	Background

The Arms Export Control Act authorizes the sale of defense articles and  services to eligible foreign customers under the FMS program. Multiple organizations have a  role in the FMS program, including DSCA and the military services, State,  and CBP. Weaknesses in Shipment Verification Process Continue, and Expanded Monitoring Program Lacks Guidance for Country Visits

Agencies responsible for the FMS program have not taken the actions  needed to correct previously identified weaknesses in the FMS shipment  verification process, and DOD’s expanded end-use monitoring program  lacks written guidance for selecting countries for compliance visits using a  risk-based approach. First, agencies are not properly verifying FMS  shipment documentation, in part because State has not finalized revisions  to the ITAR to establish DOD’s role in the verification process. Second,  DOD lacks mechanisms to fully ensure foreign governments receive their  FMS shipments—in part because DOD does not track most FMS  shipments and continues to rely on FMS customers to notify the  department when a shipment has not been received. Finally, while DOD  has visited an average of four countries each year since 2003 to assess  compliance with FMS agreement requirements, it does not have written  guidance using a risk-based approach to prioritize the countries it visits to  monitor compliance and has not yet visited several countries with a high  number of uninventoried defense articles. In one case, the DSP-94 listed seven ports. For example, in our 16 case studies, 188  supply discrepancy reports were filed. In addition, DOD officials identified another mechanism for tracking FMS  shipments that is being used for countries within the U.S. Central  Command area of responsibility, in particular Iraq and Afghanistan. DOD Lacks Information Needed to Effectively Administer and Oversee the FMS Program

While DOD has implemented initiatives aimed at improving the overall  administration of the FMS program, it lacks the information needed to  effectively administer and oversee the program. Specifically, DSCA has twice adjusted the surcharge rate—the rate  charged to FMS customers to cover program administration costs. However, DSCA does not have sufficient information to determine the  balance necessary to support the program in the future. DSCA Lacks Sufficient Information to Improve Metric Regarding FMS Agreement Development Time Frame

In an effort to ensure FMS sales agreements are developed and presented  to customers in a timely manner, DSCA established a goal of developing  and presenting 80 percent of agreements to its customers within 120 days  of receiving a request to purchase a defense article through the FMS  program. In 2008, DSCA began a  study to determine if the 120-day goal was reasonable or if it needed to be  revised. However, as the portal is  based on information from 13 different systems, the data have the same  limitations in providing DSCA with comparable data to oversee the FMS  program. To ensure CBP port officials have the information needed to verify FMS  shipments are authorized, we recommend that the Secretary of State  direct the Assistant Secretary for Political-Military Affairs, that the  Secretary of Defense direct the Under Secretary of Defense for Policy, and  that the Secretary of Homeland Security direct the Commissioner of  Homeland Security’s U.S. Customs and Border Protection to coordinate on  establishing a process for:    ensuring the value of individual shipments does not exceed the total  value of the FMS agreement;    designating a primary port for each new and existing FMS agreement;    developing a centralized listing of these primary ports for use by CBP    providing CBP officials with information on FMS agreements that were  closed prior to fiscal year 2008. In its technical comments,  DOD also stated that it has sufficient information and that it is not  required to gather information on actual costs to administer the FMS  program.
Why GAO Did This Study

In fiscal year 2008, the Foreign Military Sales (FMS) program sold over $36 billion dollars in defense articles and services to foreign governments. The Departments of State, Defense (DOD), and Homeland Security (DHS) all have a role in the FMS program. In 2003, GAO identified significant weaknesses in FMS control mechanisms for safeguarding defense articles transferred to foreign governments. In 2007, GAO designated the protection of technologies critical to U.S. national security a high-risk area. GAO was asked to (1) evaluate program changes State, DOD, and DHS have made since 2003 to ensure that unclassified defense articles transferred to foreign governments are authorized for shipment and monitored as required, and (2) determine what information DOD has to administer and oversee the FMS program. GAO conducted 16 case studies; analyzed U.S. port data and FMS agreements; reviewed program performance metrics; and interviewed cognizant officials.

What GAO Found

Agencies involved in the FMS program have made some changes in the program but have not corrected the weaknesses GAO previously identified in the FMS program's shipment verification process, and the expanded monitoring program lacks written guidance to select countries to visit to ensure compliance with requirements. State--which is responsible for the program and approving FMS sales--has not finalized proposed regulatory revisions to establish DOD's role in the FMS shipment verification process, although the FMS agencies reached agreement on the proposed revisions about a year ago. DHS port officials, responsible for export enforcement, also continue to lack information needed to verify that FMS shipments are properly authorized. GAO found six FMS agreements that had unauthorized shipments, including missile components. In one case, 21 shipments were made after the agreement was closed. At the same time, DOD, which administers the FMS program and FMS agreements, lacks mechanisms to fully ensure that foreign governments receive their correct FMS shipments--in part because DOD does not track most FMS shipments once they leave its supply centers and continues to rely on FMS customers to notify the department when a shipment has not been received. With regard to monitoring defense articles once in country, DOD does not have written guidance to prioritize selecting countries for compliance visits using a risk management approach and has not yet visited several countries with a high number of uninventoried defense articles. DOD lacks information needed to effectively administer and oversee the FMS program. For example, within the last 10 years DOD has twice adjusted the surcharge rate--the rate charged to FMS customers to cover program administration costs--but it does not have information on program costs to determine the balance necessary to support the program in the future. Also, while DOD has a goal to release 80 percent of FMS agreements to a foreign government within 120 days of receiving its request to purchase defense articles, DOD officials stated they do not have the information needed to determine if the goal is reasonable. In addition, DOD lacks information to oversee the program, in large part due to the fact that FMS data reside in 13 different accounting, financial, and case implementation systems. DOD is in the process of defining its requirements for FMS program information before it moves forward with improving its data systems. In the meantime, DOD is relying on systems that do not provide it with sufficient, comparable data to oversee the program's performance.