Financial Management: Arms Sales Ceiling Based on Inconsistent and Erroneous Data

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Report Type	Reports and Testimonies
Report Date	April 12, 1978
Report No.	FGMSD-78-30
Subject	Cost accounting standards compliance Cost control Financial management Financial records Foreign military sales Foreign military sales costs Accounting errors Accounting systems

Summary:

In November 1977, the Defense Security Assistance Agency (DSAA) disclosed that its previously reported estimate of $9.9 billion for fiscal year (FY) 1977 foreign military sales was understated by $1.4 billion. The President based FY 1978 arms sales ceiling of $8.6 billion on FY 1977 sales.

There were substantial accounting inconsistencies and errors relating to the $1.4 billion adjustment. As a result, FY 1977 sales of weapons and weapons-related items subject to the ceiling were overstated by $594 million. Using the corrected sales figures, the ceiling now represents only a $66 million reduction from FY sales rather than the $695 million reduction originally estimated. DSAA inconsistently accounted for price changes and made other accounting errors, and efforts to correct the accounting records at FY end largely failed.

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Financial Management: Arms Sales Ceiling Based on Inconsistent and Erroneous Data