Foreign Military Sales: Improved Navy Controls Could Prevent Unauthorized Shipments of Classified and Controlled Spare Parts to Foreign Countries: GAO-04-507.

UNITED States. Navy; UNITED States. General Accounting Office; NATIONAL security; SPARE parts; MAINTENANCE equipment

From 1993 through 2002, the Department of Defense (DOD) delivered over $150 billion in services and defense articles, including classified and controlled items, to foreign countries through foreign military sales programs administered by the military. Foreign countries may request items using blanket orders, which are for a specific dollar value and are used to simplify supply actions on certain types of items. GAO was asked to review whether the Navy's key internal controls restricted blanket orders for (1) classified spare parts and (2) controlled items sold to foreign countries. Also, GAO was asked to determine if periodic tests were conducted to ensure that the Navy's system is working as intended. The Navy's internal controls over foreign military sales using blanket orders are not adequate, placing classified and controlled spare parts at risk of being shipped to foreign countries that may not be eligible to receive them. The Navy might not have followed DOD policy when it approved 26 blanket orders leading to the release of classified spare parts to foreign countries. Navy policy states that classified parts can be requested under blanket orders when countries obtain waivers, but the Defense Security Cooperation Agency indicated that this Navy policy contradicts DOD policy, which prohibits the use of waivers. Navy officials have no plans to recoup these parts because the countries were approved to purchase them, and they were entitled to receive the parts under a different process. GAO agrees. However, Navy officials stated, there are no written policies to recover parts that countries should not have requested and received under blanket orders. The Navy does not always document the reasons for overriding its system and releasing classified parts. According to the Standards for Internal Control in the Federal Government, all transactions and other significant events need to be clearly documented. GAO identified four blanket orders for which the Navy's country managers overrode the system, but the files did not contain documents explaining the reasons for releasing the parts. The Navy lacks written policies to process blanket orders from countries requesting spare parts by manufacturer or vendor part numbers. GAO identified two blanket orders for which the Navy released four classified parts. The release occurred because the Navy's country manager substituted classified parts for parts ordered, which caused the system to bypass the control-edit function designed to check a country's eligibility to receive the parts. The Navy's system lacked control edits over controlled cryptographic parts and allowed countries to obtain them under blanket orders without determining the countries' eligibility to receive the parts. GAO identified five blanket orders for which the Navy's system approved and released 32 controlled cryptographic circuit card assemblies. According to DOD and Navy officials, the system has been modified and now reviews controlled cryptographic codes. Also, Navy officials do not plan to recover these parts because the countries were approved to purchase the parts and GAO agrees. The Navy has not conducted periodic tests to ensure that its system is accurately reviewing and approving blanket orders in accordance with its foreign military sales policies. DOD and Navy officials said that the last systemwide test was conducted in 2000. However, according to the Defense Security Cooperation Agency, the Navy is not prohibited from periodically testing the system. [ABSTRACT FROM AUTHOR]

Copyright of GAO Reports is the property of U.S. Government Accountability Office and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)