creates daily reports that identify problems with  requisitions, which are then reviewed by Army case managers before  continuing through the system. While officials indicated several external  audits with GAO and the Army Audit Agency have been recently  completed, these audits focused on the overall foreign military sales  program and not the requisition process. Based on our observations, these  audits do not replace a system test to determine whether the current  system is in compliance with existing requisitioning policies and  procedures.
section_title: Conclusion
paragraphs: The Army has not maintained effective internal controls over foreign  military sales sold under blanket orders. Specifically, the Army lacked  control edits in its system and allowed the substitution and release of  classified spare parts under blanket orders for shipment to foreign  countries that may not be eligible to receive them. Also, the Army lacks  control edits in its system to prevent the release of some unclassified  items containing military technology to foreign countries. Moreover, the  Army has no written policies to determine the actions needed to recover  classified spare parts and unclassified items containing military  technology that have been shipped to foreign countries not eligible to  receive them. Further, the Army failed to periodically test the Centralized  Integrated System for International Logistics system. If the Army had  conducted tests to determine whether its system was in compliance with  requisitioning policies and procedures, some classified spare parts—as  well as unclassified items containing military technology—may not have  been released to foreign countries under blanket orders. Without adequate  internal controls, classified spare parts and unclassified items containing  military technology may be released to foreign countries under blanket  orders, thereby providing military technology to countries that might use it  against U.S. interests.
Recommendations for 	 To improve internal controls over the Army’s foreign military sales  Executive Action	 program and to prevent foreign countries from being able to obtain  classified spare parts or unclassified items containing military technology  that they are not eligible to receive under blanket orders, we are  recommending that the Secretary of Defense instruct the Secretary of the  Army to take the following two actions:
Modify existing policies and procedures, after consultation with the  appropriate government officials, to cover items shipped in lieu of items  ordered to also ensure the recovery of classified spare parts that have  been shipped to foreign countries that may not be eligible to receive them  under blanket orders.
Modify existing policies and procedures covering items, after consultation  with the appropriate government officials, to cover items shipped in lieu of  items ordered to also ensure the recovery of unclassified items containing  military technology that have been shipped to foreign countries that may  not be eligible to receive them under blanket orders.
To improve the Army system’s internal controls aimed at preventing  foreign countries from obtaining classified spare parts or unclassified  items containing military technology under blanket orders, we are  recommending that the Secretary of Defense direct the Under Secretary of  Defense for Policy to require the appropriate officials to take the following  two actions:
Modify the system so that it identifies blanket order requisitions for  unclassified items containing military technology that should be reviewed  before they are released.
Periodically test the system and its logic for restricting requisitions to  ensure that the system is accurately reviewing and approving blanket  order requisitions.
section_title: Agency Comments and Our Evaluation
paragraphs: In commenting on a draft of this report, DOD concurred with two of our  recommendations and did not concur with the two other  recommendations.
First, with regard to our recommendation to modify the system so that it  identifies blanket order requisitions for unclassified items containing  military technology that should be reviewed before they are released, the  department concurred. DOD’s comments indicated that the Army will  comply with making the specific changes to the system that the Defense  Security Cooperation Agency identified as required or that the Army  would conduct its own study, given the funding and guidance necessary, to  identify items that should be reviewed before they are released. Second,  with regard to our recommendation to periodically test the Centralized  Integrated System for International Logistics, the department stated that  the Army will conduct periodic testing of the system and its logic for  restricting requisitions, given the funding and guidance necessary to do so.  We also received technical comments and we incorporated them wherever  appropriate.
With regard to our two recommendations to consult with the appropriate  agencies to determine what actions the Army needs to initiate in order to  recover (1) classified spare parts and (2) unclassified items containing  military technology that have been shipped in error, i.e., shipped in lieu of  items ordered, under blanket orders, DOD did not concur. The department  said that the Army already has procedures in place to recover classified  spare parts and unclassified items containing military technology that have  been shipped in error, i.e., shipped in lieu of items, ordered under blanket  orders. The procedures include (1) systemic status codes that will advise  the case manager that an incorrect item is being shipped by the supply  center, at which time the error can be corrected; (2) if the item is still  shipped, the case manager can begin retrieval actions by contacting the  Security Assistance Office in country; and (3) the customer can initiate a  Supply Discrepancy Report upon receipt of the incorrect item to return the  item.
We acknowledge that these procedures might address wrong items  shipped. However, they do not address the intent of our recommendations  to recover classified spare parts and unclassified items containing military  technology shipped to foreign countries that are not eligible to receive  them. If the country requested classified spare parts or unclassified items  containing military technology that it is not eligible to receive under  blanket orders, it will not likely submit a Supply Discrepancy Report if it  had intended to order the items. In addition, we interviewed Defense  Security Cooperation Agency and Army officials to determine if the  procedures they cited in the agency comments are referring to items  shipped in lieu of items ordered instead of shipment of items that foreign  countries are not eligible to receive. According to the officials, the  procedures are for items shipped in lieu of items ordered and not for the  recovery of items that the foreign countries are not eligible to receive.
As stated in our report, Army officials told us that they had no written  procedures in place to recover classified spare parts or unclassified items  containing military technology, because it is not within their responsibility  to recover these items. These officials stated that this responsibility  belongs to the foreign military sales end-use monitoring program, which  includes the Department of State and the Defense Security Cooperation  Agency. In following-up with officials on their written comments on the  draft of this report, they agreed that they need to modify existing policies  and procedures covering items, after consultation with the appropriate  government officials, to cover items shipped in lieu of items ordered to  also ensure the recovery of classified spare parts and unclassified items  containing military technology that have been shipped to foreign countries  that may not be eligible to receive them. As a result, we have modified our  two recommendations accordingly.
section_title: Scope and Methodology
paragraphs: To assess and test whether the Army’s internal controls adequately  restricted blanket orders for classified spare parts sold to foreign countries, we obtained current DOD and Army guidance on the foreign  military sales programs. We also held discussions with key officials from  the United States Army Security Assistance Command, New Cumberland,  Pennsylvania, to discuss the officials’ roles and responsibilities, as well as  the criteria and guidance they used in performing their duties to restrict  foreign countries from requisitioning classified spare parts and other items  containing military technology under blanket orders. Also, we interviewed  the officials on the requisitioning and approval processes applicable to  classified spare parts. In addition, we obtained written responses from  officials at the Defense Security Cooperation Agency, Washington, D.C., to  identify the agency’s roles and responsibilities regarding the policies and  procedures relevant to the foreign military sales programs. We also  interviewed officials from the Defense Security Assistance Development  Center, Mechanicsburg, Pennsylvania, to discuss their roles and  responsibilities, as well as the criteria and the guidance they used to  maintain and oversee the Army’s Centralized Integrated System for  International Logistics system to restrict foreign countries from  requisitioning classified spare parts and other items containing military  technology under blanket orders. Furthermore, we interviewed officials to  determine the functional and operational controls that are used to validate  requisitions entered into the system.
To test the adequacy of the Army’s internal controls to restrict access to  certain unclassified items containing military technology, we obtained  DOD and Army guidance on the foreign military sales program. We also  reviewed requisitions for unclassified items containing military technology  for which the system had approved the shipments under blanket orders. In  addition, we interviewed Army officials to obtain their reasons for  releasing these items. Also, we obtained records from the United States  Army Security Assistance Command on all classified spare parts and  unclassified items containing military technology that were purchased  using blanket orders and approved for shipment to foreign countries from  October 1, 1997, through April 30, 2003. We limited our review to blanket  orders because defined orders and Cooperative Logistics Supply Support  Agreements specified the parts that countries were entitled to requisition  by the national stock number. The records covered 21,703 requisitions for  classified spare parts and unclassified spare parts and other items that  contain military technology. We tested the system by identifying the 40  requisitions for classified spare parts that were shipped under blanket  orders and reviewed the restrictions applied to determine if the system  was operating as intended. To assess the Army’s internal controls on the  release of unclassified items containing military technology, we reviewed  21,663 requisitions for which the system had approved the shipments  under blanket orders. Further, we obtained written responses from DOD  officials concerning whether unclassified items containing military  technology should be reviewed prior to being released to foreign  countries. While we identified some issues concerning the appropriate  procedures for such items, in all the cases we reviewed, we found that the  items had been ordered and shipped from the Army’s system.
To determine whether the Army periodically conducted tests to validate  the system to ensure that it accurately identified for review and approval  blanket order requisitions to support foreign military sales, we obtained  and reviewed documentation identifying the system tests to determine  how often they were conducted. Also, we interviewed Army and DOD  officials to determine how periodic reviews and tests were performed on  the system.
We conducted our review from May 2003 through December 2003 in  accordance with generally accepted government auditing standards.
As arranged with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the  date of this report. At that time, we will send copies of this report to the  Secretary of Defense; the Secretary of the Army; the Director, Office of Management and Budget; and interested congressional committees. We  will also make copies available to others upon request. In addition, the  report will be available at no charge on the GAO Web site at http://www.gao.gov.
Please contact me on (202) 512-8365 if you or your staff have any  questions concerning this report. Key contributors to this report were  Lawson (Rick) Gist, Jr.; Carleen Bennett; Latrealle Lee; Elisah Matvay;  Arthur James, Jr.; and Ann DuBois.