Foreign Military Sales: Changes Needed to Correct Weaknesses in End-Use

Monitoring Program (Letter Report, 08/24/2000, GAO/NSIAD-00-208).

 

Pursuant to a congressional request, GAO reviewed the Foreign Military

Sales Program, focusing on: (1) the Department of Defense's (DOD)

implementation of its requirement to observe and report on defense

articles and services transferred under the Foreign Military Sales

program; (2) DOD's implementation of requirements to perform end-use

checks; and (3) the extent to which DOD has satisfied the reporting

requirements of the end-use monitoring amendment to the Arms Export

Control Act.

 

GAO noted that: (1) DOD has not effectively implemented the requirement

that its field personnel observe and report on foreign governments' use

of U.S. defense articles and services transferred through the Foreign

Military Sales program; (2) because the extent of observation needed to

verify that defense articles and services are being used appropriately

will vary from country to country, DOD has not issued guidance

specifying what monitoring is required; (3) as a result, field personnel

interpret the requirements and the activities that they should perform

differently; (4) DOD has not effectively implemented requirements for

its field personnel to perform end-use checks in response to specific

standards or for selected weapon systems; (5) for example, field

personnel responsible for performing checks are not receiving the needed

information from Defense or Department of state officials; (6) as a

result, GAO identified 16 countries where end-use checks were not

performed in fiscal years 1997-1999, even though one of the standards

was met; (7) in addition, specific requirements have been established to

conduct end-use checks for selected weapon systems such as Stinger

missiles; (8) for some other weapon systems, such as Advanced Medium

Range Air-to-Air Missiles, sales agreements allow U.S. personnel to

conduct end-use checks; (9) for both of these weapon systems, the U.S.

relies on host country records to maintain accountability; (10) however,

the reliability of such records varies from country to country; (11) for

example, after performing a worldwide inventory of Stinger missiles, DOD

identified discrepancies in some countries' records, which left some

missiles unaccounted for; (12) further, according to GAO survey and

field visits, no end-use checks of Advanced Medium Range Air-to-Air

Missiles have ever been performed by U.S. personnel; (13) DOD has not

complied with the reporting requirements of the end-use monitoring

amendment to the Arms Export Control Act because it does not collect the

information needed to do so; (14) the amendment requires DOD to report

annually to Congress on actions taken to implement the end-use

monitoring program; (15) this report is to include a detailed accounting

of the cost and number of personnel associated with its program; and

(16) field personnel are currently not required to track the resources

they use in performing end-use monitoring activities and only routinely

report on the number of Stinger missile inspections conducted.

 

--------------------------- Indexing Terms -----------------------------

 

REPORTNUM: NSIAD-00-208

TITLE: Foreign Military Sales: Changes Needed to Correct

Weaknesses in End-Use Monitoring Program

DATE: 08/24/2000

SUBJECT: Weapons systems

Foreign military sales

Monitoring

Reporting requirements

Foreign governments

International relations

Noncompliance

Foreign military arms sales

IDENTIFIER: DOD End-Use Monitoring Program

Foreign Military Sales Program

Advanced Medium Range Air-to-Air Missile

Stinger Missile

 

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GAO/NSIAD-00-208

 

Appendix I: List of Countries Included in Our Survey of End-Use Monitoring

 

20

 

Appendix II: Comments From the Department of Defense

 

21

 

Appendix III: Comments From the Department of State

 

24

 

Appendix IV: GAO Contacts and Staff Acknowledgments

 

25

 

National Security and

International Affairs Division

 

B-285781

 

August 24, 2000

 

The Honorable Benjamin A. Gilman, Chairman

Committee on International Relations

House of Representatives

Dear Mr. Chairman:

 

In July 1996, the Arms Export Control Act was amended to require an end-use

monitoring1 program for defense articles and services transferred through

the U.S. government's Foreign Military Sales program.2 The amendment also

requires an annual report from the Department of Defense to Congress on the

program's implementation. In response, in December 1996 the Department

expanded its monitoring program by requiring field personnel to initiate

end-use checks of U.S. defense articles and services sold to foreign

governments when specific circumstances develop, such as unusual political

or military upheaval in the recipient country. At the time, the monitoring

program included requirements that field personnel observe and report on

foreign governments' use of U.S. defense items and perform periodic physical

inspections of selected weapon systems. These requirements are still in

effect today.

 

This is the second in a series of reports that respond to your request that

we review the Foreign Military Sales program. Our first report addressed the

process for approving technology and arms transfers.3 This report focuses on

the Department of Defense's implementation of end-use monitoring

requirements. Specifically, we assessed (1) the implementation of the

Department of Defense's requirement to observe and report on defense

articles and services transferred under the Foreign Military Sales program,

(2) the Department's implementation of requirements to perform end-use

checks, and (3) the extent to which the Department has satisfied the

reporting requirements of the end-use monitoring amendment to the Arms

Export Control Act.

 

The Department of Defense has not effectively implemented the requirement

that its field personnel observe and report on foreign governments' use of

U.S. defense articles and services transferred through the Foreign Military

Sales program. Because the extent of observation needed to verify that

defense articles and services are being used appropriately will vary from

country to country, the Department has not issued guidance specifying what

monitoring is required. As a result, field personnel interpret the

requirements and the activities that they should perform differently. Field

personnel in 40 of the 68 countries we surveyed reported that they did not

carry out this requirement.4 Several field personnel told us that they are

unsure when to perform this function and do not have sufficient resources to

perform it.

 

The Department has not effectively implemented requirements for its field

personnel to perform end-use checks in response to specific standards or for

selected weapon systems. For example, while the Department identified five

circumstances, referred to as standards, under which field personnel should

initiate end-use checks of defense articles and services, it did not

establish procedures to ensure field personnel received the information

needed to initiate end-use checks or provide guidance on how to apply the

standards. Department officials assumed that the information needed to

initiate end-use checks on the basis of the standards would be available to

field personnel through State Department officials located at overseas

embassies. However, field personnel responsible for performing such checks

are not receiving the needed information from Defense or State Department

officials. As a result, we identified 16 countries where end-use checks were

not performed in fiscal years 1997-99, even though one of the standards was

met in these countries. In addition, specific requirements have been

established to conduct end-use checks for selected weapon systems such as

Stinger missiles. For some other weapon systems, such as Advanced Medium

Range Air-to-Air Missiles, sales agreements allow U.S. personnel to conduct

end-use checks. For both of these weapon systems, the U.S. relies on host

country records to maintain accountability. However, the reliability of such

records varies from country to country. For example, after performing a

worldwide inventory of Stinger missiles, the Department of Defense

identified discrepancies in some countries' records, which left some

missiles unaccounted for. Further, according to our survey and field visits,

no end-use checks of Advanced Medium Range Air-to-Air Missiles have ever

been performed by U.S. personnel.

 

The Department of Defense has not complied with the reporting requirements

of the end-use monitoring amendment to the Arms Export Control Act because

it does not collect the information needed to do so. The amendment requires

the Department to report annually to Congress on actions taken to implement

the end-use monitoring program. This report is to include a detailed

accounting of the cost and number of personnel associated with its program.

However, field personnel are currently not required to track the resources

they use in performing end-use monitoring activities and only routinely

report on the number of Stinger missile inspections conducted. In its 1997

report to Congress, the President reported only on the steps that the

Department was taking to implement the end-use monitoring program and did

not report on the cost and number of personnel associated with the program.

Until the Department of Defense tracks resources used, it will not be able

to provide Congress with specific end-use monitoring cost and personnel

information.

 

We have included recommendations in this report to correct weaknesses in the

implementation and reporting of end-use monitoring activities under the

Foreign Military Sales program. In written comments on draft of this report,

the Department of Defense generally agreed with the findings and

recommendations and stated that it will take steps to improve the

implementation of the Foreign Military Sales end-use monitoring program. The

State Department, in its written comments, expressed concern that the report

may suggest that it is responsible for the lack of an effective end-use

monitoring program for Foreign Military Sales because it has not shared

end-use violation reports with the Department of Defense. Although we agree

that the State Department is not responsible for the lack of an effective

program, we believe that a mechanism to provide the information contained in

the violation reports to field personnel is needed for the Department of

Defense to efficiently implement its end-use check standards.

 

In 1996, the Arms Export Control Act5 was amended to require the

establishment of an end-use monitoring program for defense articles sold,

leased, or exported under the act and the Foreign Assistance Act of 1961,

including articles transferred through the Foreign Military Sales (FMS)

program. The amendment requires that, to the extent practicable, the end-use

monitoring program provide reasonable assurance that the recipient is

complying with U.S. government requirements on the use, transfer, and

security of defense articles and services. The act prescribes specific

purposes for which U.S. defense articles and services may be used, such as

for internal security or legitimate self-defense, and also requires the

recipient to obtain U.S. consent before transferring U.S. defense articles

and services to other parties.6

 

The amendment also requires that, to the extent practicable, the monitoring

program provide for the end-use monitoring of defense articles and services

in accordance with the State Department's "Blue Lantern" standards. The

State Department developed and published these standards to identify

high-risk defense articles and services exported directly by U.S. defense

companies for regular end-use monitoring.7 In addition, the amendment

requires an annual report to Congress on the actions taken to implement the

end-use monitoring program. The report is to include detailed accounting of

costs and number of personnel associated with the program.

 

The Secretary of Defense is responsible for implementing end-use monitoring

under the FMS program. Within the Department of Defense (DOD), the Defense

Security Cooperation Agency (DSCA) is the principal agency for carrying out

DOD's security assistance responsibilities, including FMS end-use

monitoring. In 1996, in response to the amendment, DSCA reviewed its

policies and procedures for the accountability of defense articles and

services transferred through the FMS program. At the time, the end-use

monitoring program included −and still includes today--a requirement

that field personnel overseas observe and report, while performing other

duties, on the foreign country's use of U.S. defense articles, defense

services, and training. In addition, DSCA still requires field personnel to

physically inspect and account for Stinger missiles transferred to foreign

governments and includes, on a case-by-case basis, other monitoring

provisions in FMS agreements8 when certain sensitive weapon systems are

sold.

 

DSCA also developed a new requirement for field personnel to initiate

end-use checks of U.S. defense articles and services transferred through the

FMS program when one of five specific circumstances occurs. In December

1996, DSCA incorporated these circumstances, which it refers to as

standards, into a pamphlet on the end-use monitoring program. Beginning in

1997, a 30-minute presentation on new and existing end-use monitoring

requirements was included in training provided by the Defense Institute of

Security Assistance Management to security assistance personnel.

 

In most cases, U.S. military personnel assigned to overseas security

assistance offices are responsible for managing and implementing the FMS

program in their country of responsibility. They report through two chains

of command, the ambassador and the Unified Combatant Command.9 The

ambassador is responsible for directing, coordinating, and supervising all

U.S. government personnel within the overseas diplomatic mission. The

Unified Combatant Commands evaluate the performance of security assistance

personnel and approve staffing levels for all overseas security assistance

offices. The number of U.S. military field personnel assigned to overseas

offices varies considerably among countries. The law limits most overseas

offices to six or fewer military personnel with security assistance

management responsibilities. However, Congress authorized, and DOD assigned,

more than six military personnel to offices in nine countries.

 

Requirement

 

The Security Assistance Management Manual requires that field personnel

observe and report, during the course of their other duties, on foreign

governments' use of U.S. defense articles and services transferred through

the FMS program. The manual does not prescribe standard end-use monitoring

procedures because the extent of observation will vary considerably from

country to country. As a result, the level of observation of U.S.-supplied

defense equipment varies greatly. Because DSCA has not issued specific

guidance on when to perform the function, field personnel interpret the

requirement to observe and report differently and have different

interpretations of the activities they should perform. Field personnel in 40

of the 68 countries we surveyed told us that they did not carry out

day-to-day observation and reporting on host country use of U.S. defense

articles and services, while field personnel in 28 countries said they did.

For example, field personnel in one country we visited, where nine military

personnel are assigned to security assistance, told us that they had many

opportunities to visit foreign military facilities where U.S.-supplied

weapons were stored and to observe the use of such equipment. However, field

personnel in another country, where only four military personnel are

assigned to security assistance, told us that they spend most of their time

in their office or meeting foreign military officials, only occasionally

visiting military facilities, so do not observe the use of U.S.-supplied

weapons. Both countries purchased substantial amounts of U.S. defense

articles and services through the FMS program.

 

In 1991, we reported that U.S. military officials in seven countries we

visited interpreted the requirement to observe and report on host country

utilization of U.S. defense articles and services differently and told us

that they did not have structured programs to perform this function. 10 At

the time, we recommended that DSCA develop accountability standards for the

types and amount of control that a recipient country should apply to U.S.

defense items. We also recommended that DSCA revise the Security Assistance

Management Manual to specify the monitoring required to provide reasonable

assurance that recipient countries are meeting conditions pertaining to use,

security, and transfer of U.S. defense articles and services. As a result of

our recommendations, DSCA sent a message to field security assistance

offices in October 1991 reiterating monitoring guidance in the Security

Assistance Management Manual. However, it did not develop accountability

standards or specify the extent of monitoring needed.

 

According to several of them, field personnel are limited in carrying out

day-to-day observations because DSCA has not issued specific guidance on

when to perform this function or provided sufficient resources to perform

the function on a regular basis. Field personnel contrasted the lack of

guidance for end-use monitoring under the FMS program with the specific

guidance they are provided on how to monitor equipment granted to foreign

countries under the Military Assistance Program,11 which requires field

personnel to track equipment transferred under the program through detailed

inventories. Unified Command officials told us that they do not hold field

personnel accountable for not performing the observation function for

equipment transferred though the FMS program because of the lack of guidance

from DSCA. The officials also told us that they want field personnel to

spend their time on their primary duty, which is to work with foreign

governments on planning the acquisition of defense equipment.

 

DSCA has not effectively implemented requirements for its field personnel to

conduct checks that verify the end-use of U.S. defense articles and services

transferred under the FMS program. While DSCA identified five standards for

when field personnel should conduct end-use checks, it has not established

procedures to notify field staff of events that should trigger checks or

provided the guidance needed on when action is required. In addition,

certain weapon systems have specific requirements or provisions for end-use

checks that rely on host country records to maintain accountability.

 

Standards

 

DSCA identified five circumstances, which it refers to as standards, under

which field personnel are to perform end-use checks of defense articles and

services transferred through the FMS program. Field personnel are to perform

end-use checks when

 

there is any indication that an Arms Export Control Act violation has

occurred;

 

substantial problems or weaknesses are found when DOD reviews a foreign

government's adherence to U.S. requirements for protecting classified

military information;12

 

significant and unusual political or military upheaval in the host country

is impending or has occurred;

 

substantial defense interaction or other ties are developing between the

end user and another country whose interests are not compatible with those

of the United States; or

 

countries unfriendly to the United States in the region are illicitly

seeking U.S. equipment of types held by the end user.

 

On the basis of information we obtained from the State Department and from

our survey of 68 overseas posts, we identified 20 countries where end-use

checks were required under one or more of these five standards in fiscal

years 1997-99. However, field personnel in only four of these countries

reported performing end-use checks during that time.13 In some of these

cases, field personnel did not receive information that one of the end-use

check standards applied. In other cases, field staff did not have sufficient

guidance to know when specific circumstances required end-use checks under

the standards.

 

For example, under the first standard, field personnel are required to

conduct an end-use check within 60 days of the State Department's

notification to Congress that an end-use violation has occurred. The main

purpose of these checks is to verify that the host country is committed to

proper control and use of U.S.-origin items. The State Department reported

12 countries to Congress for end-use violations in fiscal years 1997-99.

Field personnel in only one of these countries, however, responded in our

survey that they had carried out an end-use check. A DSCA official told us

that because the State Department is responsible for reporting end-use

violations to Congress, DSCA assumed that State Department personnel at the

embassy were notifying military field personnel of violations in their

country. However, DSCA officials did not actually determine whether a

mechanism was in place to notify field personnel. Field personnel in the

countries we visited told us that they sometimes learn about alleged

violations through their embassy but do not know whether the violations have

been reported to Congress, thereby requiring an end-use check.

 

From the establishment of the standard in 1996 through March 2000, the State

Department did not provide any information on end-use violations to DSCA.

State Department officials told us that due to the political sensitivity of

the violation reports, they only provide the reports to select members of

Congress and are not required to provide them to DSCA.14 According to these

officials, the information contained in these violation reports could

seriously harm U.S. relations with the country involved if it was

inadvertently released. In March 2000, DSCA and State officials developed a

procedure for State to provide DSCA with a summary of the information

contained in the violation reports. However, the State Department does not

plan to provide DSCA with the reports themselves. DSCA advised that without

the violation reports, field personnel would not have sufficient information

to determine when to conduct end-use checks on the basis of a specific

violation. Field personnel could benefit from such information by using it

to determine which countries have weaknesses in their ability or willingness

to protect U.S. technology. Field personnel could then more carefully

monitor sensitive or vulnerable defense equipment transferred to these

countries through the FMS program. In addition, information on a country's

ability or willingness to protect U.S. technology is one of the factors used

in the process of approving the transfer of U.S. defense equipment.

 

End-use checks are also required when weaknesses are identified as a result

of a DOD security survey. DOD's Office of International Security Programs

has a goal of performing these security surveys every 5 years to determine a

foreign government's adherence to U.S. requirements for protecting

classified military information. An interagency forum comprised of State,

DOD, and other agency officials uses the results of these surveys to

evaluate current export policies. While DSCA has access to summaries that

discuss these surveys, it does not get the detailed results of the surveys,

and it has not established a procedure to ensure that field personnel

receive them. Furthermore, DSCA has not provided guidance to field personnel

on when negative information in a security survey report should be

considered a weakness that requires an end-use check to be performed. Field

personnel in the countries we visited told us that there is no process in

place to provide them with results of the security surveys. They may learn

of the results through contacts with other personnel at the embassy, or if

they happen to be involved in coordinating the visit of the security survey

team, but they still do not have a consistent basis for initiating an

end-use check. Further, field personnel told us that because of the lack of

guidance, they are not sure when negative information in a security survey

would be considered a weakness requiring an end-use check.

 

The other three standards that require end-use checks are based on the

political or military environments of individual countries. While field

personnel may be aware of adverse conditions in their countries, DSCA has

not established guidance or procedures for field personnel to use in

determining when such conditions require an end-use check. For example,

significant military upheaval occurred in both Indonesia and Pakistan within

the last several years. As a result, the State Department determined that

both countries are no longer eligible to purchase U.S. defense articles and

services. However, end-use checks of U.S. defense items already provided

were not performed in either country in response to the standard. DSCA

officials believed that the State Department was responsible for notifying

field personnel that the criteria had been met for an end-use check to be

conducted. However, DSCA and State have never established a procedure for

providing notification to field personnel.

 

Currently, the end-use monitoring training that DSCA provides to field

personnel consists of a 30-minute presentation during the security

assistance management course at the Defense Institute of Security Assistance

Management. This training is intended to familiarize students with end-use

monitoring requirements. However, this training does not provide any

guidance or procedures on how to execute an end-use monitoring program at

overseas posts or when to initiate end-use checks in response to one of the

five standards.

 

DSCA relies primarily on host country records to maintain accountability of

weapon systems, such as the Stinger missile, that have specific end-use

check requirements. However, reliability of host country records varies.

Other weapon systems, such as the Advanced Medium Range Air-to-Air Missile

(AMRAAM), may have special monitoring provisions included in the terms of

the sale, but these provisions are not being implemented.

 

The Security Assistance Management Manual requires mandatory physical

inventory checks by U.S. personnel of Stinger man-portable air defense

missiles after delivery to foreign governments. These requirements are

included in FMS agreements for the missiles as a special condition of sale.

In 1998, DSCA revised the manual and reduced the scope of annual physical

checks by U.S. personnel. Prior to the change, U.S. personnel were required

to perform a 100-percent physical inventory of Stinger missiles each year.

U.S. personnel are now only required to physically inspect 5 percent of

missile inventories each year, but the purchasing country is required to

perform 100-percent inventories and allow U.S. personnel to review its

accountability records. DSCA eliminated the 100-percent annual inventories

after determining that having U.S. personnel perform inventories duplicated

the efforts of foreign government personnel. DSCA determined that these

duplicative efforts did not improve accountability to a degree that

justified the resource expenditures and were detracting from the overall

functions of field personnel. Field officials from the 13 countries in our

survey required to perform annual Stinger missile inventories reported that

they did so.

 

Because U.S. personnel physically inspect only 5 percent of Stinger missiles

each year, DSCA relies on foreign governments to account for the missiles in

their possession. According to one official with Stinger missile inventory

experience, the revised procedure relies on the foreign government to

perform an all-inclusive annual inventory, including an accounting of

expended items, and to provide this information to U.S. personnel. However,

relying on the foreign government's records may pose a risk to achieving

100-percent accounting of the missiles because the reliability of

accountability systems varies from country to country. For example, in one

country, the government prohibits U.S. field personnel from gaining access

to Stinger missiles located in certain parts of the country, limiting their

ability to check the adequacy of the host country's inventory. DOD has

discovered problems in the past with this country's accountability

procedures. Furthermore, DSCA completed a worldwide baseline inventory in

December 1999 that accounted for most, but not all, Stinger missiles and

identified security concerns in some countries. DSCA is investigating these

discrepancies by asking for more information from these foreign governments

on the disposition of the missiles.

 

While FMS agreements for the AMRAAM include provisions permitting U.S.

personnel to verify that purchasing countries have met security

requirements, including the verification of inventory numbers, end-use

checks have not been performed on the basis of these provisions. Although

this policy was formalized in 1999, the provisions were included in FMS

agreements for AMRAAM as early as 1994. According to Air Force officials, 11

AMRAAM agreements with 9 countries, out of a total of 29 agreements with 18

countries, contain provisions permitting end-use checks. However, none of

the field personnel in the nine countries that have these provisions

responded in our survey that they conducted any end-use checks on the basis

of these provisions. Field personnel that we visited told us that they would

need specific direction from DSCA or the military departments before they

would initiate end-use checks of AMRAAMs, and no specific direction has been

provided. Senior State Department and Air Force officials told us that the

purpose of these provisions is to provide authority for U.S. government

personnel to perform end-use checks if problems are suspected or identified

with the host country's accountability for the missiles. Because end-use

checks have not been performed under these provisions, information is not

available to evaluate the adequacy of the host countries' accountability for

these missiles.

 

According to information obtained from the 68 posts we surveyed, end-use

checks were required for only 1 other weapon system besides Stinger missiles

in fiscal years 1997-99. In one country, U.S. personnel annually audit the

effectiveness of the security measures taken to safeguard the classified

components and technology of the M1A1 tank, and particularly its armor.

Another country reported that the U.S. government is asking for special

end-use monitoring of the Patriot Advanced Capability-3 missile. The

monitoring may include unannounced inspections of sensitive missile

components.

 

The end-use monitoring amendment requires an annual report to Congress on

the actions taken to implement the end-use monitoring program that is to

include detailed accounting of costs and number of personnel associated with

the program. However, DSCA does not collect information on the activities

and resources expended for end-use monitoring and has not reported annually

to Congress as required.

 

DSCA does not require field personnel to track the allocation of time they

spend on specific FMS responsibilities, so it cannot track the personnel

costs of end-use monitoring activities. We previously reported that DSCA

does not have sufficient information to determine the actual costs of

 

administering the FMS program.15 Furthermore, officials at both Unified

Commands we visited do not use hours spent by field personnel on end-use

monitoring to justify manning requirements. The total authorized number of

military field personnel that may perform FMS responsibilities was 378 in

fiscal year 1999.

 

While field personnel submit periodic activity reports to security

assistance managers in the Unified Commands, officials told us that the

reports do not include end-use monitoring activities because they are not

being performed. The reports we reviewed did not include information on

end-use monitoring activities, except for Stinger missile inspections. Field

personnel advised us that they would report end-use monitoring information

only if they observed evidence of misuse of U.S. equipment.

 

In 1997, the President reported to Congress on end-use monitoring activities

performed under the Arms Export Control Act and the Foreign Assistance Act.

This report contained information on DOD's implementation of end-use

monitoring under the FMS program. In 1998, DOD reported to Congress through

the annual congressional presentation document16 on the level of end-use

monitoring training it provided to field personnel in fiscal year 1997. The

report did not include any information on DOD's end-use monitoring

activities or the resources that it expended on these activities. In 1999,

DSCA did not provide input to the congressional presentation document on

end-use monitoring during fiscal year 1998. DSCA officials attributed this

omission to staff changes. Although the most recent congressional

presentation document, issued in May 2000, contained supporting information

justifying the State Department's end-use monitoring program, it did not

contain any information about DSCA's end-use monitoring of

government-to-government transfers. A DSCA official advised us that he

prepared input on the agency's end-use monitoring program and did not know

why the State Department omitted it.

 

In response to the 1996 end-use monitoring amendment to the Arms Export

Control Act, DOD issued standards for end-use checks and established

training for overseas field personnel, but it did not issue implementing

guidance or procedures. Without them, DOD's end-use monitoring program

cannot provide assurances that foreign governments are adhering to

conditions placed on U.S. arms transfers. Because adherence to such

conditions is one of the components in the decision-making process of

approving arms transfers, information obtained from the end-use monitoring

program could also be used in the approval process. Further, because DOD has

not collected required information, Congress may be limited in its ability

to evaluate the implementation of the end-use monitoring program or to

determine if additional resources are needed.

 

To improve the implementation of the end-use monitoring program, we

recommend that the Secretary of Defense, with concurrence from the Secretary

of State,

 

issue specific guidance to field personnel on what activities need to be

performed for the routine observation of U.S. defense equipment and

additional guidance for the monitoring of specific weapon systems;

 

develop procedures to provide field personnel with the information

necessary to apply the five end-use check standards, including the

information contained in Arms Export Control Act violation reports, and

provide guidance on when to apply the standards;

 

reconcile discrepancies in foreign governments' Stinger missile

inventories, where discrepancies exist; and

 

comply with the 1996 end-use monitoring amendment by reporting required

information to Congress.

 

In written comments on a draft of this report, DOD generally agreed with our

findings and recommendations and stated that it plans to take steps to

improve the implementation of the Foreign Military Sales end-use monitoring

program. In response to our first recommendation on routine observation and

specific weapon monitoring, DOD stated that it has drafted an enhanced

end-use monitoring program that it will coordinate with the State

Department. The program would specifically target high-risk defense articles

for random annual end-use checks. In response to our other three

recommendations, DOD plans to (1) develop standardized information necessary

for field personnel to apply the five end-use check standards and provide

them with guidance on when to apply the standards, (2) task field personnel

to ensure that an action plan is in place to rectify any discrepancies in

Stinger missile inventories, and (3) require field personnel to report

work-years and dollars associated with Foreign Military Sales end-use

monitoring activities in order to comply with the Arms Export Control Act

reporting requirements. DOD's comments are reprinted in appendix II.

 

In written comments on a draft of this report, the State Department

expressed concern that the report may suggest that it is responsible for the

lack of an effective end-use monitoring program for Foreign Military Sales

because it has not shared end-use violation reports with DOD. State said

that the violation reports it prepares for Congress are based on information

that is frequently available to both State and DOD simultaneously and that

the violation reports are not an effective driver for initiating end-use

checks.

 

We agree that the State Department is not responsible for the lack of an

effective end-use monitoring program for Foreign Military Sales, but as we

state in our report, DOD needs the information contained in the end-use

violation reports to implement its end-use check standards. According to

DOD, the purpose of conducting end-use checks under this specific standard

is to verify, after the identification of a violation, that the foreign

government is committed to the proper control and use of U.S.-origin items.

In 1996, when DOD proposed this end-use check standard, it coordinated with

the State Department. On the basis of our discussions with both Defense and

State officials, there is no indication that the State Department raised

objections to the standards at that time. While the initial intelligence may

be available to both agencies, the State Department investigates allegations

to confirm the existence of a violation before it reports to Congress. A

separate investigation by DOD officials of the same allegations would

duplicate the State Department's efforts. In order to allow flexibility, we

did not recommend that the State Department provide the end-use violation

reports to DOD. We have modified our recommendation that the Secretary of

Defense develop procedures to provide field personnel with the actual

violation reports, and instead recommend that the Secretary provide the

information contained in the violation reports. We continue to believe that

sharing the information contained in the State Department's violation

reports is the most efficient means for field personnel to implement DOD's

current end-use check standards. The State Department's comments are

reprinted in appendix III.

 

To assess implementation of DOD's end-use monitoring requirements for

defense articles and services transferred under the FMS program, we

interviewed DOD and State officials at headquarters and field locations. We

obtained documentation on roles and responsibilities of organizations

involved in end-use monitoring. We obtained and reviewed laws, regulations,

policies, and procedures for end-use monitoring of defense articles and

services transferred through the FMS program in government-to-government

transfers and directly, under export licenses, by U.S. defense contractors

to foreign purchasers. To become familiar with the roles and

responsibilities of field personnel, we attended a training course for

security assistance officials assigned to overseas posts at the Defense

Institute of Security Assistance Management.

 

We also used the Internet to survey personnel assigned to 68 overseas posts

to determine the extent of end-use monitoring activities conducted in fiscal

years 1997-99. We visited two Unified Command headquarters offices and field

offices responsible for security assistance programs in five countries. Most

of the survey countries had purchased sensitive or significant defense

equipment. We selected countries by (1) reviewing a cumulative list of FMS

equipment purchased, as of August 1999, for all participating FMS entities

and (2) consulting with officials at DOD and State to obtain their input for

additions or deletions. Countries included in our survey are listed in

appendix I. After reviewing initial responses to our survey, we obtained

clarifications and additional information from 34 posts through e-mail

exchanges, telephone contacts, and field visits to five countries (listed

below). To evaluate end-use monitoring activities, procedures, resources,

and limitations, we visited the U.S. European Command, the U.S. Pacific

Command, and five countries in the areas of responsibility of these two

commands: Germany, Greece, Korea, Spain, and Thailand.

 

To determine the extent to which DOD has satisfied the reporting

requirements of the end-use monitoring amendment to the Arms Export Control

Act, we obtained copies of the initial report on the implementation status

sent by the President to Congress in August 1997 and of the annual

congressional presentation documents for fiscal years 1998-2001. We

discussed reporting requirements and the Department's compliance with the

requirements with officials responsible for input on end-use monitoring of

government-to-government transfers.

 

We performed our review between November 1999 and August 2000 in accordance

with generally accepted government auditing standards.

 

We are sending copies of this report to the Honorable Sam Gejdenson, Ranking

Minority Member, Committee on International Relations, U.S. House of

Representatives, and the Honorable Jesse Helms and the Honorable Joseph

Biden in their capacities as Chairman and Ranking Minority Member, Committee

on Foreign Relations, U.S. Senate. We are also sending copies to the

Honorable Madeleine K. Albright, Secretary of State; 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 at (202) 512-4841 if you have any

questions concerning this report. Contacts and key contributors to this

assignment are listed in appendix IV.

 

Sincerely yours,

 

Katherine V. Schinasi

Associate Director

Defense Acquisitions Issues

 

List of Countries Included in Our Survey of End-Use Monitoring

 

Argentina Korea

Australia Kuwait

Austria Latvia

Bahrain Lebanon

Belgium Lithuania

Bolivia Luxembourg

Botswana Malaysia

Brazil Mexico

Cameroon Morocco

Canada New Zealand

Chad Nicaragua

Chile Norway

Colombia Oman

Costa Rica Panama

Czech Republic Paraguay

Denmark Peru

Dominican Republic Philippines

Ecuador Portugal

Egypt Saudi Arabia

El Salvador Singapore

Estonia South Africa

Ethiopia Spain

Finland Sweden

France Switzerland

Germany Taiwan

Greece Thailand

Guatemala The Netherlands

Honduras Tunisia

Indonesia Turkey

Israel United Arab Emirates

Italy United Kingdom

Japan Uruguay

Jordan Venezuela

Kenya Yemen

 

Comments From the Department of Defense

 

Comments From the Department of State

 

GAO Contacts and Staff Acknowledgments

 

Katherine V. Schinasi (202) 512-4841

Thomas J. Denomme (202) 512-4287

 

In addition to those named above, John Neumann, Anne W. Howe, Paula J.

Haurilesko, Jack E. Edwards, David J. Henry, and Eric E. Petersen made key

contributions to this report.

 

(707450)

 

 

1. End-use monitoring refers to the procedures used to verify that foreign

governments are using and controlling U.S. defense articles and services in

accordance with U.S. terms and conditions of the transfer. Verification

measures, referred to as end-use checks, range from contacting the

appropriate foreign government representative for information to physical

inspection by U.S. personnel.

 

2. A security assistance program to transfer U.S. defense articles or

services to foreign governments and international organizations from

Department of Defense stocks or through Defense-managed contracts.

 

3. Foreign Military Sales: Review Process for Controlled Missile Technology

Needs Improvement (GAO/NSIAD-99-231, Sep. 29, 1999).

 

4. Using an Internet survey, we obtained end-use monitoring information from

military field personnel assigned to 68 countries. These countries

represented all of the countries that had purchased sensitive or significant

defense equipment through the Foreign Military Sales program, according to

Defense and State Department officials and our evaluation of program data.

 

5. 22 U.S.C. 2785.

 

6. 22 U.S.C. 2753-2754.

 

7. The State Department uses the Blue Lantern standards to conduct checks of

selected export license applications prior to approval to determine the

legitimacy of the transaction and the end-user. The State Department also

conducts checks after defense articles or services have been shipped to

determine whether they have been received by the authorized foreign entity

and, in some instances, whether they are being used in accordance with the

terms and conditions of the license.

 

8. FMS agreements are signed by the U.S. government and a recipient foreign

government or international organization and are used by DOD to sell U.S.

defense articles and services through the FMS program.

 

9. A Unified Combatant Command has operational control of U.S. combat forces

from two or more military departments and is normally organized on a

geographical basis.

 

10. Military Aid: Stronger Oversight Can Improve Accountability

(GAO/NSIAD-92-41, Dec.16, 1991).

 

11. Since the 1950s, the United States has provided military equipment to

foreign countries on a grant basis under the Military Assistance Program.

Beginning in 1982, funds from that program were merged into the FMS program

for recipients to purchase defense items through FMS credits. Equipment

transferred under the prior program is still subject to monitoring

requirements.

 

12. These reviews are conducted by DOD's Office of International Security

Programs in accordance with General Security of Military Information

Agreements in which the United States and another country agree to mutually

protect classified military information.

 

13. We did not ask field personnel to indicate which of the five standards

had been met.

 

14. The Arms Export Control Act requires that violations be reported to the

Speaker of the House of Representatives and the Committee on Foreign

Relations of the Senate. (22 U.S.C. 2753 (c), (e).)

 

15. Foreign Military Sales: Efforts to Improve Administration Hampered by

Insufficient Information (GAO/NSIAD-00-37, Nov. 22, 1999).

 

16. This document supports the State Department's request for resources to

carry out foreign operations, including DOD's security assistance programs.

*** End of document. ***