Egypt is currently among the largest recipients of U.S. foreign assistance, along with Israel, Afghanistan, and Iraq. Since 1979, Egypt has received an annual average of more than $2 billion in economic and military aid. Egypt has generally received about $1.3 billion each year in foreign military financing assistance in the form of grants and loans. From 1982 to 1988, the United States forgave Egypt’s FMF debt to the United States and began providing military assistance in 1989 solely in the form of grants with no repayment requirement. State and DOD planning documents describe FMF as one of several U.S. security assistance programs which are a subset of U.S. security cooperation efforts designed to build relationships that support specified U.S. government interests. These interests include building friendly nations’ capabilities for self-defense and coalition operations, strengthening military support for containing transnational threats, protecting democratically elected governments, and fostering closer military ties between U.S. and recipient nations.According to State, the objectives of the FMF program worldwide include: assisting friendly foreign militaries in procuring U.S. defense articles and services for their countries’ self defense and other security needs; promoting coalition efforts in regional conflicts and the global war on improving capabilities of friendly foreign militaries to assist in international crisis response operations; contributing to the professionalism of military forces; enhancing rationalization, standardization, and interoperability of friendly foreign military forces; maintaining support for democratically elected governments; and supporting the U.S. industrial base by promoting the export of U.S. defense-related goods and services. Generally, FMF provides financial assistance in the form of credits or guarantees to U.S. allies to purchase military equipment, services, and training from the United States. Recipient countries can use the assistance to purchase items from the U.S. military departments through the Foreign Military Sales (FMS) process or directly from private U.S. companies through direct commercial sales. State is responsible for the continuous supervision and general direction of security assistance programs, including FMF, in coordination with DOD. DSCA leads the day-to-day program implementation for each FMF recipient country in coordination with other DOD entities at the unified combatant commands and in the recipient countries. CENTCOM’s responsibilities include developing and implementing security cooperation plans for Egypt and other countries in the Middle East, as well as coordinating with other government entities on major Egyptian equipment requests. (See appendix II for a description of the FMS process for purchasing FMF-funded cases and appendix III for a description of the roles and responsibilities of the entities involved in the program.) Members of Congress have periodically sought to alter the balance of economic and military assistance to Egypt. In 1998, the United States and Egypt agreed to a 10-year assistance phase-down in conjunction with a similar package for Israel. The package for Egypt reduced economic assistance by $40 million each year but did not increase FMF assistance to Egypt. U.S. economic assistance to Israel was reduced by $120 million each year, and the amount of U.S. military assistance was increased by $60 million per year. In 2004 and 2005, amendments to the Consolidated Appropriations bill for fiscal year 2005 and the Foreign Relations Authorization billfor fiscal years 2006 and 2007 proposed converting some military assistance to economic assistance to Egypt. The 2004 amendment was not adopted and did not become law. Furthermore, as of March 2006, the 2005 amendment has not been enacted. Additionally, a conference report attached to the fiscal year 2006 Foreign Operations Appropriations bill requires State to report to Congress on the balance between economic and military assistance provided to Egypt, including whether maintaining the current level of military assistance in relation to economic assistance is appropriate in light of the political and economic conditions in Egypt and in the region. Although this requirement was not stipulated in law, it conveys congressional intent to have this information provided to the Congress. Over the past decade, Congress and the executive branch laid out a statutory and managerial framework that provides the foundation for strengthening government performance and accountability, with GPRA as its centerpiece. GPRA is designed to inform congressional and executive decision making by providing objective information on the relative effectiveness and efficiency of federal programs and spending. A key purpose of the act is to create closer and clearer links between the process of allocating resources and the results expected to be achieved with those resources. Program evaluations are objective studies that answer questions about program performance and results, and explore ways to improve them. In 2002, OMB implemented the Performance Assessment Rating Tool (PART) method of assessing federal programs. PART assesses federal programs in four areas: purpose and design, strategic planning, management, and results and accountability. Another assessment tool, which we have discussed in previous reports, is a logic model. This tool can be used to describe a program’s components and desired results, while explaining the strategy by which the program is expected to achieve its goals. A logic model is a representation of the relationship between the various components of a program, typically including at a minimum, inputs, activities, outputs and outcomes. By specifying the program’s theory of what is expected at each step, a logic model can help evaluators define measures of the program’s progress toward its ultimate goals. (See appendix IV for details on the logic model.) Since 1979, Egypt has received about $34 billion in FMF assistance which the United States has generally appropriated in annual amounts of approximately $1.3 billion. In fiscal year 2005, Egypt received nearly $1.3 billion in FMF grants, more than 25 percent of the total amount of FMF assistance provided worldwide. FMF assistance to Egypt accounts for 80 percent of Egypt’s military procurement budget and has served to replace some of Egypt’s Soviet-supplied equipment with modern U.S. equipment. Egyptian officials stated that 52 percent of their military inventory is U.S. equipment as of August 2005. Over the life of the FMF program, Egypt has purchased 36 Apache helicopters, 220 F-16 aircraft, 880 M1A1 tanks, and the accompanying training and maintenance to support these systems, among other items (see fig. 1). According to U.S. and Egyptian officials, the Egyptian military is better equipped to defend its territory and participate in operations in the region. For example, the Egyptian military has participated in peacekeeping missions in East Timor, Bosnia, and Somalia. In addition, the Egyptian military participates with the United States in Operation Bright Star, a biannual military exercise involving forces from other coalition countries, including Germany, Jordan, Kuwait, and the United Kingdom. The purpose of the exercise is to conduct field training to enhance military cooperation among U.S. and coalition partners and strengthen relationships between the United States and Egypt, as well as other participating partners. From 1999 to 2005, the United States provided a total of about $7.8 billion to Egypt in FMF funds. Egypt spent almost half of its FMF funds from 1999 to 2005 (about $3.8 billion) on major equipment such as aircraft, missiles, ships, and vehicles (see fig. 2). For example, Egypt spent 8 percent of its FMF funds on missiles, including 822 ground-launched Stinger missiles, 459 air-launched Hellfire missiles, and 33 sea-launched Harpoon missiles. Egypt also spent 14 percent on aircraft, including 3 cargo airplanes; 10 percent on communications and support equipment, including 42 radar systems and 8 switchboards; and 9 percent on supplies and supply operations, including 1,452 masks to protect against chemical and biological agents. Egypt spent the remaining amount of its FMF funds—about $2.5 billion— on maintenance, weapons and ammunition, and other requirements. DSCA adheres to a total package approach when working with Egypt to procure items through the FMF program, which ensures that the costs of support articles and services for new equipment are included in the total price of the item. In addition to the equipment, support items include training, technical assistance, initial support, and follow-on support. Egyptian officials stated that approximately one-third of their FMF funds are dedicated to follow-on support; one-third to upgrade U.S.-supplied equipment; and nearly one-third to new procurements. The United States permits Egypt to finance its military purchases using a statutory cash flow financing arrangement that allows Egypt to make purchases in one year and pay for them over succeeding years using grants made from future FMF appropriations. The arrangement allows the United States to enter into contracts in advance of—and in excess of—current FMF appropriations for Egypt. Specifically, Egypt is not required to pay the full amount of the LOA up front. Cash flow financing allows Egypt to pay only the amount that signed LOAs require in a given year for specified defense articles and services. The cash flow financing arrangement benefits Egypt in that it can receive more defense goods and services than it can under other financing arrangements. However, the program accumulated undisbursed funds because the agency refrained from making as many new commitments for goods and services as the annual appropriation would have allowed, according to DSCA officials. The cash flow financing arrangement allows for significant commitments to be made based on anticipated appropriations. Unlike other countries that receive FMF assistance, Egypt and Israel are currently the only countries that may receive defense goods worth more than the annual FMF appropriation and pay for them over multiple years. Cash flow financing enables Egypt to purchase more defense goods and services than under other financing arrangements and to better plan its military purchases over a number of years. For example, Egypt may begin the process of purchasing an F-16 in one year and make installment payments for the item over the life of the contract.